Spain's finance minister, Maria Jesús Montero

Spain's finance minister, Maria Jesús Montero.

01-10-2020J. J. Guillén

The Spanish government, having been defeated in Congress when its proposal for town halls to lend it money from their budget surpluses was voted down, has made a complete about-turn in the rules regarding these surpluses.

Budgetary stability legislation greatly restricts town hall spending, but the finance minister, Maria Jesús Montero, has announced that the rules are to be temporarily suspended for this year and 2021. The European Union, which was instrumental in making Spain adopt the budgetary stability rules because of the financial crisis, has approved the relaxation.

Montero told Congress that this is "good news for local authorities which, until now and by law, could not use their surpluses". They will now be able to do so in order to pay for public services and "to aid the economic and social reconstruction of the country".

The relaxation of the spending rules is due to be explained to regional government ministers at this coming Monday's Council of Fiscal and Financial Policy. Montero has added that there will be a special fund for town halls which don't have surpluses, while there are also negotiations regarding a decree law designed to improve local authority liquidity.

Although there is to be a relaxation, the government stresses that financial control measures, necessary for balancing public finances, must continue to be applied.

In the Balearics alone, town halls have something around 600 million euros of accumulated budget surplus cash that has been sitting in banks. Alcudia has far and away the highest amount of this cash - in the region of 90 million euros.

Alcudia, as with most other town halls in the Balearics, rejected the idea of lending the surplus to the government, arguing that the law which established restrictions on the spending of surpluses should be scrapped. The government's measure doesn't go as far as that, but with the EU having given its blessing, it has come round to the town halls' way of thinking by suspending the rules for now.

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