Political noise often obscures economic reality. In Spain, pending reforms are keeping the government from paying of its national debt and trimming the deficit. Catalonia and Valencia, two regions that are political opposites, have asked the state for the most money and continue to outspend other regions. Between them, they took 60% of the 20.5 billion euros that regions borrowed from a cash fund dedicated to helping regional governments pay their service providers.
Critically, requests for state aid correlate with increased bids on public works projects in Q1 2014 more than the same period in 2013. These numbers are 195.5% and 334.1% in Catalonia and Valencia, respectively. The numbers show that the situation in these regions is not sustainable, and the same situation is happening in other regions on a smaller scale.
These numbers show two more things. First, the regions continue to spend more than they have while continuing to ask the state for money to pay their bills. Second, it is clear that they have not executed necessary reforms. At the regional level, reform work has been the least diligent. One example of this trend is that they continue to miss their debt and deficit targets.
Even though the regional government financing system has its holes, this is no excuse for some regional leaders being irresponsible and trying to hide the fact that they cannot sustain themselves financially and resorting to state aid instead.
