New Spain PM rallies regions for deficit-cutting

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Spain's incoming prime minister rallied leaders of its indebted regions Thursday for the task of slashing public spending to stabilise the national finances amid a eurozone debt crisis, his party said.

Mariano Rajoy met with the presidents of the autonomous regions controlled by his Popular Party for the first time since his November 20 election victory to give them their financial marching orders.

"The four agreements at today's meeting were fulfilling the deficit targets, eliminating double-ups, greater efficiency in public services and spending caps for all the regions," said one of the party's leaders, Javier Arenas.

Annual budget shortfalls and big debts in Spain's 17 regions -- of which 11 are governed by Rajoy's party -- 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.

Another top Popular Party member had earlier said the new government will give regional administrations more time to pay their debts to the central state, but Arenas said this was not discussed at Thursday's meeting.

"This will be tackled when we have a full knowledge of how the deficit is developing," he told a news conference.

Official data on Monday showed that the regions' belt-tightening so far had helped them close in on 2011 deficit targets.

They curbed their combined deficit to 1.19 percent of Spanish gross domestic product (GDP) in the first nine months of the year -- close to the central government's goal of 1.3 percent for 2011.

Under pressure on the debt markets, Spain is seeking to slash its total public 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 limit of 3.0 percent by 2013.

The Popular Party on Thursday also confirmed the timetable for the handover of power, saying Rajoy will take office as prime minister on December 21 and his new government on December 22.

Party spokeswoman Maria Dolores Cospedal told a news conference Rajoy would take office on December 22 after a two-day investiture debate in parliament, and his government will hold its first cabinet meeting on December 23.

© 2011 AFP

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