Catalonia asks for €5bn aid from Spanish government
by Daniel Mason
The north-eastern region, which accounts for a fifth of Spain's economic output, has debts of €42bn and is shut out of capital markets. But a spokesman for the regional administration said it would not accept political conditions in return for the aid "because the money is Catalan money", potentially stoking tensions with Madrid.
Spanish Prime Minister Mariano Rajoy said regional debts were "the big problem in this country at the moment". Catalonia is the third of the country's 17 autonomous regions, after Valencia and Murcia, to says it requires assistance from the €18bn government fund set up in July. The regions are responsible for more than a third of public spending and their debts were a significant contributor to Spain's deficit of 8.9 per cent in 2011. As many as six regions are eventually expected to access the fund, which is drawn partly from the national lottery.
The request from Catalonia came as new official data showed that the Spanish economy as a whole shrank by 0.4 per cent between April and June. On an annual basis gross domestic product was down 1.3 per cent, leaving the country deep in recession. Unemployment stands as 25 per cent. And private deposits at Spanish banks fell in July at the fastest pace since the introduction of the euro.
Rajoy, speaking yesterday after meeting European Council President Herman Van Rompuy, said the government had not yet decided whether to ask for a full eurozone bail-out on top of the €100bn of loans already made available to Spanish banks. However, he said that so far there had been no request and no negotiations.
The prime minister said his administration would "take all necessary measures" to resolve the crisis. "We've already taken complicated, painful decisions, but they were required in this situation," he said. "We have to lower our public deficit, we can no longer continue in this situation where refinancing is so difficult." No request for aid is expected until after the European Central Bank's meeting on September 6, when it is widely expected to flesh out plans to buy the bonds of struggling eurozone countries to help control their borrowing costs.
Meanwhile Van Rompuy said Spain would have the backing of fellow eurozone countries if it did decide to ask for further help. "If financial markets defiance persists during this period of adjustment, European leaders have stated during the June European Council their readiness to assist the Spanish authorities further. In this respect, the ECB has presented on August 2 a framework which outlines possible interventions and that I fully endorse."
The reconfiguring of Catalan politics could just as likely mark the deeper entrenchment of secessionist sentiments, with leaders less willing to compromise now gaining ascendancy – writes Nicholas Siegel
We have finally reached the long-awaited economical suffocation of Catalonia. With regards to the 'no strings attached' bail-out, I don't think any person with a little common sense would believe that.
Can you imagine how everything would be if the lender did not put some conditions to any loan? Sometimes I believe that the Catalan government must live in another galaxy, oblivious to the real situation between Catalonia and Spain.
Catalonia has no Charter left from when Catalans voted in the referendum in 2005. It means that effectively any powers devolved from the Spanish government could be revoked at any time. Should this happen, it would be like going back to 1939, under the Franco dictatorship.
In some economist's opinion - again using some common sense, it is 'very bizarre' that Catalonia contributing to Spain's GDP of around 20 per cent - and around 9 per cent never returning to Catalonia, it has to ask for a loan to make front to very urgent payments.
Otherwise, Catalonia would not be able to pay the wages of public servants, suppliers and services. Like it happened in July. It is now the time when Catalonia needs a very strong leadership to readdress this situation and to take the country out of the mess it is submerged in.
But sincerely, I do not believe that this government will be able to perform this task. Instead it will sink Catalonia even deeper into debt and submission to Spain, where they seem to swim very comfortably.
Jordi Margalef - Worthing, UK
The whole of Spain is a financial disaster. Not this government nor the last government would have been able to save Spain from its financial fiasco. Spain has being cooking the books since it first adopted the euro currency. The best thing for Spain to do, is to returne to the peseta -the old currency. This will be better for all of us and the rest of the European countries.
No name supplied
The blame for the current financial situation of Spain falls on various protagonists. Of course, we had a prime minister plus cabinet acolytes not that long ago with very low standards and the worst people power has to offer in terms of a reverse meritocracy, "socialism" as institutionalised envy and so on. In the case of the regional debt issue, the scenario is slightly different and yet a case of financial sub-nationalistic populism where the issue of debt on the shoulders on future generations is simply avoided for the short term political gain, and the ability to deviate public funds to an intertwined network of political mafias and business mafias.
There are plenty cases to illustrate this and it is essential that Catalans admit that the Catalan sub-nationalism has been used as a bait by the organised swindlers of all of us. This, in turn, couldn't have happened if Spain had had true independence and the ability to prevent other international powers from pressuring her to conform to some sort of bogus international standards - and had not been subject to a joint black mail by our internal and external enemies (often fake friends and allies under the guise of leading us into the realm of "democratic nations").
True, leadership is always original and leadership is not the conveyor belt of orders from globalist overlords. Spain is the weakest link today of globalisation because of the economic mess we have (underestimated since 24 per cent of our economy is not on the books) and the frailty of our imposed institutions. Also, because our ruling class from either party is not committed to anything that their unspeakable loyalties to international finance, occult circles of power, as well as of course their own gain as a business.
That is why European institutions will manoeuvre and do all kind of gyrations to save us not unlike the selfish "helping hand" of the US that has prevented Mexico from descending into the next - and then unmanageable- level of chaos. We will somehow get out of the hole with help and fiscal discipline etc. Hopefully, this is a lesson for the generations of Spaniards that will be the voters in the upcoming series of elections in future decades. Older generations, particularly in the countryside, are a lost cause. They are way less educated and are stuck in the Spanish Civil war and left versus right rift mentality. At least, the latest constitutional reforms forbid the kind of irresponsible fiscal behaviour we had to powerlessly witness from 2004 to 2012 - and before, from 1982 to 1996.
Yet, a solid solution requires more than that. It requires a revolution that will, inevitably, reverse the whims of the autonomic state and the existing constitution. Whether Europeans like it or not, Spain needs to simplify to the extreme its administration and rid itself from superfluous institutions that have no historical base.
The Catalan delusions have, apparently, affected their capacity to use simple arithmetic for simple arguments. It is impossible - as picturesquely argued before me in this venue - that a region with 20 per cent GDP of the national total, transfers 10 per cent. That would imply a tax bracket of 50 per cent for all the population and a 100 per cent net transfer of the tax revenue to the central government.
The best that can happen is that not Catalonia but the Catalan regional government cannot pay. Supposedly, by law, employees are paid first in cases of bankruptcy but probably the sub-nationalistic mafia will run away with the cash in the form of payments to the business they control. Ideally a supra-regional entity would be able to foreclose on them and auction various assets such as public buildings and so on to pay their creditors.
The expected course of events is another one. The central government is going to quietly impose its conditions, the regional government is going to accept them while claiming otherwise - and not a lot of dust will be raised.
Daniel A. Jaimen Navarrete - Madrid
