Spain sets up emergency fund to protect regions from default

Sat, Jul 14, 2012, 01:00

SPAIN CREATED an emergency fund to protect its regional governments from defaulting, and warned that pensions would also be overhauled as public anger mounted yesterday over deep spending cuts needed to dodge an international bailout.

After a weekly cabinet meeting the Spanish government gave details of the €65 billion austerity package prime minister Mariano Rajoy announced this week.

Ministers approved an overhaul of city and regional governments, wage cuts for public workers and cuts in unemployment benefits.

They said they would also pass this month a reform of the energy sector and laws to liberalise the rail, road and air transport sectors.

Workers blocked streets and railways in Madrid in protests against cuts, which they said hurt ordinary people more than the bankers and politicians blamed for the country’s economic crisis.

More than 100 civil servants gathered outside the presidential palace, whistling and booing, as Mr Rajoy’s ministers convened under pressure from euro zone leaders and financial markets to approve the new budget plan.

“Spaniards are living today one of the most difficult and traumatic moments of our history, a crisis which has muted into a daily drama for millions of Spaniards,” said deputy prime minister Soraya Saenz de Santamaria.

As expected, the government approved yesterday a new mechanism to help Spain’s 17 autonomous regions, currently shut out of international financial markets, to fund themselves and repay their debts.

The instrument, with a maximum capacity of €18 billion, will be funded through a €6 billion loan from the state lottery and by the treasury.

The regions will, however, be obliged to repay any loan they obtain. – (Reuters)