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Spain’s Public-Sector Revamp Delay Derails 2013 Budget Plans

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Feb. 15 (Bloomberg) -- Spending cuts included in budget plans Spain sent to the European Commission last year won’t be made in time to reduce the deficit in 2013 as a public-sector overhaul meant to be implemented in 2012 runs late.

Spain’s Cabinet examined a second draft plan of the law on the rationalization and sustainability of local administration today, Deputy Prime Minister Soraya Saenz de Santamaria said in Madrid. The law was to have been approved in the last quarter to generate 3.5 billion euros ($4.7 billion) in savings this year.

Prime Minister Mariano Rajoy wants euro finance ministers to relax Spain’s budget goals as it fails to tackle the second-largest shortfall in the region amid a sixth year of an economic slump. The European Commission will make recommendations in May after it updates growth forecasts next week.

The public-sector revamp will generate 7.13 billion euros of savings over three years, Budget Minister Cristobal Montoro told reporters. He didn’t provide a per-year breakdown. The plan, which must be sent to the highest administrative body before approval by the Cabinet and parliament, will redefine how power is shared between regions and town halls, he said.

“This way we’ll obtain more savings as well as more voluntary participation in politics without compensation,” Montoro said. A modified version of the text introduces a one-year transition period before regions’ and town halls’ powers are redistributed and cuts local politicians’ pay rather than reducing their number, he said.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

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

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