Castilla-La Mancha on Thursday became the fifth Spanish region to seek a bailout from the central government’s rescue fund, which faces a huge depletion in its resources before it has even been set up.
Regional premier María Dolores de Cospedal, who is also the secretary general of the ruling Popular Party, said Castilla-la Mancha needs 800 million euros from the Regional Liquidity Fund (FLA) to meet debt maturities.
Madrid is currently finalizing the establishment of the FLA with funding of 18 billion. The petition from Castilla-La Mancha brings total requests from the country’s cash-strapped regions to around 15.6 billion euros. Earlier this week, Andalusia said it would need close to five billion euros from the FLA. Catalonia has requested just over five billion, Valencia 4.5 billion and Murcia 300 million.
Of Spain’s 17 regions, only Madrid, Galicia and La Rioja have categorically ruled out availing themselves of the liquidity pot. The FLA will be funded by the Treasury, the state lottery company and commercial banks.
Madrid has conditioned access to the LA to regions meeting their commitment to reducing their budget deficits to 1.5 percent of GDP this year.
Cospedal said the sum the region is requesting, which amounts to about 10 percent of its financial debt, is relatively modest given that it ran up a deficit of three billion euros last year.
“I am not embarrassed to say that we’re going to have to ask for help from the central government,” Cospedal said.
Finance Minister Cristóbal Montoro on Wednesday said the central administration would transfer funds to Catalonia “in the next few days” to help the region cover debts of 471 million euros that are due to mature shortly. “The state will see to these maturities to save Catalonia’s image,” Montoro said during a debate in the Senate.
The minister lamented what he described as the “incoherence” of Catalonia tapping the FLA the same day that the ruling CiU center-right nationalist group in the region called for early elections to seek a mandate for greater control over its own affairs.
At midday, Spain’s risk premium was down slightly at 460 basis points.
Read more here – http://elpais.com/elpais/2012/09/27/inenglish/1348741615_894391.html