Almost a year ago, the Ministry of Finance put its Service Provider Payment Plan in place by financing 27 billion euros to regional governments and town councils so that they could pay pending bills to companies that provide them with various services to public administrations. It was a good idea and put some cash back into an economy that had been stalling since the crisis began because of low revenues, higher deficits and weak credit. The Ministry of Finance warned that it would not let governments continue to delay paying their bills, but they did anyway, and the Ministry turned a blind eye.
The proof? Finance minister Cristóbal Montoro announced a second plan to help governments make back payments to providers and put their accounts at zero. Although the Ministry of Finance did not specify the amount necessary to do so, it could total as much as 15 billion euros. This kind of stimulus would give the economy a boost, as it did in 2012, but would only be felt in the second half of the year. Still, plans like this also show that Montoro is using accounting tricks more than real spending cuts in order to trim deficits.
The government trusts that the Service Provider Payment Plan will not contribute to the national deficit. If so, it would add up to 1.5% to the deficit/GDP ratio. In order to finance the measure, the government will certainly have to increase its debt. The same happened the Regional Government Liquidity Fund (FLA is the acronym in Spanish) for debt servicing payments and other operating costs. Deficit and debt take and give from each other, and in 2013 our debt/GDP ratio will be around 90%. It is evident, once again, that the root of Spain's deficit problems is not being fixed and so-called cutbacks are really just a game of smoke and mirrors to hide the government's stalling reform efforts.
