Brussels, 26/09/2012 (Agence Europe) - The new Spanish bailout fund for the regions will come on stream at the end of the week, and a fourth region has announced that it will be requesting nearly €5 billion of aid from it, namely Andalucia, a further illustration of the financial problems facing the Spanish regions as a new separatist movement is building in Catalonia ahead of early elections in November.
In order to help the regions pay their bills, Madrid set up a regional bailout fund (Fondo de Liquidez Autonómico - FLA) for the country's seventeen regions, with lending capacity of €18 billion. It is due to come on stream before the end of the month, but there is little room for manœuvre because four regions have already announced that they will be requesting aid from it, including Andalucia on Tuesday 25 September. Andalucia wants €4.9 billion from the FLA, Catalonia more than €5 billion, Valencia €4.5 billion and Murcia €700 million, which makes nearly €15 billion in total. Nevertheless, the Rajoy government is making reassuring noises and a government spokesman said on Tuesday that according to its calculations, there would be enough money in the FLA. It is known that Galicia, Madrid and La Rioja will not be calling for FLA cash.
The FLA comprises central government funding (€4 billion from the Spanish treasury), €6 billion from the National Lottery, €3 billion in bonds issued on Wednesday and €5 billion in private investment (to be forthcoming part-way through October). Although the Spanish central government has promised to bail out struggling regions, this will come at a price - they will have to reduce their budget deficit to 1.5% of GDP.
Rise of Catalonian separatism. Although forced to turn to the central government for a bailout, Catalonia is talking tough, with separatist demands bubbling over. On 11 September, “Catalonia Day,” some one and a half million Catalonians demonstrated in Barcelona, demanding independence. On Tuesday, the president of Catalonia, moderate nationalist Artur Mas, called early elections for 25 November and hinted at a referendum on Catalonian independence. This is a direct challenge to Madrid, because only last week Spanish prime Mariano Rajoy refused to give Mas any further budget autonomy for the region. One of the engines of the Spanish economy, Catalonia is being hard hit by the crisis and this is feeding into bitterness about the central state.
New structural reforms. Faced with a sharper-than-expected recession, the Spanish government will be unveiling new structural reforms on Thursday, required to meet its budget deficit reduction targets (6.3% of GDP in 2012, 4.5% in 2013 and below 3% in 2014) (see EUROPE 10689 and 10694). Officially, these reforms are part of the commitment made by Spain (when it requested a bailout of its banks) to comply with the country's budget and macroeconomic recommendations. New figures were released on Wednesday showing that the central state had already exceeded the public spending caps for 2012. The European Commission refused to make any official comment on Wednesday 26 September or say whether Spain would need to introduce yet more austerity measures, preferring to wait for the details of the newly announced measures and the official outcome of an audit to determine the final recapitalisation requirements of Spanish banks, suffering from the collapse of the property bubble. An initial audit in June suggested that some €60 billion would be required, and the eurozone has promised up to €100 billion. (MB/MD/transl.fl)