Saturday

21st Jan 2017

Spanish regions raise doubts on EU budget pledge

  • Seville statues. Grinan: 'We are taking resources away from health care and education to save the banks' (Photo: Lochaven)

An escalating dispute between Madrid and Spain's regional authorities risks undoing its austerity pledge to EU authorities.

The conflict erupted on Tuesday (31 July) when Jose Antonio Grinan, the President of the Andalucia region, walked out of a meeting of Madrid's Council of Fiscal and Financial Policy when it told him to cut another €3 billion from his 2012 budget.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Catalonia boycotted the meeting in the first place, saying it already cannot pay some hospital, child-care and elderly-care centre workers.

Asturias and the Canary Islands voted against the council's demands. The Basque region also raised heckles.

Regional spending was the main reason why Spain last year missed its deficit targets under EU rules: Andalucia and Catalonia between them have a GDP of €346 billion, or 32 percent of the country's total economy.

Andalucia's Grinan renewed his attack on the government on Wednesday.

He said at a press conference in Seville, the Andalucian capital, that he would challenge Madrid's demands in Spain's Constitutional Court if need be.

The Socialist also fired a political broadside against conservative Prime Minister Mariano Rajoy.

"This [the proposed cuts] could close 19 hospitals, all of the Andalucian health service, or get rid of 60,000 public workers, one in four of the local governments workforce," he said at the press event, according to local news agency Europa Press.

"We are taking resources away from health care and education to save the banks, that is intolerable."

The rebellion comes at a sensitive moment for Spain, which is trying to convince markets that it can stick to a debt limit of 3 percent of GDP by 2014 and avoid asking for a full-blown state bailout.

The government is to auction €3 billion of bonds maturing between 2014 and 2022 on Thursday.

The sale is to take place a few hours before a European Central Bank (ECB) meeting in Frankfurt in order to capitalise on pre-meeting optimism.

The ECB is expected to say whether or not it will buy more Spanish bonds in future, but German opposition to the move hinges on lack of faith in southern countries' austerity promises.

Investors in any case are voting with their feet: the Bank of Spain noted capital flight of €41.3 billion in May, compared to €9.2 billion the same month last year.

For their part, ratings agency S&P and US bank Citibank in separate notes published on Wednesday said Spanish regions pose a threat to solvency.

S&P said its outlook will "be influenced by any large and persistent budgetary deviations by the regions ... as these deviations would increase net general government debt."

Citibank said Spain's "recently passed Budgetary Stability Law looks formidable on paper, but has yet to prove effective."

It added: "Political tensions between the centre and the regions may make the application of the Budgetary Stability Law more difficult, particularly in regions with strong regional identities, such as Catalonia."

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey