Regional indebtedness steadies for first time since crisis broke

The debt of Spain's regions stabilized in the third quarter for the first time since the current crisis broke as belt-tightening measures started to take effect.

The news coincided with Fitch's decision Friday to put the ratings of Belgium, Spain, Slovenia, Italy, Ireland and Cyprus in review for possible downgrade after concluding that a "'comprehensive solution'" to the euro-zone crisis is technically and politically beyond reach.

The Bank of Spain said Friday the combined debt of the country's 17 regions totaled 135.15 billion euros, equivalent to 12.6 percent of GDP at the end of September, up only a tenth of a percentage point from June. The combined debt of all of the public administrations was steady at 66.0 percent of GDP. Central government debt was also unchanged at 50 percent of GDP, while that of the country's municipalities fell by 0.1 percentage points to 3.4 percent.

Prime Minister-elect Mariano Rajoy has made fulfilling the country's commitment to reducing the public deficit to 4.4 percent of GDP from a projected 6.0 percent this year the main pillar of his economic policy. There have been doubts about the regions' ability to deliver their target of a shortfall for the full year of 1.3 percent of GDP. The deficit at the end of September fell slightly from June to 1.2 percent of GDP.

In absolute terms, the 135.15 billion in debt issued by the regions still represented an absolute record since the Bank of Spain started compiling figures in 1990. The amount was up 22 percent from a year earlier but up only 3.4 percent from the end of June.

Valencia, Spain's most indebted region, saw its debt as a percentage of regional GDP fall by 0.2 percentage points to 19.9 percent. Catalonia, which has taken the ax to spending on health and education, saw its debt rise by 0.3 percentage points to 19.7 percent of regional GDP. Castilla-La Mancha's debt rose by almost a full percentage point to 18.3 percent of GDP despite the incoming Popular Party government embarking on a draconian austerity drive.