Rating agency Moody's said on Tuesday that Spain's fiscal outlook remained challenging despite recently softened deficit targets. The announcement comes when the Secretary for Public administration admitted that 4.000 ‘ayuntamientos’ town councils in Spain are not financially viable.
“While the revised fiscal target for 2012 is more realistic than the previous one, Moody’s believes that the Spanish government will still need to implement a substantial fiscal adjustment this year. Several measures have already been identified, but these will not be sufficient to reach the overall budget deficit target”, read Moody’s statement.
“The easier targets do not affect the country's A3 government bond rating with negative outlook because Moody's had already incorporated a likely deviation from original fiscal targets and a slower pace of fiscal consolidation into its analysis”, the ratings agency said.
The ratings confirmation came after Brussels allowed Madrid to relax its annual public deficit target to 5.3% of GDP in 2012 and 3.0% in 2013.
That came after the country missed its own goal of 6.0% in 2011, running up a shortfall that hit 8.5 per cent of GDP.
Meanwhile Spain’s Secretary of State for Public Administration Antonio Beteta declared that there are 4,000 ‘ayuntamientos’ town councils in Spain that are not financially viable.
Beteta declared that the merger and restructure of these local authorities which range from the Mancomunidad entities to provincial ‘diputaciones,’ into larger units is the way forward.
He said half of Spain’s 8,000 ayuntamientos “are not financially viable because their populations are far too small to be able to deliver services efficiently”.