Bloomberg News

Spain to Slim Industry of Public Companies That Owe $75 Billion

February 17, 2012

Feb. 17 (Bloomberg) -- Spain will cut the number of public companies and foundations to curb spending and increase control over state firms, which accumulated 57 billion euros ($75 billion) of debt that isn’t included in official data.

The Cabinet, which meets today at 10 a.m. in Madrid, will approve a “significant rationalization” of companies and foundations, Economy Minister Luis de Guindos said in an interview with RNE. Deputy Prime Minister Soraya Saenz de Santamaria will hold a news conference at about 2 p.m.

Public companies linked to the central government have accumulated debt of 32.3 billion euros, according to the Bank of Spain, and European Union rules don’t require that borrowing to be included in public debt data. Regions and city halls have taken on 24.9 billion euros of debt, Bank of Spain data show.

“These kinds of companies and foundations, which in the end aimed to avoid the controls of the central government, have blossomed, to put it nicely, and it’s not good practice,” de Guindos said late yesterday.

Spain’s two month-old government is trying to slim down state spending that ballooned during the decade-long property boom amid a surge in tax revenue. The People’s Party government is seeking to restore investor confidence to reduce borrowing costs and protect Spain from contagion from the Greek crisis.

--Editors: Jeffrey Donovan, Andrew Atkinson

To contact the editor responsible for this story: Emma Ross-Thomas at erossthomas@bloomberg.net


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