Spain Plans Loans to Help Cash-Starved Town Halls Pay Bills
February 08, 2012, 3:56 AM ESTBy Angeline Benoit
(Updates with details in second paragraph, statement from pharmaceutical companies starting from seventh.)
Feb. 7 (Bloomberg) -- Spain will create a credit line to help town halls pay their bills, Economy Minister Luis de Guindos said, less than a week after offering regions as much as 15 billion euros ($20 billion) to ease a liquidity squeeze.
The credit line, aimed at helping town halls pay their suppliers, will be offered via the state-managed Official Credit Institute and is expected to be approved this week, de Guindos told a parliamentary committee today in Madrid. He gave no more details.
The People’s Party government, in power since Dec. 21, is seeking to help local and regional administrations meet debt payments and pay suppliers while demanding budget cuts in exchange. Spain’s regional governments owe companies about 12 billion euros for drugs and healthcare equipment, pharmaceutical lobby Farmaindustria said today.
While Spanish law forbids the central government from bailing out the regions, de Guindos said on Feb. 3 the Official Credit Institute, or ICO, will provide a credit line of 10 billion euros, extendable to 15 billion euros, to help the regions meet debt redemptions and pay companies. In exchange, “strict” conditions will be demanded from the regions, which control about a third of public spending including health care.
The government, which says overspending in the states was the main reason Spain missed its national deficit target last year, has pledged not to let any regions fail. Shut out of public debt markets and suffering a slump in tax revenue, local and regional administrations have accumulated unpaid bills.
German and French chambers of commerce and Spain’s pharmaceutical lobbies have written to Spanish Prime Minister Mariano Rajoy calling for an “urgent” solution to the 12 billion euros of unpaid bills for pharmaceuticals delivered to hospitals and healthcare equipment. The ICO credit line for regions isn’t sufficient, they said in an e-mailed statement.
--Editors: Emma Ross-Thomas, Jeffrey Donovan
To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
