Belt-tightening regions in line to meet 2012 deficit target

Spain’s financially-stressed regions had a public deficit of 0.9 percent of GDP in like-for-like terms in the first half of the year, putting them in line to meet their target for the full year of 1.5 percent, Finance Minister Cristóbal Montoro said Thursday.

Including advance transfers received from the central government, the shortfall in the regions’ books in the period was 0.77 percent of GDP.

"The regions are on course to comply with the target set for them for the end of the year,” Montoro said. "The regions are making an adjustment, an adjustment we should appreciate and celebrate. When we all get down to work, we are all involved in winning back confidence. We are all the state.”

Montoro said the central government is closely monitoring the regions’ finances, particularly those that are having most difficulties in meeting the target set.

Navarre was the only region in the first half with a deficit of over two percent of GDP (2.5 percent). But the secretary of state for public administrations, Antonio Beteta, said this was due to different accounting criteria used.

When we all get down to work, we are all involved in winning back confidence. We are all the state”

Other regions with problems included Extremadura and Murcia, whose deficits were 1.89 and 1.80 percent respectively.

Montoro pointed out that this is the first year that a breakdown of the regions’ finances has been given on a quarterly basis. In the first quarter, the regions’ books were in balance. However, this reflected an advanced transfer of 5.176 billion euros to the regions by the central government. Factoring this out, the deficit in the first quarter was 0.45 percent of GDP.

The central government has already surpassed its deficit target for the full year of 4.5 percent, in part due to transfers to the regions.

Spain has pledged to reduce the shortfall for all of the public administrations for this year to 6.3 percent of GDP from 8.5 percent in 2011. The target for last year was six percent of GDP, with the regions mostly responsible for the blowout after booking a deficit of 3.3 percent, more than double their target.

In his first televised interview since taking office in December of last year, Prime Minister Mariano Rajoy said reducing the deficit rather the decision of whether to apply for a bailout from the European rescue funds was the government’s top priority.