The six regional governments that did not meet budget in 2013 are planning new budget cutbacks. One year away from regional elections, Murcia, Valencia, Castile-La Mancha, Catalonia, Navarra and Aragón are banking on the economy to recover and for a healing financial sector to help them trim their budget imbalance by one percent.
Valencia is in the worst shape and has said on record that "cutbacks are a thing of the past." The electioneering has begun, calling for deeper reforms and more efficient management of public funds. It's a mistake to hope that we can fix the deficit simply because the economy will improve. Along these lines, fixing the budget will drive growth and improve investor confidence so that regional governments can start to buy debt on the open markets again. So how can regions that failed to meet their budget goals want no more cutbacks when they asked Finance to extend their repayment terms and ease interest rates on the public funds they received to pay service providers?
It is embarrassing how flippant some politicians are acting. Sowing false optimism is not hard. What's hard is building an efficient system for financing regional government and meeting spending goals. What we are seeing now is empty propaganda and a vain attempt to sweep the dust under the rug in hopes that nobody will notice.
