The amount of debt repayment that the regional government will need to make provision for until its administration concludes in 2019 is put at 2,407 million euros, added to which are over 400 million euros of bank interest. In other words, over the next three years the government will have to spend 2.5 million euros per day in order pay debts that are owed to the central government and banks.
Given the scale of these repayments, the government’s room for manoeuvre is limited. It lacks the financial resources and indeed the capacity to generate more, beyond the likes of the tourist tax. This tax alone, were it destined for debt payment, would have to be collected for eight years in order just to pay off current interest.
In 2016, the government’s budget has set aside 713.9 million of repayment plus 156 million interest provision. This will rise to 832 million in 2017 with a further 138 million interest. By 2018 the repayment will be up to 861 million, albeit that interest should come down to 121 million.
The government, in order to try and avoid being suffocated by this debt, is wanting to negotiate debt deferral with Madrid.
This would be more complicated with the banks, but finance minister Catalina Cladera is reasonably hopeful of it being less so with central government. Of the total 8,260 million euros of debt held by the regional government more than half of it is with Madrid. “We cannot ignore the law, so this debt has to be paid,” she has said of the money owed to the banks. Where Madrid is concerned though, the regional government will look to renegotiate the debt after the forthcoming general election.
While Cladera looks to re-arrange the debt commitments, the government continues to pursue a policy of seeking an improved system of financing. Although the current system is an improvement on the previous arrangement, it is still insufficient and positive benefits from it take two years to filter through the system. Cladera’s ministry is, therefore, working on a proposal for reform that will be presented to central government after the election. There is no fixed date for this, but all Spain’s regions believe that negotiations on financing are urgent in order to arrive at a new system for 2017.
The regional finance ministry has upped its own budget by 10% for next year so that it can work on preparing the ground for these negotiations. The view of the ministry and of the regional government is that Madrid should reduce in a progressive manner the great dependence and indebtedness that regions have where central government is concerned. Cladera believes that the regions should have greater autonomy so that they can fix their priorities which, in the Balearics case, are of a social nature.
The content of comment is the opinion of users and netizens and not of mallorcadailybulletin.com.
Comments contrary to laws, which are libellous, illegal or harmful to others are not permitted');
mallorcadailybulletin.com - reserves the right to remove any inappropriate comments.
Please remember that you are responsible for everything that you write and that data which are legally required can be made available to the relevant public authorities and courts; these data being name, email, IP of your computer as well as information accessible through the systems.