REGIONAL AND LOCAL GOVERNMENT IN SPAIN
Oh, my Goodness!
Has the lid of Pandora’s Box been lifted? Finally?
What am I on about? Well, the financial situation of the 17 autonomous regions of Spain. That is what – and their parlous financial situation. Up until now this has been kept if not ‘secret’ then certainly very quiet. Indeed, I wonder how much the EU and the EU finance controllers really know?
After all, there has been a fair amount of praise, universally, for what the national government in Spain has been doing to rectify Spain’s finances through their austerity measures over the past year. In fact, the overall view propagated has been that Spain can probably avoid the problems of Portugal or Greece having taken the right ‘evasive’ action.
However, what the national government does in Spain and what the regional governments in Spain do can be quite different. In any event, it appears that the regional governments in Spain have built up colossal debts – so great that it would be hard for these debts not to become an inherent problem for the whole Spanish economy.
If you have a look at this excellent article in El Pais you will see the potential scale of the problem. Just look at the health debt and, perhaps, to illustrate this I can quote from the same El Pais article:
In its report on the health debt, Farmaindustria said companies have to wait an average of 410 days to get paid, while in five regions the delay is as long as 600 days. Andalusia holds the largest debt at 1.2 billion euros, followed by Valencia and Madrid, at 957 million euros and 700 million euros respectively.
Can you imagine having to wait, on average, 400 plus days to be paid – let alone 600 days!!! If that is not an indication of financial crisis then I do not know what is.
Needless to say, the opening of Pandora’s box has come just before the newly elected PP (conservative) party politicians take power over the many regional governments in Spain that they won in the recent regional and local elections. This happens, formally, tomorrow as the new Mayors are sworn in.
However, the newly powerful PP politicians are all too aware that they are inheriting positions of power that are likely to be severely toxic by anyone’s standards. After all, a politician’s power (and lasting popularity) comes from having money to spend. Cuts are never popular, however necessary, and the reality for the regional governments is that they are in such trouble that they may even be technically bankrupt. This means that any new governments will be severely restricted in what they can do.
So, understandably, the newly elected politicians are having to reveal the previously ‘secret’ financial mess of the regional authorities to avoid being blamed for it themselves over the coming months.
Meanwhile, matters are no better in the town halls across Spain. Many of these have shown a positive genius for over-spending during the past few years and their debts mimic those of the regional governments. So, the any new Mayors will face much the same problems as their counterparts in the regional governments of Spain.
What do we conclude from all of this?
Well, we have had the Spanish property crash and then (after much denial) a crisis amongst the Spanish banks – albeit mainly the Cajas (‘local’ savings banks). For many people, that was the bad news out of the way. The trouble is that the potential scale of the debts of the regional governments in Spain and the town halls is immense and may yet destabalise the Spanish economy again.
In short, the troubles of the Spanish economy are not over yet – and the ‘fat lady has not started singing yet’. So, watch this space as matters unravel…
RELEVANT INFORMATION
Spanish economy: problems, problems…
The Spanish property crash is not over yet
Spanish economy – unemployment up again
The prospects for the Spanish economy 2011 look gloomy
The Spanish property crash and the Banks
Banks in Spain – how safe are they?
The Spanish economy – rotten to the core?
Hello Nick
that is indeed a grim picture. I know from comments made by our mutual friend G.H. that Valencia city has been throwing money at glitzy projects that have no apparent purpose, the Veles y Vents building for example. The dubious rationale of the extension of Ave Blasques is another. There is a building in the CAC complex that seems to be one building too many.
When I last walked around the America’s Cup complex, it was evident that ‘white elephant’ is ‘le mot de jour’. The America’s Cup is held at a venue of choice of the winner of the previous competition. That it might return to VLC is vanishingly unlikely. I’ve seen what Auckland did to revive its old rundown dockside. The development there took into account that sooner or later some other team would take the trophy off the Kiwis and the circus would move on. So now, long after the Americans beat the Kiwis and the event moved to San Diego, there is something akin to what Barcelona did down on the waterfront when the Olympics went there.
The weeds are beginning to sprout in the cracks down at the America’s Cup complex. From the state of local finances you describe, the area will go the way of The Atomium in Brussels – a sad, rundown, neglected wasteland.
By the way, the saying is that “it’s not over TILL the fat lady sings”.
In Grand Opera, when you see the hero lying dead of the fatal darstardly stab wound, all the chorus gather around wailing, the heroine [the fat soprano lady] launches into her final aria whilst slowly fading away from the poison she has taken to join her late beloved wherever people go who ruin good music with silly singing ….
Regards
Chris Nation
Chris
Thank you for that – and the fat lady correction!! Either way, I fear that the public finances of the regions are in a terrible state. The irony, of course, is that after a boom of ten years they should be in good order – damaged by the crisis but still ‘workable’. However, it was- as we both know – a time of spend and spend with nary a thought to the future…