Central government is going to reduce its funding to the Balearics by 2.11 percent, or 42 million euros which mean that the Balearics government will receive 1,942 million euros from Madrid for next year as opposed to the 1,984 it received this year.
The decision has come as a surprise blow to the Balearics considering that the region, like the rest of the country is still gripped by the recession.
However, central government maintains that Palma still owes central government money dating back to 2008 and 2009 and that next year, the revenue from taxes and VAT will fall in the Balearics, so the Minister for Finance in Madrid, Cristobal Montoro is both calling in outstanding debts and adjusting for a fall in fiscal revenue.
Last week, the Balearics government said that the local economy had bottomed out and was showing clear signs of recovery but it is not going to happen next year and until the green shoots are clearly visible, the Balearic government needs all the money it can get from Madrid.
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