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Shock cuts hit healthcare in Spain’s richest region

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Spain’s crisis spending has cut a bit deeper with its richest region, Catalonia, suspending payments this past week to care homes and mental clinics because the money ran out. 

The regional government insisted it was a temporary cash-flow measure, but health workers complained it will hurt the most vulnerable members of society over the coming months.

“These measures affect care centres for the elderly, the disabled, drug addicts and mental health patients,” said Toni Codina, director of a federation of welfare providers in Catalonia.

“We don’t understand how the Catalan government, at a time of funding difficulties, can have concentrated these measures on one of the most vulnerable sectors in Catalan society.”

The regional government insisted it was a temporary measure and all arrears would be paid by the end of the year. The latest measures “are part of a shock strategy” adopted because the regional government will not be able to pay the budgets of certain health clinics for two months, health spokeswoman Susagna Caseras told AFP.

Francesco Homs, the spokesman for the ruling Catalan nationalist party CiU, told national radio: “It is a question of cash flow. I would not count it as one of the cuts.”

Catalonia is on track to record a deficit double the regional limit — 1.3 per cent of gross domestic product — set by the national government this year, despite an austerity budget that aims to save a billion euros by shaving 10 per cent off health spending.

It had already begun closing hospitals in July, but these efforts did not impress foreign investors and the ratings agency Fitch downgraded Catalonia’s credit rating on September 14 to A-minus from A.

The region responded by adopting a law on Tuesday that will oblige it to keep its deficit down to 0.14 per cent of gross domestic product from 2018. The following day it said it would have to suspend payments to care centres.

“This announcement is a prelude to a rather painful few months for most regions as they scramble around to meet their increasingly challenging budget deficit target,” said Raj Badiani, an analyst at IHS Global Insight.  Cutbacks are biting in regions across Spain.

In Madrid the regional government has asked teachers to work longer hours, prompting angry protests by staff who say this lowers the quality of teaching. The Navarra region has announced cuts in health and education that aim to save 190 million euros, and the Balearic Islands plan to cut 800 regional public sector jobs.

“Health care and social security pay-out delays seem to be a popular measure in Spanish regions, because they are partly financed by the federal government,” said Christian Schulz, an analyst at Berenberg bank.

However, investors are watching more carefully than ever to see how forcefully Catalonia, an independent-minded economic powerhouse which accounts for nearly 19 per cent of Spain’s overall economy, will act. “Catalonia may be one of the richest regions in Spain, but not the most responsible in fiscal terms. Catalonia actually needs to do more than many other regions in Spain,” Schulz told AFP.

With a big effort from the regions, the federal government is aiming for a six-per cent national deficit this year as it tries to calm debt concerns that have rattled the entire Eurozone.  “All measures that help Spain meet the deficit target of six per cent (of GDP) for 2011 are helpful, because meeting the target will help the credibility of the country in the financial markets,” said Schulz.

Madrid, Oct 2, 2011 (AFP)