Spain May Privatize Public TV as Rajoy Reins in Regions

Spain’s Cabinet passed a bill to allow regions to sell public broadcasters while approving cuts to health and education, as the People’s Party government tightens its grip on the budgets of regional administrations.

Regions will be able to choose how to run their public broadcasters, and if they keep them the channels won’t be allowed to run deficits, Deputy Prime Minister Soraya Saenz de Santamaria told reporters in Madrid today.

The Cabinet also passed measures designed to save regions 10 billion euros ($13 billion) in health and education including higher university fees and greater taxpayer contributions to the cost of drugs.

Spain’s four-month old government has increased taxes for wage earners and companies, reduced subsidies and knocked 54 percent off the Foreign Ministry’s budget in its attempt to reorder public finances. Prime Minister Mariano Rajoy is now focusing on the regions, which spend most of their budgets on health and education, and he’s created legislation that allows the government to intervene when the states flout budget rules.

The bill on regional broadcasters will be sent to Parliament for urgent approval, Saenz said. The measures on health and education, which include limits on foreigners’ use of state health care, were set with regional leaders this week.

Spanish bond yields rose to 5.967 percent today from 5.925 percent yesterday, swelling the extra yield compared with German borrowing costs to 426 basis points.

Regional Costs

Regions are crucial to the government’s efforts to rein in the deficit as they manage hospitals and schools and hire about half of all public workers. All but one region missed its budget goal last year, pushing the national shortfall to 8.5 percent of gross domestic product and topping the 6 percent target.

The government is struggling to restore investors’ confidence, even as Rajoy undertakes the deepest overhaul of legislation since the nation returned to democracy three decades ago. Rajoy has revamped labor rules, tightened the budget law, and given the central government unprecedented power to intervene in regional administrations when they fail to meet budget commitments.

The People’s Party, which has the largest majority that any party has secured in the national parliament since 1982, also controls 11 of the 17 regions, strengthening Rajoy’s ability to impose cuts. Catalonia, the biggest region, is run by a nationalist party that seeks more autonomy from Spain, and the third-biggest, Andalusia, is run by the Socialists.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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