Monday, January 16, 2012

SPAIN'S REGIONS need tough love treatment:

Spanish regions are like teenagers pushing their parents to the limit. The country’s 17 autonomous regions, which are responsible for education and health (over 50 percent of total government spending), missed their fiscal targets again last year, and caused the country to miss its own. Madrid faces the same dilemma as the European Commission when it comes to ensuring compliance of member countries with the stability pact: how to force the regions to follow the rules?

The government’s sticks so far haven’t been too effective. It has prevented some regions from issuing long-term debt and demanded rebalancing plans from overspending regions. But instead of cutting back, the regional governments have delayed billions of euros in payments to suppliers and issued expensive, one-year bonds geared to retail investors.