Political pain or blame game?
Cutbacks in regional and local government budgets may jeopardize basic services
Like other European countries, Spain has had to respond to the emergency caused by the debt crisis by announcing additional budget adjustment measures, which Economy Minister Elena Salgado is due to present in upcoming Cabinet meetings. The most notable measure is an increase in corporate tax payments for large companies, but perhaps an even more important aspect will concern the regulation of regional government expenditure; this ought to be ready before the end of September.
In a ruling issued on the 27th of last month, the Constitutional Court recognized the state's capacity to impose limits on regional spending. But the government has declined to take this course, and awaits an agreement on spending guidelines, to be approved by the regional governments that so desire. Salgado also set a date for the planned reform of the accounting system, which will offer a more exact idea of regional deficits. Both Brussels and the Bank of Spain had warned of the specific risk which the state of regional and local finances posed to the Spanish economy — due not only to the volume of debt they carry, but also to the opacity that surrounds it.
The drop in the income of regional and local administrations is having an impact on the debts they owe to their suppliers - a taboo subject now highlighted by the pharmacies' strike in Castilla-La Mancha. But the problem also affects other sectors such as public works, the pharmaceutical industry as a whole and municipal street-cleaning concessions. One effect of the delay in payments is a hike in the rates charged by these suppliers, which aggravates the problem; another possible long-term effect being layoffs in affected firms. The other side of this situation is cutbacks in social-assistance services (kindergartens, pension supplements, etc.), and price rises in services such as public transportation and garbage collection - a solution which most governments prefer to tax hikes. The next step may be a charge, at least partial, for previously free services.
It may be that the present emergency situation demands this; but just as the indebtedness is in large measure due to laxity in the appraisal of certain investments (airports, universities and television channels) in the boom years, the task of climbing out of the financial crisis is going to require transparency, prioritizing payments, and the negotiation of delay in lesser-priority areas. Every cutback requires sacrifices, but it is not the same to make sacrifices in entirely useless regional television channels as in public health, for example. Nor is it the same to negotiate postponements in payments to large public works companies, as in those to family-run pharmacies.
This ought to be the subject of debate, and not the crossfire of trivialities about the rival leader's summer vacation, or about the legacy of debt received from an outgoing regional government. Many politicians are more concerned with finding someone to blame for the difficulties, than with actually solving them.
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