17-03-2015Miquel A. Cañellas

While the regional government is anticipating being able to arrive at improved financing arrangements for the islands with Madrid and while the regional finance minister, Catalina Cladera, has held positive discussions with central government, the fact is that, for the moment, there is no change at the national finance ministry. Cristóbal Montoro is, as are all ministers in Madrid, fulfilling an acting function, but the work of government cannot simply grind to a halt because of the impasse over the formation of a new government. Montoro has, therefore, reminded the regional administration that if it wishes to access financing from the Autonomous Liquidity Fund (a specific funding mechanism for the Spanish regions), then Cladera and her government will need to approve a new financial adjustment plan.

If this plan is not forthcoming, then its absence (or its unacceptability to Madrid) will result in application for funding being rejected. And in order for it to be acceptable, it needs to comply with state objectives for budgetary stability and public debt. There are further demands that the plan has to recognise: reduction in the time it takes to pay suppliers to public institutions; developments in the restructuring of the public sector; and commitment to reforms to reduce public debt.

The Balearic government overshot the stipulated level of deficit for 2015 by more than twice the percentage it should have been. The government had insisted that it was left with no option because a great deal of the deficit had been used by the time it took office. The deficit target for 2016 is lower still, and the government's ability to meet this tougher target may well depend upon altered financing arrangements with Madrid. But if the uncertainty at national government persists, it could yet be that there is a new election in June, meaning that the current government of the Partido Popular will have presided, in an acting capacity, for more than half the financial year before a new government is sworn in.  he Partido Popular will have presided, in an acting capacity, for more than half the financial year before a new government is sworn in. 

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