April 16, 2016 / 11:02 AM / 4 years ago

Spanish government pressures regions to control spending

MADRID (Reuters) - Spain’s acting treasury minister met with the heads of the country’s regional governments late on Friday, urging them to control their spending this year in order to rein in one of the European Union’s largest public deficits.

People cool off at Sant Sebastia beach in Barceloneta neighbourhood in Barcelona, Spain, August 16, 2015. REUTERS/Albert Gea

The task is a politically uncomfortable one for the caretaker government of the centre-right People’s Party (PP) at a time when Spain is likely to hold a second general election in June after an indecisive December vote.

Spain’s 17 regions manage their own budgets on big ticket social spending in areas such as health and education where cuts lose votes. Over-spending by the regional governments helped lead the country to the brink of an international bail-out at the time of the euro zone debt crisis.

Since then, many of the regional governments have changed hands from the PP to coalitions between the opposition Socialists and leftist newcomer parties, making it more difficult for Madrid to enforce austerity.

Spain announced a 2015 budget shortfall of 5 percent of economic output last month, missing the 4.2 percent agreed with the European Commission and prompting calls from Brussels and Washington for swift action to cut costs.

Only three of the 17 regions - the Canary Islands, the Basque Country and Galicia - met their deficit targets for 2015. Six even oversaw spending rises from the previous year.

Together the regions booked a deficit of 1.66 percent of gross domestic product (GDP) in 2015, overshooting by one percentage point a 0.7 percent target.

Acting Treasury Minister Cristobal Montoro said on Friday the government would approve spending cuts worth 2 billion euros (£1.5 billion) at the central government.

Rather than asking the regions to implement more cuts, he has asked them to maintain spending levels and use any savings from items such as lower interest rates on debt payments to pay down their deficits.

However, regional heads have said the controls on spending are excessive and will hurt ordinary people.

“It’s unrealistic, both from a social and a practical point of view,” Oriol Junqueras, the economy head of the northeastern region of Catalonia, wrote in a letter to Montoro on Friday.

Reporting by Sonya Dowsett and Blanca Rodriguez; Editing by Mark Potter

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