More cash freed up for regions: €2.4bn extra to spend next year

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SPAIN’S new president Pedro Sánchez has given regional governments licence to spend extra cash this year by relaxing debt limits.

Increasing regions’ deficit margins from 0.1% of their GDP to 0.3% will free up another €2.4 billion across the board.

As a result, long-shelved plans such as building, expanding or renovating schools, hospitals and transport infrastructure may be able to go ahead, or at least reach the next stage in planning.

It also means more spending on social welfare needs will be possible.

This extra cash freed up will coincide with the European, local and regional elections when additional spending will be necessary.

This extra leeway has been made possible thanks to new finance minister Nadia Calviño’s having negotiated with the European Commission to relax national debt targets for Spain.

For this year, the country was required to get its deficit down to 2.2% of its GDP, but Sra Calviño realised this was going to be impossible after Spain closed 2017 on 3.1%, having missed its target by some distance.

The Commission has agreed to up the target by 0.5 percentage points for this and next year – to 2.7% for 2018 and 1.8% for 2019 instead of the original requirement of 1.3%.

President Pedro Sánchez has opted to pass this saving onto regional governments, partly to help modernise Spain and partly to help him assess spending needs so he can calculate the so-called ‘expenses cap’ for 2019 more accurately – figures Sánchez hopes to have approved before this coming August.

Money available for spending will differ from region to region – the Basque Country will have an additional €150 million, according to the Basque National Party (PNV), one of those which is in favour of the move.

Andalucía and Asturias, both run by the socialists, say the relaxed debt target will make their lives easier, although Catalunya and Valencia both support it by say it is ‘not enough’ and a complete review of regional financing is needed, since both consider they are underfunded.

Meanwhile, analysts at the BBVA bank are concerned, saying the government should be ‘taking advantage’ of Spain’s ‘economic improvement’ in order to reduce debts rather than making targets more lenient.

The State and the Social Security office, which funds pensions and, partly, healthcare are responsible for the largest part of the national debt, or €16bn, whilst regional governments account for €4bn.