Regions of Spain ‘main budget risk’

MADRID - Agence France-Presse

People enjoy the sun at a beach in Cullera, Valencia. Some Spanish regions are resisting government’s budget cuts.

Spain’s 17 powerful regional governments pose the main threat to the nation’s goal of reining in its public deficit, a Spanish economic foundation warned on Aug. 21.

Spain has agreed with the European Union it will lower the public deficit from a runaway 8.9-percent of gross domestic product last year to 6.3 percent of GDP this year.

But the regions, which are responsible for their own health and education spending, were on track to bust their agreed limits, said a report by the Foundation for Applied Economic Studies (FEDEA).

“If we suppose that the regions implement their announced measures in their economic and financial plans, their deficit would be 2.2 percent of GDP, a slippage of 0.7 percentage points,” it said.

Spain’s central government has limited the regions to a public deficit equal to 1.5 percent of GDP.

“If the regions do not implement the announced measures and maintain the pace of spending in the first quarter, their deficit would slide to 4.0 percent of GDP, or 2.5 percentage points over target,” FEDEA added.

Spanish regions led by Catalonia and Andalusia have in the past weeks started to resist austerity measures imposed by Madrid.

The FEDEA study said regions faced a tough task reaching their 2012 target having finished the previous year with a deficit equal to 3.34 percent of GDP, which accounted for 70 percent of the nation’s deficit overrun.