Spanish town and city councils, struggling to pay their suppliers, yesterday met the government’s deadline and presented to the Treasury Department lists of outstanding invoices.
The initiative is part of a central government scheme to create a Credit Line of up to 35 billion euros for municipal governments to clear the backlog of bills to suppliers, many of whom have not been paid for months.
Cristobal Montoro, the Treasury Minister, claimed yesterday that “most of the municipal governments have adhered to the Credit Line”.
Although the minister did not specify just how much supplier debt is on the balance sheets of the town councils that have adhered to the scheme, the chairman of the Spanish Town Council Federation, Fernando Martínez Maíllo, suggested today in the El País newspaper that it may be as high as 17 billion euros.
Madrid city council topped the bill with 1.02 billion euros owed for street cleaning, rubbish collection, and other municipal services and supplies.
Barcelona city council was one of few to reject the Credit Line. The mayor of Barcelona, Xavier Trias, claimed that the council is up-to-date with all but four suppliers.
It is still unclear how the financial mechanisms of the credit line will work. The El Confidencial newspaper explains that the mayors of the approximately 5,000 municipalities involved in the scheme will be offered 10-year credits with interest rates of 5%.
To guarantee the participation of banks, a new Fund for Payments to Suppliers, applicable for municipal and also regional governments, was approved on 10 March. It will allow banks to purchase outstanding invoices from suppliers at an 8-10% discount, thereby achieving greater returns on the 5% interest rate credits.
The government claims that within weeks all debt with suppliers will be cleared, without increasing the deficit.
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