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Penalising town halls

| Palma |

Radical approaches to financing are needed, as I noted yesterday, and one such approach is the Spanish government agreement with the Federation of Municipalities and Provinces for town hall cash surpluses that are sitting in banks to be "lent" to the government. For all town halls in Spain, this amounts to some 15,000 million euros. The loans will be repaid - eventually. In the meantime, the government will make available a third of this amount for categories of town hall spending which it will be determining.

In seeking to persuade reluctant mayors, the government says that it will pay the interest that town halls pay banks for the privilege of banks looking after money that the government won't allow them to spend. The government also maintains that the 5,000 million euros it will provide will mean increased spending.

It is generous of the government to pay the interest, but what interest will there be if bank deposits are raided? This is one aspect of an arrangement where the logic is passing me by. Another is the seemingly voluntary nature of these loans. How voluntary will voluntary be?

In terms of national solidarity, there is a case to be made for this arrangement. But town halls are going to be experiencing shortfalls in their budget capacities. Would it not be fairer to enter into a compromise whereby a percentage is lent and there is permission for another percentage to be used? All parties would benefit, therefore.

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