The worst forecasts about Spanish regional government budgets in 2014 have been issued. Yesterday, the Minister of Finance confirmed that data through August show that the governments will not meet the deficit goals set by the Spanish national government.
The total debt load equals 1.01% of GDP, which is a tenth of a point over Finance's limit. While this imbalance is tiny and doesn't push the debt above the national limit of 5.5%, the problem will come before the year ends. A prediction from the think tank Fedea, which came true, was that the regions would be at their deficit limit by autumn and that they would finish the year 1.8% in the red, which is double what they were allowed.
Fedea argued that the deficit was way out of control in six regions: Extremadura, Murcia, Castille-La Mancha, Andalusia, Catalonia and Navarra. Finance confirms that these are the worst offenders. Predictions from Fedea and the Independent Tax Authority are dependable, so it would be foolish to expect the regions to fix their spending problems by year end.
On the contrary, they will likely cover up their spending by deferring it to next year's budget. This only pushes the problem to next year without solving it fundamentally. Worst of all, it makes the work harder for the next governments to take power.
