Madeira's

Olli Rehn, the European commissioner for monetary affairs, called Madeira's unaccounted-for debt "less-than-a-welcome surprise."

NYT > Home Page By RAPHAEL MINDER 2011

The EU subsidy funds, which often require national governments to put up part of the costs, have played a part in driving overspending on Madeira's public-works projects and in expanding the region's debt, Prime Minister Passos Coelho said.

Island's Hidden Spending Strains Portugal Patricia Kowsmann 2011

"It is a problem," Mr. Passos Coelho said of Madeira's debt, noting that it raises a "credibility" issue.

Island's Hidden Spending Strains Portugal Patricia Kowsmann 2011

An evaluation conducted by Bank of Portugal of Madeira's accounts showed it failed to report €1.1 billion $1.53 billion in debt from 2008 to 2010 related to agreements between the government of Madeira and construction companies.

Portugal Bank Says Debt Hole Is Deeper Patricia Kowsmann 2011

Asked in an interview on local television in Madeira last month about the added €1.1 billion in debt, Mr. Jardim blamed the previous government—of a rival party to his own— for cutting Madeira's funding.

Island's Hidden Spending Strains Portugal Patricia Kowsmann 2011

Mr. Jardim is a controversial figure, known for his tight control over the island as owner of Madeira's main newspaper and for his defiant attitude toward Portugal's leaders.

Island's Hidden Spending Strains Portugal Patricia Kowsmann 2011

Despite Lisbon's calls for austerity, Alberto João Jardim, Madeira's governor since it gained autonomy in 1976, vowed more building when he spoke late last month at the opening of a €1.1 million $1.5 million road linking a small neighborhood to a new church in the rural district of Calheta.

Island's Hidden Spending Strains Portugal Patricia Kowsmann 2011

Late last month, Portuguese Finance Minister Vitor Gaspar said the government is drawing up an austerity plan for the island; Mr. Jardim has said he will consider it if, as expected, he wins a new term in Madeira's elections Sunday.

Island's Hidden Spending Strains Portugal Patricia Kowsmann 2011

Critics, however, say much of Madeira's publicly funded building is a waste.

Island's Hidden Spending Strains Portugal Patricia Kowsmann 2011

As Madeira's debt woes have fanned tensions between the mainland and the island, Medina Carreira, a former finance minister and respected economist, in a television interview last month warned the Portuguese people to keep the situation in perspective.

Island's Hidden Spending Strains Portugal Patricia Kowsmann 2011