Spanish regional government debt rose above 90.1% of GDP for the first time in June, which is dangerously close to the 2013 limit of 91.4%. The forecast is not auspicious because the regional governments, if Finance Minister Montoro lets it happen, could increase their debt levels unevenly during the next three years.
This decision makes little since because the 2012 debt/GDP ratio of 17.6% will go up to 20.3% by 2016. Faced with a rigorous debt objective, Montoro could be so flexible with these debt objectives that he flouts the law completely. The government is running the risk that some of the deficit trimming will end up fattening the total volume of regional government debt, making it even more difficult for Spain to achieve the kind of financial stability that the EU wants.
