Brussels, 01/08/2012 (Agence Europe) - Regional authorities in Europe are building up dangerously high levels of debt, according to Standard and Poors. A report published by the ratings agency on 30 July predicts that Western European regions will borrow €276.6 billion in 2012, 27% more than in 2011, taking local authorities' debt to €1,500 billion by the end of the year.
Standard and Poors examined 102 regional budgets from 12 Western European countries (Germany, Spain, United Kingdom, Switzerland, France, Sweden, Norway, Denmark, Italy, Austria, Belgium and Finland). Their level of indebtedness could be as high as €1,500 billion in 2012, up 6% on last year. The ratings agency attributes this rise principally to the weakness of regional finances in Spain and the refinancing needs of the country's public administrations. The current reform of housing taxation in the United Kingdom is also having an effect. The impact is likely only to be limited, however, given the transfer of debt towards British local authorities.
Spain and the UK are among the five countries of Western Europe whose regions are most heavily indebted, alongside Germany, Switzerland and France. Standard and Poors is less critical of the borrowing of German local authorities, which it expects to continue to reduce their indebtedness, thanks to robust growth in fiscal revenue. This should also be the case in Italy, where local authority borrowing is expected to continue to fall as a result of tighter fiscal rules, though more slowly than in previous years. Standard and Poors is more sanguine with regard to France, deeming the budgetary performance still to be robust and likely to fall only marginally from 2012. This is down to more difficult access to bank loans and an improvement in local authorities' operating margin (operating revenue related to expenditure). (MD/transl.rt)