Spain’s regions agree to tighter deficit limits

Spain’s powerful regional governments agreed Tuesday to tighter deficit limits for the next three years as part of a wider push to rein in public spending and avert a Greek-style debt crisis.

The 17 autonomous communities, which provide essential services like health care and education, must limit their deficits to 1.3 percent of gross domestic product instead of the 2.4 percent agreed in March, the finance ministry said.

To meet this new target they will have to carry out an additional one billion euros (1.2 billion dollars) in spending cuts next year, it added in a statement.

The limit on the regional government’s deficits will remain at 1.3 percent in 2012 and will be reduced to 1.1 percent in 2013.

The agreement on the tighter deficit limits was backed by regional governments from across the political spectrum.

“There was total unanimity and an absolute commitment on the part of the autonomous communities to do their part to reduce the deficit,” Finance Minister Elena Salgado told a news conference after the agreement was reached.

Spain’s national government has unveiled 65 billion euros in spending cuts this year to slash the public deficit to the eurozone limit of 3.0 of GDP by 2013 from 11.2 percent last year.

The government predicts the deficit will drop to 6.0 percent next year and 4.4 percent in 2012.

Last month international ratings agency Standard & Poor’s, which in April cut Spain’s credit rating, warned that the regional governments face worsening deficits.

The regions’ capacity to rein in spending was clouded by “uncertainties” given their historically high expenditure growth, as well as their desire to keep ambitious investment programmes and expensive social services, it said.

Spain is highly decentralized, with its 17 autonomous communities accounting for around one-third of general government expenditures and just over half of the nation’s total number of civil servants.