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Spain Unpaid Bills May Haunt Rajoy as States Crave Liquidity - Bloomberg

Spanish Prime Minister-electMariano Rajoy is set to inherit billions of euros of unpaid bills along with the euro region's third-largest budget deficit.

Spain's 8,000 municipalities and 17 semi-autonomous regions are suffering from a cash squeeze as many are shut out of markets, prompting them to delay paying suppliers. Regions' debt rose 1.5 percent to 135 billion euros ($176 billion) in the third quarter the Bank of Spain said today. Catalonia had the highest debt, at 39.3 billion euros.

Companies are being paid 157 days late on average, about three times the legal payment delay, according to the Platform Against Late Payment, a federation of employer groups, and pharmaceutical companies say they are owed 5.83 billion euros by public hospitals. While Rajoy has pledged to help local administrations pay suppliers, that may add to the state's debt burden and undermine efforts to lower sovereign borrowing costs.

"Rising commercial debt means there is more deficit and that the risk of missing deficit targets increases," said Marisol Blazquez, an analyst at the ratings company Moody's Investors Service in Madrid. "Apart from the Basque country, the Madrid region and Galicia, all the regions we rate are having liquidity issues."

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Sun Dec 18th, 2011 at 12:03:47 PM EST
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