Spain’s Catalonia also seeks rescue

MADRID - Agence France-Presse

Tourists try to shelter from the sun in the shade of an umbrella in Barcelona, the capital of Catalonia. EPA photo

Spain’s debt-struck Catalonia region reached out on Aug. 28 for a 5 billion-euro ($6.3-billion) central government rescue as the entire nation lurched closer to a sovereign bailout.

The northeastern region’s government, facing huge repayments on its 40-billion-euro debt, said it would tap an 18-billion-euro liquidity fund set up by Madrid to finance troubled regions.

“The government has decided to request participation in the liquidity fund,” Catalan government spokesman Francesc Homs told a news conference.

But the region, responsible for one-fifth of Spanish economic output and in open conflict with
Madrid over its deficit-cutting demands, would do so “without accepting political conditions,” he said.

Rajoy promises support
Catalonia’s announcement highlighted Spain’s tremendous financial squeeze, feeding expectations that the eurozone’s fourth largest economy will be forced to seek a broad bailout -- and soon.

Spanish Prime Minister Mariano Rajoy said the central government would help Catalonia, “as we help the rest of the regions.”

“The regions are also Spain so the Spanish government will not wash its hands of the regions,” Rajoy told a news conference.

Rajoy’s conservative government snatched a 100-billion-euro eurozone rescue loan in June to salvage the balance sheets of its banks.

But analysts believe Spain’s high borrowing costs will still force it to seek a sovereign bailout before a repayment crunch in October when more than 30 billion euros in debt payments are due.

The Spanish government has called on the ECB to come to its aid by resuming its program of purchasing government bonds.

But the ECB is expected to act only if Madrid accepts new conditions by formally applying to the eurozone bailout funds, the European Financial Stability Facility and its successor the European Stability Mechanism.