This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS MADRID 004405 
 
SIPDIS 
 
TREASURY PASS TRACI PHILLIPS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN SP
SUBJECT: ANDALUSIA BALANCES BUDGET WITH GOS AND EU HELP 
 
REF: A. MADRID 4385 
     ¶B. MADRID 3715 
 
¶1. Summary: The Andalusian budget which was presented to the 
regional Parliament the final week of October contains EUR 
24.5 billion (USD 31.7 billion) in outlays, an increase of 
10% over 2004.  Andalusia has already received the funds 
necessary to pay for its budget expenditures from the central 
government and EU, paying only 50% of expenditures from tax 
income.  Shortly after winning the March 14 elections, the 
Socialist government in Madrid assumed the Socialist regional 
government of Andalusia's outstanding debt, ensuring that the 
Andalusian region would be supportive during national budget 
negotiations.  End Summary. 
 
¶2. EconOff and Econ Analyst met October 28 with Andalusian 
regional Secretary of Economy Antonio J. Avila Cano to 
discuss the Andalusian budget for 2005 and find out if the 
Andalusian government would be pressing for more handouts 
during the national budget debates.  According to Avila, the 
balanced budget presented to the regional parliament projects 
EUR 24.5 billion (USD 31.7 billion) in expenditures, and 
increases overall spending by 10%.  Andalusia's robust 
economy is expected to grow by 7% (compared with 2-3% 
nationally).  Roughly 20% of the total will be spent on 
public investment and 80% on current programs. 
 
Investment 
---------- 
 
¶3. The Andalusian budget for 2005 calls for spending 
increases of 8% in current programs and 24% in public 
investment.  The regional government is particularly proud of 
the planned increases in investment.  The investment line 
item includes budgetary increases of: 30.5% in R&D, 45% in 
infrastructure, 20% for universities and 56% on environmental 
projects.  Key infrastructure projects include an extension 
of the AVE high speed train to Granada and Malaga, a new 
cross-regional highway, a second terminal for Malaga airport 
and mass transit projects in Seville, Granada, Malaga and 
Cadiz. 
 
Half of Funding from Transfers 
------------------------------ 
 
¶4. Even with recent growth, Andalusia remains one of Spain's 
poorer autonomous regions, and continues to receive 
significant budgetary funding from central government and EU 
sources.  Only 40% of Andalusia's tax budget outlay is paid 
for by tax income collected by the tax authorities in 
Andalusia, and 10% from taxes levied directly by Andalusia. 
Direct transfers from the central government account for 30% 
of regional income, and EU transfers for infrastructure 
supply 10% of the budget.  The final 10% of income comes from 
transfers from various agreements between the Andalusian 
government and individual ministries. (Note: Andalusia's per 
capita GDP of 69.4% of the EU average qualifies for EU 
structural funds.  Once Andalusia's per capita income reaches 
75%, predicted in 2008, it will lose this funding.  An 
additional benefit Andalusia recently received from the 
national government was a payment of it's regional debt of 
EUR 2.5 billion (USD 3.24 billion) that accumulated between 
1997 and 2001 when the Socialist regional government did not 
accept the national Popular Party government's regional 
financing scheme and continued to spend more money than it 
received in transfers. 
 
¶5. Comment: The Andalusian government receives sufficient 
transfers from the national government and the EU to maintain 
a balanced budget.  Unlike the Catalan regional government 
(ref B), the members of parliament from Andalusia are 
unlikely to make demands on the national government that will 
effect the overall national budget debate, especially since 
the national Socialist government subsumed Andalusia's 
regional debt shortly after winning the March 14 elections. 
Andalusia provided the greatest number of new Socialist seats 
in Parliament, accounts for 14% of Spanish GDP and 17% of the 
population.  In the 2005 national budget, 13% of 
infrastructure investment will go to projects in Andalusia. 
The national government is keen to take care of the needs and 
wants of this most Socialist of autonomous regions. 
ARGYROS