Balearics and other regions told to improve budget transparency

SPAIN will press regional governments, which control more spending than the central administration, to improve transparency over their budgets, Prime Minister Jose Luis Rodriguez Zapatero said.

Finance Minister Elena Salgado will call a meeting of regional economy chiefs before the end of the month “with the objective of increasing coordination and transparency over budget information,” Zapatero told lawmakers in Parliament in Madrid yesterday.

Spain's regions manage twice as much spending as the central government, with control over health and education, and they employ more than half of all public workers. Bank of Spain Governor Miguel Angel Fernandez Ordonez said on October 5 that the regions may pose the greatest risk to Spain's budget goals and that it is “urgent” to correct their “lack of transparency.” While the central government reports budget data monthly, aggregated figures for the regions are available quarterly and with a lag of about four months.

Spain is trying to stem a surge in its borrowing costs prompted by contagion from Ireland's fiscal crisis. The extra yield on Spanish debt compared with German equivalents has increased 1 1/2 times since the end of July as Portuguese and Irish spreads set euro-era records.

The Spanish spread today was 202 basis points, unchanged from yesterday, after Irish central bank Governor Patrick Honohan said he expects the country to ask for a bailout from the European Union and the International Monetary Fund.

Zapatero also said the government will present a bill to overhaul the public pension system in the first quarter of 2011, after asking a parliamentary committee on pensions to conclude its report on possible changes by the end of the year. “I want to say once again that there is no going back on this commitment,” Zapatero said.