Catalonia seeks €5bn Madrid bailout

CATALONIA HAS announced that it needs a €5 billion bailout from the Spanish state, highlighting difficulties facing the country’s regions and piling further pressure on the central government.

Catalan regional government spokesman Francesc Homs said €5.02 billion was needed for the region to meet looming debt obligations.

The money is expected to come from Spain’s newly created regional liquidity fund, which contains €18 billion but has not yet been activated.

“Let’s hope it is ready by September, if not we’re in trouble,” Mr Homs said.

An industrial hub with an economy the size of Portugal’s, the northeastern region has debts of €42 billion. In July, Catalonia delayed payment to thousands of health and social sector workers for the month, blaming the central government for the lack of funds.

The Catalan government, led by the moderate nationalists of the CiU coalition, announced it would need help from the state in early July, following the lead of Valencia on the east coast and Murcia in the southeast.

Spain’s 17 regions are responsible for 40 per cent of the country’s spending. Their difficulties in recent weeks have created a new problem for the central government and helped keep the country at the heart of the euro zone debt crisis.

Ties between Catalonia and Madrid have been tense lately, with the region pushing for increased economic autonomy. The strong wording of Mr Homs’s announcement of the rescue figure required yesterday hinted at the uneasy relationship, with the spokesman insisting that Catalonia will not accept “political conditions” attached to the money.

“Requesting a bailout from Europe and asking for one from the Spanish state are two different things,” he said, referring to the central government’s recent request for a €100 billion rescue for the bank sector.

“That’s because the money we’re asking for is paid out by Catalans and managed by the Spanish government. In the case of Europe, it’s not Spaniards’ money but other countries’ money.”

Catalan regional premier Artur Mas is due to meet with prime minister Mariano Rajoy in Madrid on September 20th to discuss fiscal targets and financing needs.

Mr Rajoy met with European Council president Herman van Rumpuy in the Spanish capital yesterday, and both denied the country was negotiating a sovereign bailout.