Fitch says Spain regions on track for 2012 deficit targets

MADRID Tue Dec 11, 2012 2:25pm EST

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MADRID Dec 11 (Reuters) - Ratings agency Fitch said on Tuesday that Spain's 17 autonomous regions were set to achieve their joint deficit target for this year, but cautioned the outcome was not guaranteed.

Spain's regions are at the heart of the country's economic crisis, with investors concerned whether Madrid can bring the overspending territories to heel.

The regions, which missed deficit targets in 2011, reported a joint deficit for the third quarter equivalent to 0.93 percent of gross domestic product, Fitch said, meaning they are on track for the year-end target of 1.5 percent of GDP.

"Spanish regions are implementing sharp reductions in operating expenditure and capital expenditure, which is positive, even if not all of them will hit their deficit targets," Fitch said in a statement.

Spain's autonomous regions manage their individual healthcare and education spending. Their joint deficit stood at 9.8 billion euros ($12.7 billion) for the first nine months of the year, compared to 23.4 billion euros at the same time in 2011.

Capital expenditure tumbled 26 percent year-on-year to 7.6 billion euros as local governments put big projects on hold to meet targets, while revenues increased 2.3 percent.

Fitch said the increase in revenues was under threat from Spain's shrinking economy and also warned that the final reading for the first nine months of 2012 could change because of accounting adjustments.

Spain's Treasury said on Tuesday it would not use the state lottery to raise cash for a regional liquidity fund set up earlier this year to support the autonomous territories after total payouts for this year came in around a third less than expected at 12.6 billion euros.

Nine regions have tapped the fund so far. Fitch said the Navarra and Murcia regions had already exceeded the 1.5 percent deficit target and meeting the goal will be "challenging" for Catalonia, Andalusia and Extremadura.

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