Regions not facing collapse, says Salgado

Economy Minister Elena Salgado on Thursday ruled out the risk of any of the country's cash-strapped regions facing financial collapse.

"I don't think there is [a risk of collapse]," Salgado said in an interview with SER radio station. "In fact many regions are presenting their quarterly accounts and are well on the road to reducing their deficits, while others have to make an additional effort."

Salgado was responding to remarks earlier by the premier of Galicia, Alberto Núñez Feijóo of the opposition Popular Party (PP), who said a number of regions face possible financial collapse by the end of the year.

Tensions between the Socialist government and the regions over financial issues have increased after elections in May in which the PP won several regions from the Socialists. The government needs the regions to adhere to its austerity drive in order to meet the commitments to reduce the state's budget deficit.

At a meeting on Wednesday with Salgado, regional leaders agreed to a deficit-reduction program under which the shortfall in their finances will be trimmed to 1.3 percent in 2012 and 1.1 percent in 2013. They also agreed to introduce legislation at the regional level limiting their spending. At the meeting, Salgado offered the regions access to loans from the state-owned lender ICO to return funds owed to the state.