At the edge. Spanish regional governments are approaching the limit of their annual budgets, and the second half of the year could result in drastic spending cuts and a significant increase in taxes. At the end of Q2, all regional governments combined had accumulated a deficit of just over 13 billion euros, equivalent to 1.2% of their annual GDP. The upper limit set by a national Stability Program is 1.3%.
Still, one group of regional governments has staid on track for the first two quarters, while the others have surpassed their limits.
The budget gap is driven by decreased tax revenues and increased spending on elections. Tax revenues total to 60.97 billion euros, which marks a 3.59% drop year-to-year. Spending reached 74.03 billion euros, an increase of 0.48%. If figures from the past two quarters are compared to last year's data, one notices that spending is trending downward from a year-to-year rate of 5.44% in the first quarter to -3.4% in the second.
Breaking down the governments by region, the first thing to mention is that Basque is the only regional government with a surplus; it is currently at 0.12%. The rest are in negative figures (deficit). Those in the best position to meet their budget objectives are Aragon (total deficit of -0.63%) and La Rioja (-0.64% of regional GDP). Both had gone over budget in the first quarter. Madrid registered -0.7%, with only a one-tenth of a point increase since last quarter.
