Madrid rebels against Spain's regional financing system

Madrid, the ruling Popular Party's biggest regional stronghold, has become the latest authority to rebel against Prime Minister Mariano Rajoy over the manner in which the central government funnels money to the local administrations.

In an October 11 letter sent to Finance Minister Cristóbal Montoro and obtained by EL PAÍS, Madrid's new economy commissioner demanded reforms to the country's regional financing system, which he describes as "unjust, incoherent," and even bordering on "the absurd."

In his letter, Enrique Ossorio informed Montoro of "an error" in the projected revenue figures for the Madrid region next year, in which the central government proposes to hold back some one billion euros more compared to 2012 because of different taxes and other duties the regional administration is expected to receive.

"How can you say that Madrid, on a year-to-year basis, is going to do better than the rest of Spain? Figuratively speaking, Madrid's liquidity could worsen like it did in 2011 compared to 2010, when revenues dropped to 330 million euros from 1.27 billion," Ossorio wrote.

The Rajoy government has come under increasing pressure from several regions to reform the financing system. After rejecting Catalonia's recent call for a special fiscal pact, the central administration pledged to look at reforming the structure on how Spain's 17 regions receive money from the central administration.

Before coming on board as Madrid economy chief when Ignacio González took over from Esperanza Aguirre as regional premier last month, Ossorio served as the right-hand man for the secretary of state for public administration, Antonio Beteta. Sources at the Finance Ministry say that Beteta has been a strong critic of the current regional financing system, saying it was "bad, but this is the only one we have to follow because it is the current law."