The Role of Regional Public Enterprises in Spain: Room for a Shadow Government?

The main objective of this paper consists of analyzing regional public sector enterprises (PSEs) in Spain. We provide a general overview of Autonomous Communities’ (ACs) financial resources in the context of the Stability and Growth Pact and Budgetary Stability Act. From 2002, such regulation imposes stringent constraints on ACs’ indebtedness. We investigate the PSEs as an alternative to traditional financing mechanisms. Descriptive and econometric analyses confirm our expectations related to this ‘shift effect’. In a dynamic context, a significant link between public debt and the creation of PSEs debt shows that ACs used public enterprises to avoid stringent financial rules.