A big debt

IT wasn´t long ago that the Balearics were known as one of the richest areas of Spain with government coffers full of cash thanks to tourism and the real estate boom. Yesterday, it was revealed that the islands have a debt mountain of 4'500 million euros.

An incredible amount. What makes matters worse is that the majority of the debt was run-up in the last four years. It means that the new Balearic government will have little option but to introduce major spending cuts at a time when the local economy is still recovering from the recession.

The debt is close to 17 percent of the total Gross Balearic Product. The money spent on the interest payments alone would solve many of the islands´ ills. Many of the Spanish provinces, the Balearics included, are in deep financial problems and it is starting to cause some concern in Madrid, which is under orders from the European Union to reduce its budget deficit. The Spanish government should really have controlled the financial excesses of the regional governments. In the case of the Balearics, the new government, is being forced to borrow yet more money to help the local economy. Many local authorities, even the Balearic parliament, are in serious economic difficulties. Already the local government has been forced to postpone payments to some of its creditors. But what is clear is that governments, local authorities and even council should not spend more than they earn. It is as simple as that.