Some regional governments have quickly forgotten the financial crisis. At least it looks that way, because instead of following the national government's mandate to "slim down public administrations" to make them more efficient and less costly, these regions have stopped dieting and resumed spending by increasing the number of government employees on staff.
Specifically, Andalusia, Aragon, Baleares, Cantabria, Castile-Leon, Galicia, Murcia and Navarra upped their payroll by 35,000 jobs in Q3 2013. Andalusia leads the pack. Still, this wasteful government spending could spread, especially now that macro-economic indicators are boosting confidence. Some experts expect the Spanish economy to grow by around 1.5% of GDP in 2014, the risk premium to stay below 200 basis points, and for more jobs to be created. One could say that the worst has passed. But that would be a mistake. In 2013 we left an economic recession, not the crisis.
Some regions have stuck to their plan. Madrid and Catalonia, widely criticized for slashing spending, have not slowed their economic reforms. Faced with difficulty getting loans, Mas was forced to enact a cutback program that was stiffer than expected. And this plan should not be changed given that Catalonia has insisted that the national government cut its payroll spending, too.
But the truth is that after five years of crisis, the regions still need to trim some fat. Montoro cannot relax now if he wants to keep the deficit from going out of control again. And he more than anyone knows that private companies fire two employees for every one that the government lets go.
