Spanish businesses to be paid by town hall offices

The 2012/02/29 at 08:58
Valérie Demon, in Madrid

The City Hall of Sevilla
The Spanish government is setting up a system to deal with the prickly issue of invoices unpaid by town hall offices.

The government had made a promise: the unpaid invoices owed by regional and town hall offices to their suppliers constituted an urgent file. The latest Ministerial Council held on Friday 24 February broached the issue of these invoices awaiting payment, accumulated over several months (or even several years) by regional and local administrations indebted to SMEs. According to the latter, the debts come to a total of somewhere between 30 and 50 billion euros. While the adoption of a detailed plan was expected, the government has not specified anything about the future of these invoices owed by regional administration.


Meanwhile, town hall offices will be obliged to present, by 15 March, a list of all the invoices they have notched up from suppliers. And by 30 March, they will need to provide the central government with a viable and credible plan for repaying the loans that will be used to pay the companies awaiting payment. Suppliers inclined to accept a cut in what they are owed will be paid in priority for the moment. Older invoices will also be the first to be paid. The government has not announced the exact mechanism allowing funds to be released, but it is already known that it will act as the guarantor and that the first repayments will be made in May 2012.


The Minister for Finance and Public Administration, Cristobal Montoro, revealed, a few days ago, the solution being sought: a consortium to be established between banks and the Official Credit Institute. The latter is to contract loans from banks and can then pay suppliers directly. This mechanism is to be confirmed by the government in coming weeks. According to certain Spanish economic dailies, banks need more time before agreeing to being involved in such a complex mechanism. These measures appear vital for releasing thousands of SMEs and self-employed workers from suffocation, many of whom have already had to close their businesses.


What the announcements also fail to mention is any interest on the delayed payment of invoices. According to the private sector, this interest comes to around 3 billion euros. Jaime Malet, President of the AmChamSpain (US Chamber in Spain), recalled this point in a letter sent to the President of the Spanish government at the end of December. “Spain has become one of the leading OECD countries to be late with payments, particularly regional and town hall authorities,” indicates the text. In this way, payment delays tally 421 days in the health sector and over 48 months in the medication sector. The Madrid Town Hall, for example, has announced that it owes 986 million euros to its suppliers. The businesses that are victims of this situation are those taking care of maintenance of public lighting, the watering of parks, or municipal cleaning.

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