Portugal’s Insolvent Town Halls and the Trouble with Greece’s New Bonds

"It appears Portugal's municipalities have a debt problem that is a spitting image of that plaguing Spain's regional governments. As remittances from the central government decline, many have reached the point where they would normally be considered insolvent. Some € 9 billion in municipal debt are apparently threatening to default unless some aid comes forth from the central government. The problem with this is of course that the government needs to hew to its 'troika'-imposed deficit targets and therefore can not help them.

As Bloomberg reports:

“Portugal’s town halls face default amid 9 billion euros ($12 billion) of debt unless the government provides aid soon, said Fernando Ruas, president of the nation’s association of municipalities.

“At a company we call it insolvency,” Ruas said in a telephone interview from Lisbon on March 21. “It could happen that some town halls could have to restructure their debt if the government doesn’t intervene.”

Ruas blamed a decline in money transfers from the government in Lisbon to municipalities for their growing financial woes. Portugal last year became the third euro-area country to request external aid, following Greece and Ireland. Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of the 78 billion-euro rescue.

“A sharp decrease in money transfers has made it harder for many town halls to comply with their ongoing commitments,” said Ruas. His association estimates town halls face about 9 billion euros in liabilities. About 1.5 billion euros of the total is in bills to suppliers overdue by more than 90 days while the remainder is mostly made up of debt banks, he said.”

at  http://www.acting-man.com/?p=15800