Brussels, 29/08/2012 (Agence Europe) - Three out of the 17 Spanish autonomous communities have so far applied for aid from the central State by means of the regional rescue fund, which will have an envelope of €18 billion. Catalonia needs €5 billion, the region of Valencia €3 billion and Murcia €300 million. Nearly €9 billion have already been made available, whilst the Fondo de Liquidez Autonómico (FLA) will be operational in September. This situation does not concern the European Commission. “The €18 billion set aside by the Spanish authorities will be sufficient to cover needs”, the spokesperson to the Commissioner in charge of the euro, Olli Rehn, said on Wednesday 29 August.
Taking note of the request made the day before by the Catalan regional government, the Commission stressed the conditional nature of aid to the regions, whereas this region hopes not to be bound by any obligations in return (see EUROPE 10676). “Participation in this scheme is subject to strict fiscal conditionality. This is in line with our country-specific recommendations for Spain, which call for strict respect of the financial stability law and the adoption of strict fiscal measures at regional level. We understand that the strict deficit targets established for the regional communities will remain set at 1.5% of GDP for this year. We are confident that the government and regions of Spain will adopt and implement the measures needed to achieve these objectives and that the deficit of the central government will be 6.3% this year”, said Mr Rehn's spokesperson.
The law on financial stability requires the Spanish regions to bring down their public deficit as follows: 1.5% in 2012, 0.7% in 2013, 0.1% in 2014. In 2015, the budget of the regions should even be in surplus, to the tune of 0.2% of GDP. In 2011, Catalonia recorded a deficit of 3.9% of its wealth. Its indebtedness stands at nearly €42 billion. In 2011, the downgraded public finances of the Spanish regions were the main cause for the central government's deficit. In early July, the Ecofin Council gave Madrid an extra year to bring its public deficit below the threshold of 3% of GDP as follows: 6.3% in 2012, 4.5% in 2013 and 2.8% in 2014 (see EUROPE 10652).
Catalonia's call for aid has revived concerns about Spain's ability to restore balance to its public finances, with the economic recession hitting the country hard and the recapitalisation level of Spanish banks - around €60 billion - still to be determined. The interest rate on Spain's 10-year debt has increased above the 6.5% mark. This situation greatly exasperates the Spanish Prime Minister. “We can no longer continue in this situation where refinancing is so difficult”, Mariano Rajoy said on Tuesday, after his meeting with the President of the European Council, Herman Van Rompuy. However, the Spanish government is remaining vague over possible requests for aid to reduce the refinancing costs via a joint intervention of the European rescue funds and the ECB. Rajoy is waiting until he knows more about the conditions attached to a programme of this kind. “Nobody is negotiating any additional adjustment of any kind”, the Spanish Economy Minister Luis De Guindos said on Wednesday, reported on the website of the newspaper El País. (MB/transl.fl)