Regions ordered to hunker down to task of cutting budget deficit

The central government on Tuesday reiterated that the country’s regions would have to bite the bullet and adhere to the deficit ceiling set for them for this year.

Speaking hours ahead of a key meeting with regional representatives at the Council of Fiscal and Financial Policy, the secretary of state for public administrations, Antonio Beteta, said the regions are better placed to meet the deficit target of 1.5 percent of GDP this year than the 1.3-percent goal they faced last year.

Beteta referred to a syndicated loan of 35 billion euros extended to the regions to allow them to pay their suppliers and another credit line of 10 billion euros from the Instituto de Crédito Oficial (ICO) to allow them to meet debt maturities. Beteta also reminded the regions that Madrid had extended the period regions have to return excess transfers from five to 10 years.

“When they (the regions) committed themselves to achieving a target of 1.3 percent of GDP they did not have the mechanisms we have put in place,” Beteta said.

In only 10 years the number of employees in public administrations had increased by more than 440,000”

The regions posted a combined deficit last year of 2.94 percent, the main reasons why the state overshot its 6-percent target by 2.5 percentage points. Of Spain’s 17 regions, only Madrid hit the target.

The country’s biggest regions, Andalusia and Catalonia, have asked the central government for some leeway in the target, arguing that the budget measures required to achieve it will mean cutbacks in essential services such as education and health. Andalusia’s deficit last year was 3.22 percent of GDP and Catalonia’s 3.72 percent.

In order to reduce the overall deficit to 5.8 percent of GDP, the central government is planning budget measures this year that aim to generate savings of 37.9 billion euros of which the regions will have to find 15.6 billion.

Beteta lamented that the public administrations in Spain had grown out of hand. He pointed to the fact that while since 2001 the central government had reduced its staffing levels by 22 percent, those of the regions and municipalities had grown by 44 and 39 percent respectively.

“This has brought about a situation that in only 10 years the number of employees in public administrations had increased by more than 440,000,” the official said. He insisted this increase arose as a result of the multiplication of companies and new public institutions rather than the need to fulfill added responsibilities transferred by the central government to local administrations.

“The fall in revenues and the need to maintain our welfare state poses one of our biggest challenges; one that requires the modernization and simplification of the structure” of the public administrations, Beteta said.

The official reminded local administrations that there was a state pact to reduce the number of public institutions and companies by 4,000. He also noted that the central government has reduced the number of high-ranking officials by 18 percent or 88.