Rajoy stalls on PP regional debt deferrals

Party barons expected grace period "of around 10 years" on repayments

In his first meeting with Popular Party barons since the general election, Prime Minister-elect Mariano Rajoy took a backward step on his promise to allow regions under his party's control to defer debt payments to the state.

Regional PP premiers had in June petitioned the Economy Ministry's Council of Fiscal and Financial Policy for a postponement of payments to the central administration deriving from advances granted in 2008 and 2009. It was anticipated that the matter would be resolved at Thursday's meeting, ahead of which the PP chief of interior policy, Juan Manuel Moreno, said that a grace period of "around 10 years" would be discussed. However, Rajoy said he would wait until he could study the books before making any decision on the subject.

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The meeting also resolved that all PP-governed regions would meet their deficit-reduction targets in 2012 and 2013, without laying out exactly how the cash-strapped administrations, some of which have not yet submitted a 2012 budget forecast, would achieve their goals. In any case, the meeting served to highlight the priorities of the incoming leader, whose investiture will take place on December 19.

Despite meeting with bankers and taking the first steps toward negotiations over labor market reform, Rajoy has yet to make any public policy statements since his November 20 electoral victory.

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