[logan]

I have thought for some time that Spanish regional debt is a ticking time bomb for Spain. The extent of spending has reached epic proportions. Infrastructure improvements are a substantial asset but at what cost to the future of the country.
The combined public debt of Spain’s 17 autonomous regions reached a record €57.69 billion in 2010, an increase of 1.5 percent over a year earlier, according to the latest figures from the Bank of Spain. .

The regions of Catalonia, Madrid and Valencia together accounted for more than 60 percent of the region’s combined debt despite taking on very little new borrowings last year.

Zapatereo has given an interview to the FT today and warned the Regions he will act if deficits are not kept under control.
http://video.ft.com/v/750398622001/Zapatero-on-reforms-reforms-and-reforms-

http://www.businessweek.com/news/2010-08-12/spanish-crisis-faces-second-front-on-regional-debt.html (August 2010)

[adiep]

Any idea what action is open to him? How autonomous are the autonomous regions?

[logan]

It appears it is illegal in Spanish law for the national government to bail out the regional governments. Having looked at his options there is very little he can do. If he tried sanctions against Catalonia he would have a full blown succession crisis on his hands me thinks.

[adiep]

Perhaps they’ll invent their own local currency for public sector payments, a kilo of oranges in Valencia, a pound of pata negra in Sevilla.

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