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Spain to Reform Health Care, Education, De Guindos Tells FAZ

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April 7 (Bloomberg) -- Economy Minister Luis de Guindos said Spain will focus on health care and education in its next steps to overhaul the euro region’s fourth-largest economy and fight the sovereign debt crisis, Frankfurter Allgemeine Zeitung reported.

De Guindos said in an interview with the German newspaper “a reform of the public sector, especially health care and education, i.e. a rationalization of spending in the autonomous regions,” is next on the government’s reform agenda.

Health care and education account for about 60 percent of expenditure in Spain’s 17 regions, which handle over a third of the nation’s payments. Prime Minister Mariano Rajoy has asked them to halve their budget shortages this year after they contributed to most of the nation’s deficit slippage in 2011.

Spain’s financing costs will rise should the markets fail to see budget consolidation, the newspaper cited de Guindos as saying. Even so, Spain will manage to get through the current crisis without external help, the minister said.

Spanish borrowing costs have surged since March 2, rising above Italy’s for the first time since August, after Rajoy said a 1.7 percent recession will prevent the nation from meeting its budget deficit target set by the European Union this year.

Still, Rajoy last month presented the deepest budget cuts in over thirty years to trim the shortfall from 8.5 percent of gross domestic product to 5.3 percent this year and 3 percent next year, as requested by euro zone finance chiefs.

Analysts including Antonio Garcia Pascual, chief southern European economist at Barclays Capital, say regional overspending will derail budget cutting again this year unless the central government redefines the health care, education and social services they have to provide.

To contact the reporters on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net; Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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