Spain further tightens regional government deficit limit

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Spain, which is seeking to calm market fears that it will eventually need a bailout, said Wednesday it will further tighten its limit for the public deficit of its powerful regional governments.

The country's central government set a limit for the public deficit of the regions of 1.0 percent of gross domestic product in 2014, down from the limit of 1.1 percent set for the previous year, the finance ministry said.

The limit has been tightened gradually since 2010, when it stood at 2.8 percent. For both this year and the next it was set at 1.3 percent of output.

"I think the regional governments are on the path of bringing their deficits down to what was agreed, so I am not worried," Finance Minister Elena Salgado told reporters after a meeting with regional government representatives.

Spain's 17 regional governments run schools and hospitals and account for about half of total spending.

They are at the heart of market fears that Spain may be forced to seek a rescue package from European Union and the International Monetary Fund as Greece, Ireland and Portugal have done.

At the end of 2010, Spain had a total public-sector deficit -- including regional and municipal governments and the social security administration -- equal to 9.2 percent of GDP.

Spanish Prime Minister Jose Luis Rodriguez Zapatero has vowed to bring it down to 6.0 percent of output this year and to a eurozone limit of 3.0 percent in 2013.

© 2011 AFP

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