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April 12, 2012 6:19 pm
Spain’s governing Popular party has attacked what it calls the “excesses” of some of the country’s 17 autonomous regions and vowed to make them conform to drastic public spending cuts agreed by Madrid and the European Union.
The centre-right PP on Thursday pushed through parliament a “budgetary stability” law obliging Spain to cut its annual budget deficit to zero by 2020 – from €90bn or 8.5 per cent of gross domestic product last year – and to limit total public debt to 60 per cent of GDP, compared with a predicted 80 per cent of GDP at the end of 2012.
PP leaders under Mariano Rajoy, prime minister, have rushed through the new law, which allows the central government to intervene in errant regions to ensure compliance, in response to concerns among bond market investors and European officials that spending in Spanish regions and municipalities is out of control.
Amid continued selling pressure on Spanish bonds and equities, Antonio Beteta, secretary of state for public administrations, criticised the “excesses” of the “mini-states” that have grown up in Spain since the death of the dictator Franco and the launch of the current democratic constitution in 1978.
However, Mr Beteta and other PP leaders did not go as far as Esperanza Aguirre, a right-winger in the party and premier of the Madrid region, who this week called for control of health, education and justice – the main financial and administrative responsibilities of the regions – to be returned to the centre.
She said she had suggested to Mr Rajoy that savings of €48bn could be made with a “profound revision” of the autonomous system. “It has not done what it was designed to do – to integrate the Catalan and Basque nationalist parties,” she said. “In fact it has complicated the operations of the other 15 regions.”
International sovereign bond investors have taken fright at Spain’s economic prospects partly because the country overshot the 6 per cent deficit target for last year agreed with the EU, recording a deficit of 8.5 per cent, only a small reduction from 2010.
Most of that excess came from the autonomous regions. The PP controls 11 of the 17, but Catalonia and Andalucía, two of the largest, are dominated by Catalan nationalists and Socialists respectively.
Like the PP’s hardliners, Spanish and foreign businesses have long complained about the inefficiencies of devolution in Spain, criticising duplication of public services and a multiplicity of regional regulations that Mr Rajoy has vowed to simplify with measures to create a single market.
The Círculo de Empresarios, a business lobby group, said in a report on devolution last year that the number of public employees in Spain had risen from 2.2m to nearly 3.2m since 1996, far more than was justified by the increase in population.
Spain in fact has four levels of government – central, regional, provincial and municipal – as well as thousands of public enterprises. Concerns about waste and overstaffing have risen since the onset of the financial crisis in 2008.
Some indebted regions and hundreds of municipalities have fallen into arrears on payments owed to suppliers and service providers, including pharmaceutical groups and rubbish collectors. Mr Rajoy’s government has launched a scheme through the banks to pay off €35bn of these unpaid debts and so help small businesses.
On Thursday, Mr Rajoy repeated official denials that Spain needed a financial bailout similar to those applied to Greece, Ireland and Portugal. “Talking about a rescue makes no sense,” he said on a visit to Poland. “Spain is not going to be rescued, Spain can’t be rescued. There’s no intention, and no need and so Spain will not be rescued.”
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