Government plan to control budgets sees regions rebel

The Mariano Rajoy administration plans to increase central control over regional governments' finances. Economy Minister Luis de Guindos told the Financial Times that the center-right Popular Party (PP) means to approve a law in March that will make it mandatory for regional budgets to be first approved by the central government.

"There will be a priori controls," said De Guindos. "Before approving their budgets, [the regions] will need the green light from the central government."

Budgetary overshoots by some of the 17 semi-autonomous regions that make up Spain are partly to blame for the country's inability to meet its own 2011 target of sic percent of GDP. Besides the state-wide austerity measures already underway or in the pipeline, the central government is keen to show the markets that it has a handle on regional spending as well.

"The [regions'] liquidity problems are really an opportunity to impose tough conditions and measures in terms of reducing the deficit," said De Guindos in the same week that Madrid stepped in to ensure the cash-strapped Valencian region would not default on a loan repayment to Deutsche Bank.

But the measure has not been welcomed by all the regions, especially those with strong nationalist movements such as Catalonia, where premier Artur Mas has been justifying his own deep spending cuts as a way of preventing Madrid from meddling with Catalan finances.

"This is intolerable and unacceptable," said Catalan government spokesman Francesc Homs, of the nationalist coalition CiU. Homs said that central budgetary control would "blow away our financial autonomy" and "violate the rules of the game set down in the Constitution."

The Canary Islands went further and said it would go all the way to the Constitutional Court if there is "an invasion into our powers" and if Madrid attempts to "recentralize," in the words of regional justice commissioner Francisco Hernández Spínola, of the Socialist Party.