Controversial decision from the Spanish government to ban any loans by municipalities from January 2011.
The socialist government of Rodriguez Zapatero passed last week a law with immediate effect that forbids local governments to contract debt to finance investment. The decision, which was adopted without prior notice or debate, came as a surprise for all mayors of large and small cities, and seriously compromised the 2010 budget execution. The reaction from local governments – including large cities governed by socialist mayors like Barcelona or Zaragoza – was unanimous and after a few days, president Zapatero has had to rectify. The ban will come into force from January 2011.
This measure is part of the blunt strategy of the Spanish government to reduce public deficit, a common strategy to most of the EU member States, with deep cuts in public expenditure. What is surprising is that such a drastic measure (the ban on any kind of loans) is applied to only one of the three levels of public administration in Spain, the local one, without affecting the Central State or Autonomous Communities (regional governments).
In a previous contribution on the impact of the crisis at local level, we mentioned that the aspirations for greater financial devolution would be muted as a side effect of the fight against public deficit. However, we did not expect that the hardest efforts were to fall on the shoulders of the weakest: local governments.
URBACT Lead Expert