Spain warns regional governments

• Tweet

MADRID, April 17 (UPI) -- Regional governments in Spain have been warned Madrid may move to take control of their finances, a government official said.

The official told the Financial Times legislation expected to become law by the end of the month gives the central government the power to take over regional finances.

The legislation also allows Madrid to make automatic spending cuts in regions that breach budget targets.

Spanish Prime Minister Mariano Rajoy, who came to power at the end of last year, told business leaders Monday the country has lost the trust of financial markets.

He asked for more time to see the results of deep budget cuts, a labor market overhaul and a new plan to clean up Spain's ailing banks.

"Nobody can expect that deep-seated problems be solved in just a few weeks," Rajoy said.

Spain's economy, which started to contract at the end of last year, is forecast to shrink by 1.7 percent in 2012. It will be the country's first double-dip recession in decades.