ABSTRACT
The constitutional restrictions meant that the Spanish Government was unable to alter Ley 38/1988, which regulated regional borrowing. Although this legislation imposed restrictions on the autonomías, the practical impact was minimal. Under the legislation, regional borrowing is restricted to capital investment projects while total debt servicing costs cannot exceed 25% of the total regional receipts for the previous year (OECD, 1993, p 71). As the autonomías inherited no debt, this allowed them to borrow substantial sums before the 25% limit was reached. Furthermore, the total receipts used for the purpose of assessing this limit included the portion of regional funding which is passed on to the local authorities automatically. The region’s financial resources were thus artificially boosted for the purposes of this legislation (OECD, 1993, p 74).
