The Public Administration deficit for 2012 was 6.74% of GDP, which is four tenths of a point more than Spain agreed to with the EU in March. New numbers from the Minister of Finance, Cristóbal Montoro, show that the Social Security system finished the year with a 0.96% deficit despite forecasts of breaking even. Regional governments came up short by 1.7%, which is two tenths of a point better than expected. Montoro seemed satisfied with the results and said that more cutbacks were unnecessary for 2013.
But he did not explain how he will marry this proposal with reforms that are scheduled to start soon and other aspects of the numbers that he has publicized. The situation in Spain has improved, but the thrust of the problems remains the same. Both the Social Security System and the regional governments will need to deal with 2012 expenditures that through a legal accounting trick were translated to the 2013 budget. For example, installment payments of taxes on companies during one quarter of last year will fall in the 2013 tax year. Also in this tax year, the government will have to include all pending payments to service providers that work for the national and regional governments. Through the Regional Government Liquidity Fund (FLA in Spanish) and the Service Provider Payment Plan (both will be revised this year), the majority of the regional governments finished the year at or below the 1.5% objective for this year. Only six did not meet their goal. Four did so with an acceptable margin, but two, Murcia and Valencia, passed their objective by 1.5%.
Montoro should take measures to reprimand these two Peoples' Party regions and also Andalucía and Catalonia. He should put his money where his mouth is: he threatened to intervene when governments failed to meet their obligations, and now he needs to explain what he plans to do for those that didn't. These regions have provided a bad example for the rest, which know good and well that they need to continue with cutbacks and reform programs throughout 2013. Madrid's president supported this view earlier this week, and his government finished with a deficit smaller than 1.5%.
