Extraordinary mechanisms for payment of general government suppliers in Spain

Abstract

The economic crisis was initially associated with an increase in regional and local government payment periods and trade debt. Since 2012, central government has approved various extraordinary mechanisms for the payment of local and regional government suppliers that have signifi cantly reduced the stock of trade debt and the average supplier-payment periods attributable to these levels of government. Successive plans have helped unblock payments and channel funds of close to €67 billion towards the private sector in somewhat less than three years. And against a background of economic weakness, fi scal consolidation and diffi cult conditions of access to lending, it is believed this has provided a considerable impetus to activity that has helped mitigate some of the adverse effects of the economic crisis. In parallel, the roll-out of the plan has entailed a substantial increase in local and regional government debt vis-à-vis the State. To prevent inappropriate incentives for the conduct of local and regional government from arising, the funding mechanisms agreed on require compliance with certain adjustment plans