This month the Spanish government will publish a report on the region government's budgets. This report will include budget changes in education, healthcare and public works, all of which total to 10 billion euros per year. This year the impact of the budget cuts will be approximately half that given they will kick in mid-year.
Although these cuts will allow the regions, provided that they meet their budgets, to keep their deficits lower than 1.5% of their GDP. With first quarter data that came in before the cuts were made, the regional governments did not meet their objectives, although accounts balance out because the state made the rest of the year?s transfers early.
On paper this means that the regions met their deficit objectives and the national government's debt went up. Now, the regions can no longer resort to another advance transfer. They can merely meet their obligations. Further, if they want money from the Regional Government Liquidity, they must submit themselves to new conditions. Andalusia, which has asked for a 1-billion advance, but has resisted asking for a bailout and keeps spinning in place by avoiding cutbacks.
The problem is that, because the Ministry of Finance wants to see balanced budgets, the regions are causing the problem to affect the private sector. They are ending contracts with private businesses while continuing to finance labor unions under the umbrella of international aid agencies.
It makes sense to ask why the regional governments have aid agencies when the state should fulfill this role. Resistance like this is deepening the problems and making it harder for them to make budget. The Ministry of Finance should not let anyone slip.
