Regions may get individual deficit targets

The administration of Prime Minister Mariano Rajoy is considering setting different deficit targets for each of the country's regions depending on their individual situations, government sources said Wednesday.

The decision depends to a large extent on the degree of leeway afforded by the European Commission to the Spanish administrations as a whole of bringing the state's deficit back within the European Union ceiling of three percent of GDP.

If Brussels does cut Spain some slack, Finance Minister Cristóbal Montoro told Congress on Wednesday that Madrid would negotiate a new deficit-reduction schedule for the regions, which are being asked to reduce their combined shortfall for this year to 0.7 percent of GDP. Their deficit in 2012 was 1.7 percent of GDP, 0.2 points above target.

Montoro said he expects the European Union's statistics office Eurostat to shortly confirm the government's estimate for the overall deficit, which was 6.7 percent of GDP. That would pave the way for Brussels to relax Spain's deficit-reduction timetable that currently calls for the EU ceiling to be met in 2014.

"Within a few weeks we will have a different trajectory for the public deficit," Montoro said. "As soon as we have this new trajectory, we will discuss with the regions their part in the new trajectory." The government plans to call a meeting next week of the Fiscal and Financial Policy Council (CPFF), which is comprised of the national finance minister and the finance commissioners of the regions to fix new deficit targets, analyze budget plans and discuss new measures to facilitate funding for the regions.

The meeting will also set up a working group to study the basis for assigning different deficit goals.