The debt mountain

ALMOST a fifth of the Balearic budget for next year will go towards repaying the enormous Balearic debt. The Balearic government said yesterday that one in every five euros in the budget goes to the banks. Earlier this month Balearic leader Jose Ramon Bauza said that two million euros a day are spent on debt repayments. This is an enormous sum if you take into account the relatively limited money-raising powers the Balearic government has at the moment.

It is quite amazing the debt mountain which has been run-up over recent years. The government of Bauza has pledged to work hard to cut spending and in turn cut the debt. A large number of Balearic government creditors have still not been paid and the government has said that they inherited a local institution which was close to bankrupcy. Bauza has already made 800 job cuts and more could follow; grants to local associations have been slashed. The Balearic government hopes that it will be the private sector which creates the jobs needed by the Balearics. In some ways this has proved successful because the islands were the only area in Spain which actually saw a fall in unemployment in September. However, the jobless rate is expected to rise quite dramatically as the summer season comes to end and hotels and businesses involved in tourism start closing their doors. There are many challenges ahead for the Balearic government but repaying the debt is key.