Spanish regions to be given more time to pay their debt

1st December 2011, Comments 0 comments

Spain's new conservative government will give regional governments more time to pay their debts to the central state, a top member of the Popular Party which won last month's elections said Thursday.

Annual budget shortfalls and big debts in Spain's 17 regions are at the heart of investor concerns about the country's ability to balance its books and repay government bond holders.

The regional governments, which are responsible for health, education and other services, have taken a hit from lower tax revenues following the collapse of a property bubble in 2008.

They owe over 23 billion euros ($30 billion) to Spain's central government.

"We are going to extend the deadline for the repayment of this debt to around ten years years," the coordinator of the Popular Party's regional policies, Juan Manuel Moreno, told public television TVE.

"Otherwise we will face the financial collapse of public administrations, with the ensuing direct repercussions this would have on citizens."

The regional governments had asked the outgoing Socialist government for the deadline to be extended from the current five years to tens years but the request was turned down.

The Popular Party scored a landslide win over the ruling Socialists in November 20 elections.

Popular Party leader Mariano Rajoy met Thursday with the presidents of the 11 regional governments which are headed by his party to remind them of their obligation to reduce their deficits.

With Spains sovereign debt under pressure on the markets, the regional governments have been ordered to help rein in Spain's public sector deficit.

The country is seeking to slash the total public sector deficit to 6.0 percent of gross domestic product by the end of 2011 from 9.2 percent in 2010. It aims to reach the EU-agreed ceiling of 3.0 percent by 2013.

© 2011 AFP

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