Remember how the EU was going to encourage the development of a Europe of the regions?
May 25 (Reuters) – Spain’s wealthiest autonomous region, Catalonia, needs financing help from the central government because it is running out of options for refinancing debt this year, Catalan President Artur Mas said on Friday.
“We don’t care how they do it, but we need to make payments at the end of the month. Your economy can’t recover if you can’t pay your bills,” Mas told a group of reporters from foreign media.
The debt burden of Spain’s 17 highly devolved regions, and rising bad loans at the country’s banks, are both at the heart of the euro zone debt crisis because investors are concerned they could strain finances so much that Spain, the currency bloc’s fourth biggest economy, will need an international bailout. Catalonia, which represents one fifth of the Spanish economy, has more than 13 billion euros in debt to refinance this year, as well as its deficit.
All of the regions together have 36 billion euros ($45 billion) to refinance this year, as well as an authorised deficit of 15 billion euros.
Last year many of the regions financed debt by falling months or even years behind in payments to providers such as street cleaners and hospital equipment suppliers. This year the central government provided them with a special credit facility from the Official Credit Institute, or ICO, to pay providers, of which Catalonia has taken 2 billion euros.
The provider credit lines from the ICO run out in June and the central government has pledged to come up with a new mechanism for backing debt from the regions, which have been mostly priced out of international debt markets since the Greek rescue in 2010.
Catalonia’s Mas, from the centre-right Convergence and Union Party, said he is running out of options. In the past two years Catalonia has placed patriot bonds, at 4.5 percent to 5.0 percent, but he says the capacity for the people of the region to buy such bonds is at its limit.
A quarter of all Catalan savings are already in patriot bonds, he said.