In the first six months of the year alone, Spanish regional governments have accumulated a deficit of more than 13 billion euros. This amount equals 1.2% of their net annual GDP, while the federal government limits the debt level to 1.3% annually. Part of the excess spending so far is justified by expenditures associated with holding early elections in November instead of May of next year.
Further, government jobs have continued to grow during the first half of the year, and most of the increases are happening within regional governments. On the bright side, the federal government's changes have led to a temporary halt on excess spending in many of the regional governments.
This signifies an opportunity to draw up some zero-based budgets: it is time to revise all of them as if starting fresh. Some of the notable austerity programs are rather encouraging. The most paradigmatic could be Cospedal from Castilla-La Mancha, who is championing ideas on how to reduce regular expenditures. Also influential is a central government that has achieved most of its cutbacks through halting investments and raising the VAT tax.
The next regime will have to concentrate more on regular spending that, similar to what happened with some regional governments, could be trimmed a great deal without creating a major loss of services.
But until then, the gap between the Commercial Collection Agency Association (CCAA) and a potential worsening economic scenario could hinder Spain's ability to reach their 6% deficit goal. The federal government should put their foot down and assure that the regional governments do not weigh down their balance sheets, in particular where there are flagrant cases of excess spending.
