Spain’s regions balanced their budgets in the first quarter as the central government brought forward transfers to the cash-strapped states.
The 17 regions eliminated their overall deficit, compared with a full-year target of 1.5 percent of gross domestic product. Stripping out the impact of transfers, which have swelled the central government’s deficit, the regions’ deficit narrowed to 0.45 percent from 0.75 percent a year earlier.
Budget Minister Cristobal Montoro also said the government is working on a plan to help regions return to capital markets. The mechanism, which will be “temporary” and linked to additional budget conditions, should be ready next week, he told a news conference in Madrid after the weekly Cabinet meeting. Regions will still be responsible for their debts and the government won’t create a separate institution to manage the project, he said.
Prime Minister Mariano Rajoy is trying to rescue the regions, which manage more than a third of public spending, without increasing the burden on the central government. The central government’s 10-year borrowing costs rose to 6.56 percent today, approaching the 7 percent level that led Greece, Ireland and Portugal to seek bailouts.
Rajoy has asked the regions to cut their deficit by more than half this year after they accounted for most of the nation’s budget slippage in 2011, when the shortfall reached 8.9 percent of GDP, compared with a target of 6 percent.
Montoro also said the government will draft its 2014 budget alongside the 2013 spending plan. The budget process starts around July each year and goes to parliament by the end of September.
To contact the reporter on this story: Angeline Benoit in Madrid at firstname.lastname@example.org
To contact the editor responsible for this story: Craig Stirling at email@example.com