ABSTRACT
The markets have been quite happy to lend to the regions. Although regions are a fairly new phenomenon, they represent a relatively safe investment. Some, such as those in Spain, were born without debt. This means they have the ability to borrow extensively before reaching what might be described as saturation point. Starting from zero, the Spanish autonomías have been able to continue accumulating debt at a high level in comparison with their revenues. Significantly, this also gave the regions a bargaining counter in their negotiations with the centre. With the Spanish Government increasingly worried about deficit spending the autonomías agreed to voluntary deficit controls only in exchange for changes in block funding mechanisms. For regional borrowing to be curtailed, concessions are required on the part of Member States, and additional financial autonomy and responsibility must be granted to the regional tier. This is not necessarily something that all regions will relish.
