The central Spanish region of Castilla-La Mancha is “totally bankrupt”, according to the incoming administration of the rightwing Popular party (PP), an accusation that will deepen concerns about Spain’s budget deficit.
The claim has prompted angry denials from the Socialist government.
Spain’s 17 autonomous regions and its more than 8,000 municipalities, with €150bn ($220bn) of accumulated debt between them, have become the latest worry for investors in Spain and its sovereign bonds.
Although the amount is less than a quarter of total public sector debt, regional debt has doubled since 2008. The 17 regions collectively exceeded official budget deficit limits in 2010, and appear likely to do so again this year despite repeated demands for compliance from the central government.
Catalonia, an economy the size of Portugal, says its deficit will be double the target.
Vicente Tirado, a senior PP politician in Castilla-La Mancha, said the region was “totally bankrupt”; owed suppliers such as pharmaceutical companies that provide drugs for hospitals a total of €2bn in unpaid bills; and would have trouble finding the money to pay the region’s 76,000 civil servants next month.
Mr Marín [the pp's economy coordinator in the region] said the PP, which won the region from the Socialists in elections two weeks ago, would shut between half and three-quarters of Castilla-La Mancha’s 95 government owned companies because they duplicated the work of other organisations and were staffed mostly by Socialist party members.
At the national level, Socialist leaders have accused the PP of undermining Spain’s credibility in financial markets for domestic political ends and have noted that several PP-run fiefdoms have also exceeded their deficit limits.
Official data show, however, that Socialist-run Castilla-La Mancha was the worst-performing region last year, recording a deficit of 6.5 per cent of gross domestic product, compared with the limit for that year of 2.4 per cent.
Two opinion polls published on Sunday, meanwhile, predicted that the PP, led by Mariano Rajoy, would win national elections with a 13.8 percentage point advantage over the Socialists, under their leader in waiting Alfredo Pérez Rubalcaba.