Spanish Business News

Spanish regions’ debt burden surged to a record in the second quarter as administrations struggled to rein in spending amid a slump in tax revenue.

The 17 semi-autonomous regions’ outstanding debt burden rose to 133.2 billion euros ($183.7 billion), or 12.4 percent of gross domestic product, from 11.6 percent in the first quarter, the Bank of Spain said on its website today. The overall public- sector debt load amounted to 65.2 percent of GDP, compared with the government’s year-end forecast of 68.7 percent.

Spain’s regions are key to the nation’s efforts to cut the euro area’s third-largest budget deficit as they manage more than a third of public spending, including health and education. Fitch Ratings downgraded five Spanish regions including Andalusia and Catalonia this week, saying debt levels are climbing and the weak economic recovery will undermine revenue.

Spain’s regional governments are behind schedule to meet deficit targets, according to data released last week that Moody’s Investors Service called “credit negative.” Slippage by the regions “adds to pressure on the central government to make the needed cuts to meet the general government deficit targets,” Fitch Director Douglas Renwick said on Sept. 13. Risks to Spain’s sovereign rating are “clearly on the downside,” he said.

The 17 regions posted an average budget shortfall of 1.2 percent of GDP in the first half, the Madrid-based Finance Ministry said on Sept. 8, citing data that aren’t directly comparable to the figures used in the final deficit calculations. The regions have a target of 1.3 percent of GDP this year, as part of the overall public-deficit goal of 6 percent of GDP for this year, down from 9.2 percent in 2010.

Source: Bloomberg