(Repeat for additional subscribers)
April 4 (The following statement was released by the rating agency)
The improved operating performance by Spain's autonomous communities in 2013 is broadly in
line with central government requirements, meaning that the central government will remain
willing to provide timely liquidity support if needed, Fitch Ratings says. This willingness is
reflected in the 'BBB-' ratings floor for Spanish autonomous communities, which
we introduced last year.
Preliminary accounts for 2013, released by the Ministry of Finance and Public
Administration, include a variety of fiscal data showing that the aggregate
fiscal deficit narrowed to 1.26% of GDP. This is down from 2.23% a year earlier.
The data set is complex and the accounts will not be finalised until later this
year and may be adjusted, and several regions appear to have missed the
individual deficit targets that central government set for the first time last
Nevertheless, these regions are also pursuing fiscal consolidation, and overall
fiscal results have continued to improve. Even where individual fiscal targets
have been missed, this does not affect the ratings floor, as we think that
central government will recognise efforts to narrow deficits and reduce spending
in 2013, in the face of almost flat operating revenues.
Falls in both capital and operating expenditure have reduced deficits. Staff
costs in particular have fallen in recent years. However, a conversion of
commercial liabilities into financial debt meant that 2012 accounts included
spending from previous years that had not necessarily been reported. This helps
account for the sharp (7.3%) drop in operating expenditure in 2013 versus the
Overall operating performance improved but remains weak, with an aggregate
negative current balance. Only a small share at best of debt servicing
(principal and interest payments), which represents 18% of the autonomous
communities' aggregate 2014 budget, will be met from the operating balance, with
greater reliance on additional debt issuance. This will add to pressure to cut
operating expenditure further, which may be difficult given the extent of the
cuts already made.
Nevertheless, we think that operating performance can continue to improve, and
that central government will be satisfied with the decrease in operating and
capital expenditures seen in 2013. The EUR23bn Regional Liquidity Fund (FLA) is
available in 2014 to help the autonomous communities meet refinancing needs at
reasonable cost if other funding sources are not available.
We also view the two-year old Budgetary Stability Law (BSL) as an important
mechanism to help Spanish regions meet central government's fiscal targets. The
FLA and BSL were both important factors in introducing our ratings floor.
Our full commentary on the results will be available in a Special Report to be
published later this month. The report will be available at