Debt accumulated by Spain's regions during the first quarter has hit a historic 11.4 percent of the GDP, according to Bank of Spain figures released on Friday.
Spain's 17 regions owe some 121.420 billion euros with Catalonia leading the pact with 34.323 billion euros in outstanding bills. The Catalan figure represents 28 percent of the total debt calculation. Valencia comes in second owing 17.895 billion eurosfollowed by Madrid at 14.111 billion euros. All are governed by the Popular Party.
Despite the central government's insistence on belt-tightening measures, Friday's figures reflect concerns the regions have yet to rein in a spending splurge. At the end of 2010, regional debt stood at 10.9 percent of GDP. But the latest figures show that regional debt has swollen by more than 26 percent since then. The EU has said legal limits should be imposed on regional budget deficits.
The Canary Islands, governed by the Canaries Coalition, and Galicia, ruled by the PP, were the only two regions which were able to contain their spending and keep debt levels stable.
Following the May 22 local races, the problems facing Spain's cash-strapped regions have been the focus of international investors and analysts as they try to gauge whether Spain can avoid a European Union bailout.
Mike Riddell, manager of the M&G International Sovereign Bond fund in London, told Investor Week on Friday that Spain is facing the same danger of default as Greece, Ireland and Portugal. "For Spain's debt levels to stabilize, either Spain's borrowing costs will need to halve or it will have to run a large sustained budget surplus to make up this gap."
There was some good news, however. The Spanish stock market closed higher along with other European bourses, buoyed by the news that Germany and France have agreed terms for a new aid package for Greece. The Ibex 35 was up by 2.18 percent, closing on Friday at 10,135.20.