Spanish land of Don Quixote fame makes huge cuts

31st August 2011, Comments 0 comments

Spain's Castile-La Mancha region, home of the fictional Don Quixote, announced on Wednesday huge cuts to trim a bloated public deficit that has become a symbol of spendthrift regions.

By June 30, the semi-autonomous region already had a deficit of 4.9 percent of gross domestic product (GDP) -- far above the 1.3-percent target set by the central government.

"It is the highest in Spain," regional president Maria Dolores Cospedal told a news conference.

Cospedal, who is also secretary general of the conservative opposition Popular Party, swept into power in local elections May 22 as people turned against the ruling Socialists in Castile-La Mancha and other regions across the country.

The Popular Party is riding high in opinion polls ahead of November 20 general elections.

Castile-La Mancha's debt amounted to 7.5 billion euros ($10.8 billion) and its unpaid bills at 2.6 billion euros at the end of June at a time when it had only 36 million euros in cash, she said.

The regional boss denounced the "economic ruin inherited by the previous government".

She announced an "exceptional austerity drive at the heart of the regional government" to cut the 2012 budget by 20 percent from the previous year and to cut expenses deemed unnecessary, for example the region's office in Brussels and the sale of some of the region's 2,500 official vehicles.

The 17 semi-autonomous regions wield great financial powers in Spain but are buckling under enormous debts despite efforts to rein in spending, a major concern for markets.

In 2009, 14 of the regions missed the deficit-reduction target set by Madrid. In 2010, nine of them failed.

The central government has set the regions a deficit target of 1.3 percent of GDP in 2011, declining to 1.0 percent by 2014.

Castile-la Mancha is not the only region to bust its limits. Catalonia's budget forecasts a deficit of 2.66 percent of GDP this year and Extremadura on Wednesday tipped a deficit of 6.81 percent of GDP.

Those figures complicate the task for the central government, which has announced to watchful markets its determination to lower the overall public deficit to 3.0 percent of GDP by 2013 from 9.24 percent last year.

© 2011 AFP

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