MADRID, July 10 A row within the Spanish
government over how to plug a power tariff deficit escalated on
Wednesday when the treasury ministry dismissed assertions that a
deal had been struck on how the hole would be financed.
The 26-billion-euro ($33 billion) deficit, created by years
of mismatched regulated electricity prices and costs, has become
a growing headache for recession-hit Spain, which is likely to
slash renewable energy subsidies as part of sector reforms.
Earlier on Wednesday Industry Minister Jose Manuel Soria
said in a radio interview that the treasury ministry had agreed
to finance part of the tariff deficit through the state's budget
as part of long-anticipated reforms of the country's
dysfunctional energy sector.
That would have paved the way for the likely approval of the
reforms by the government this week, after these were initially
expected in June.
But a treasury ministry dismissed Soria's announcement,
bringing the spat out into the open and heaping more uncertainty
onto the timetable for the reforms.
While the government is thought to be most likely to
eventually finance part of the deficit, the treasury ministry is
keen to control any extra spending as it struggles to meet tough
EU-agreed deficit targets.
"There is no deal sealed to take on the costs of the energy
reform," the source from the treasury ministry said, on
condition of anonymity.
It is now unclear if the reforms will be approved at
Friday's cabinet meeting or at a later stage.
The reforms are likely to hit companies in the sector hard
as well as banks which have financed them. Electricity giant
Iberdrola, Endesa, Gas Natural as
well as solar companies Acciona and Abengoa
are expected to suffer most.
In addition to the deficit that has already accumulated, the
Spanish government estimates that it will continue to grow by 4
billion to 5 billion euros a year unless measures are taken.
Soria said part of this fresh deficit would be covered by
the state's annual budget, though he had not detailed by how
much and what form the support would take.
"As part of this reform, part of this deficit which has not
yet been covered will also be met by the treasury ministry," he
told Onda Cero radio, adding that the terms of a deal between
the Industry and Treasury ministries had been agreed.
He had said on Tuesday that the reforms would likely be
submitted for approval by the government on Friday.
Spain's treasury ministry had already pitched in with
support to plug the tariff deficit before, coughing up 2.2
billion euros in extraordinary financing to help cover some
subsidies in the system, which was booked in the 2013 budget.
Utilities have until now funded the deficit, and the
government has been gradually paying them back through the
issuance of state-backed bonds. ($1 = 0.7821 euros)