Spain’s Cabinet approved new pay limits at public companies and reduced board members before a full overhaul of the sector aimed at curbing spending to meet European Union budget pledges.
“The Cabinet will examine in a few weeks the first phase of a restructuring of the state-owned companies,” Deputy Prime Minister Soraya Saenz de Santamaria told reporters after the weekly meeting in Madrid today.
Spain’s two month-old government is trying to slim down state spending that ballooned during the decade-long property boom amid a surge in tax revenue. The People’s Party government, seeking to reduce the budget gap, is trying to restore investor confidence to tame borrowing costs and shield Spain from debt-crisis contagion.
Saenz said Spain expects major savings from restructuring central government-owned companies, which will be downsized, sold or scrapped if their business can be taken over by public administrations.
The government will also encourage regions and town halls to restructure their own companies, Saenz said, as this will be a condition to get help from Madrid to meet their funding needs.
Public companies linked to the central government have accumulated debt of 32.3 billion euros, according to the Bank of Spain, and European Union rules don’t require that borrowing to be included in public-debt data. Regions and city halls have taken on 24.9 billion euros of debt, Bank of Spain data show.
“These kinds of companies and foundations, which in the end aimed to avoid the controls of the central government, have blossomed, to put it nicely, and it’s not good practice,” Economy Minister Luis de Guindos said yesterday said in an interview with RNE.