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Castilla-La Mancha in defecit worries

Mon 6th Jun 2011

Following their recent win in the latest regional elections, the right-wing Partido Popular, who ousted the Socialist PSOE as the regional administration after over 30 years in office, has declared the region of Castilla-La Mancha to be on the verge of bankruptcy.

Spain's regional and local governments are reported to have a combined 150bn of debt, which is yet another of many causes for concern for would-be investors in the country.

The Financial Times at the weekend reported how regional debt has doubled since the economic crisis began in 2008, with the 17 regions exceeding official budget deficit limits last year, and looking likely to ignore government demands for austerity and surpass budgets once again this year.

The Castilla-La Mancha region is the worst performing region, owing suppliers such as medical suppliers a total of 2bn in unpaid bills; and is also likely to have problems paying their 76,000 civil servants next month.

The new PP administration have accused the previous Socialist government of irresponsibility and even alleged that unpaid bills had been destroyed to hide the evidence. The new regional government has also spoke of the need to close between half and three-quarters of Castilla-La Mancha's 95 government owned companies because they performed the work of other organisations and were staffed mostly by Socialist party members.

For their part the previous administration called the allegations totally untrue and in turn accused the PP of blaming the PSOE to make it easier for them to justify hefty cuts in public spending.

In 2010 the deficit of the region came in at 6.5% of GDP compared to a target set by central government of 2.4%. The country as a whole was able to meet its target of 9.3% due to the efforts of central government, with many of the regions performing badly.

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