Madrid to help Spanish regions settle bills

Fourteen of Spain’s struggling regions have submitted unpaid bills worth 17 billion euros to the central government which will help them pay off suppliers, the budget ministry said Tuesday.

The government has said it would help the 17 regions which enjoy a large degree of autonomy but whose debt has mounted sharply since the Spanish economy was rocked by the collapse of the property market and the global financial crisis in 2008.

Press reports say the 17 regions combined owe some 30 billion euros ($39 billion) to their various suppliers as they have struggled to pay their way and now face more problems as the economy slips back into recession.

The 14 regions — excluding Galicia, Navarre and the Basque country — submitted some 3.9 million bills worth 17.25 billion euros.

In return, the budget ministry said they had until the end of April to submit spending cuts to the government which is trying to put the national finances in order amid fears Spain could be forced into seeking a bailout like Greece, Ireland and neighbouring Portugal.

The state aid “is aimed at (remedying) the serious economic situation which has meant that the regional governments have built up considerable arrears on their bill payments,” the ministry said.

Press reports suggest that one in three bankruptcies in Spain could be due to such unpaid bills and the central government has set aside 35 billion euros to tackle the problem, with payments due to begin next month.

Madrid wants the regions to cut their combined deficit to 1.5 percent of Gross Domestic Product from 2.94 percent in 2011 as part of the wider effort to bring the national deficit down to the EU limit of 3.0 percent.

The government has warned that any region failing to meet the target could face direct action from Madrid to control their budget while some of the regions have complained that they are being squeezed too hard.