REUTERS

MADRID

SPAIN is planning to issue around 30 billion euros ($39 billion) in a new kind of bond that will replace regional issues, in a move to cut debt servicing costs, El Mundo newspaper reported on Sunday without citing sources.

Overspending by Spain’s 17 autonomous regions, which manage their own health and education budgets, was one of the key reasons why the country missed a deficit target by a substantial margin last year. They pay dearly for individual bond issues.

An Economy Ministry spokeswoman would not confirm the report, and said the main tools the government was using to manage the regional budgets were bridge loans to help them pay suppliers and lines of credit from the state-run lending facility, the Official Credit Institute (ICO).

“No region will be allowed to fall but what is important is that they achieve their budget targets,” she said.

Spain in June will launch a massive programme of the so-called ‘hispanobonos’ — state-backed bonds that replace regional issues and cut their debt issuance costs thus easing Spain’s overall fiscal burden, the newspaper said.

Credit rating agency Standard & Poor’s downgraded seven Spanish regions on Friday, cutting the industrial eastern region of Catalonia by four notches to just above junk status.

This makes it harder and more expensive for the regions to access funding.

The heavily indebted region of Valencia, brought low by excessive spending on grandiose building projects and hosting international sporting events during Spain’s boom years, paid highly for a six-month bill.