Spain’s Rajoy Backed by People’s Party Regional Leaders on Cuts

Spanish Prime Minister Mariano Rajoy won the backing of his party’s regional leaders for austerity plans that include reduced spending on health and education.

People’s Party chiefs from regions including Madrid, Valencia and Galicia agreed to reorganize their administrations, avoid duplication of functions between different levels of government and put deficit targets into budget laws, Maria Dolores Cospedal, deputy head of the party, told reporters in Madrid today.

“We need to manage a reality that is very tough,” Cospedal, who is also the president of Castilla La Mancha, said after a meeting of national and regional party leaders. “This shows the government’s commitment to meeting its pledges to our EU partners and Spanish society.”

Rajoy is struggling to convince investors that his government can avoid a bailout as his spending cuts plunge the economy into a second recession since 2009. Spanish credit- default swaps surged almost 22 basis points to 502 yesterday, surpassing the previous record of 493, according to CMA.

All but one of Spain’s regions, which control health and education spending and hire about half of all public workers, missed their deficit targets last year, pushing the national shortfall to 8.5 percent of gross domestic product compared with a target of 6 percent. Andalusia, which has Spain’s highest jobless rate, and Catalonia, the biggest regional economy, aren’t covered by the pact announced today because they are controlled by rival parties.

Prosperity, Welfare, Jobs

“We’ve all set out our commitment to the plan of reforms the government is implementing,” Madrid’s regional President Esperanza Aguirre said. “We know that although some are painful, it’s the only way to generate prosperity, welfare and above all jobs, which is what Spain needs more than anything.”

Regions will prioritize public services so that they can deliver spending cuts while guaranteeing “basic” services, Cospedal said. As an example, she said her region had eliminated free public transport for those over 65 to ensure they could maintain basic healthcare services for seniors.

“If the government doesn’t set priorities we won’t be able to maintain basic services,” she said. “We need to start doing things how they should be done.”

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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