Alex Trelinski
SPAIN’S government plans to write off €83 billion of debt from the country’s regional governments before the end of the year- enabled by high GDP figures and some political necessity.
The write-off will aim to cancel at least 19% of each region’s debt going up to maximum of 50%.
Finance Minister, Maria Jesus Montero, said the measure will apply to loans owed to the national government by regional administrations and ‘will benefit all regions’.
READ MORE:
The plans are seen as wooing the continuing support of Catalan separatist parties in Congress, where the PSOE-led coalition government under Pedro Sanchez is in a minority.
There had been plans for a debate over whether Sanchez should face a confidence vote, but the Catalan Junts party that called for it, withdrew their motion after the debt announcement.
The leader of main opposition party- the conservative Partido Popular- Alberto Nuñez Feijoo, described the write off plan as a ‘trap’.
“Nothing is forgiven. The debt is transferred to another place,” he said.
“If you want to talk about restructuring a debt but without forgiving it, that is something we are willing to discuss,” Feijoo added.
In recent years, waiving part of Catunlya’s debt to the national administration has been a key demand of the region’s two main separatist parties — ERC and Junts, who are both trying to get more out of Sanchez.
The proposal will also require approval from Congress, and then the 17 regions will have to voluntarily accept the write-off, according to Montero who expects approval by the end of the year.
“The central government’s debt and the regional governments’ debt all form part of the same debt ratios, so there shouldn’t be any type of uncertainty in financial markets,” Montero said.
“We don’t forecast any changes in the perception of Spain’s finances”, she added.
“Many regions are over-indebted because of the borrowing they had to take on during the 2008-2012 financial crisis”, she added.
Spain’s economic growth is forecast to be well above the rates of other eurozone countries this year, including traditional power houses France and Germany.
