LyrArc Article Gist
Spain opened the books for regional governments to reassure investors. The figures show the average deficit across 17 regions at 1.24% of GDP at the end of the third quarter, according to the Finance Ministry. Risks include additional spending items in the final quarter and a further drop in tax revenues. Fore several years before the current crisis even when the central government was running a surplus, Spain's local and regional governments ran deficits. Regional governments account for about half of all public spending in Spain, compared to 20% for the central government, with social security accounting for the rest. Catalonia was forced to raise money through patriotic bonds, and Valencia is also following this, as Spain's regional governments have been shut out of international credit markets. Moody's Investor's Service provides a different perspective, as it said in November 2010 that Spain's regions will find it "very challenging" to meet their budget targets for this year and next. Moody's view is that the central government has strong incentives to come to the aid of regional governments should they be shut out of credit markets for an extended period. The Zapatero administration lacks a majority in Congress and depends on regional parties for support. Madrid's municipal government has requested funds to refinance its 7.2 billion euros debt. About 4 billion euros went into putting the capital city's ring road underground. Regional government's will need to refinance 30 billion euros in debt in 2011.