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Regional Economies In Focus : Castilla-la-Mancha

Thu 1st Sep 2011

The Autonomous Region with the highest level of deficit in Spain, Castilla-La Mancha, has vowed to make the necessary cuts without raising taxes.

The PP Governed region of Castilla-La Mancha, which had a budget gap of 6.5% of GDP for 2010, intends to spending by 1.7 billion euros to arrive at of 1.3% of GDP by 2012.

The regional President made the pledge to reporters earlier today, promising that the PP administration would address the problems left behind by the previous administration.

Spain's regions account for more than one-third of public spending, as they assume responsibility for managing health care and education, and are therefore crucial in reducing the deficit from last year's 9.2% to a projected 6% by the end of 2011.

The failure of Central government in reigning in the regions, whose spending is considered by many to be 'out of control', has played a major part in Moody's credit ratings agency and many other financial institutions losing confidence in the country's economy.

Given that Castilla-La Mancha have pledged not to increase taxes, saving must therefore be made by reducing public spending. The President proposes that public sector recruitment will be put on hold for 2012, as will any new infrastructure projects. Furthermore, teachers will be requested to teach two extra hours per week in high schools and subsidies for unions are to be brought to an end. Several commissions and agencies run by the regional government will be wound up, including the competition commission, tourism agency, its office in Brussels and the local ombudsman.

Further cost-saving initiatives include reductions on the maintenance costs of public buildings, economising of fuel used by public vehicles and call mobile phone usage, as well savings on printing costs. Existing buildings will be utilised as office space instead of the need for renting extra space, and any real estate or other assets that are surplus to requirement will be liquidated.

However, the PP administration only accepted the reigns from their PSOE predecessors in June of this year, by which time the regions' yearly deficit had already surpassed 4% of GDP. Perhaps the PP can be forgiven for claiming to have inherited a problem that was not of their causing.

The region is negotiating with banks to pay suppliers to whom it owes more than 2.5 billion euros. The region's debt amounts to 6.1 billion euros, or 16.9% of GDP, according to the Bank of Spain.

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