Eurozone crisis focuses on Andalucía, home to sun, sand and soaring deficits
Senior Spanish officials admitted they were clueless as to the real size of the debt in the biggest region of all
It sells itself to British tourists as a holiday heaven of golden beaches, flamenco dresses and well-stocked sherry bars, but southern Andalucía – home to the Costa del Sol – has now become the focus of worries about the euro.
As inspectors from Brussels demanded answers this week from the Spanish government about how it plans to bring profligate regional governments under control, senior officials admitted they were clueless as to the real size of the debt in the biggest region – party-loving Andalucía.
Antonio Beteta, the junior minister responsible for the regions, claimed that Andalucía was cooking its books and hiding unpaid bills to cover up that debt.
“Andalucía is not being transparent,” he said. “There is a problem of both transparency and credibility.”
Officials in Andalucía reacted angrily to the claims that they were hiding debt. “I demand that the EU inspectors come to Andalucía and look at our accounts, because they are not opaque and there is no hidden deficit,” the region’s finance boss Carmen Martínez told El País newspaper.
Beteta’s words will not trouble British tourists practising their golf swing or soaking up the sun on Andalucía’s Mediterranean beaches, but they must have produced shudders in Brussels – and on the international bond markets that now view Spain as the biggest threat to the euro.
Their worries are centred on the 17 regional governments, which together spend almost four out of every 10 euros of Spain’s public money – as much as bailed-out Greece and Portugal spend together.
Last year, despite Spanish pledges of austerity, the regions failed to cut their joint deficit by a single euro – sending Spain’s total deficit wildly off target and leaving its reputation for budget control in tatters.
That left the country having to borrow some €17bn (£14bn) more than expected, with wary markets demanding ever higher interest rates as what was once one of Europe’s lowest sovereign debts swelled.
A new conservative government led by Mariano Rajoy of the People’s party has so far failed to convince investors it can tame the regions and has seen bond yields soar over the past fortnight.
On Friday 10-year bond yields – the interest rate investors demand to lend money to Spain – were pushed up to breach 6%.
Pictured: Electoral posters in Seville, Andalucia, March 2012. Brussels and international bond markets are becoming increasingly worried about Spain’s indebted regions. Photograph: Marcelo Del Pozo/REUTERS