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Tuesday 5 December 2023 Dublin: 5°C
Manu Fernandez/AP/Press Association Images Gaudi's Sagrada Familia church in Barcelona, Catolonia in Spain.
debt woes

Catalonia increases Spanish debt fears

Spain’s largest region seeks €5 billion rescue as Spanish government insists it does not need a bailout. Heard that one before?

SPAIN’S LARGEST REGION has announced that it needs a €5 billion bailout from the government in Madrid, piling more pressure on prime Minister Mariano Rajoy as he fights off suggestions that Spain needs a bailout.

Catalonia, which has debts of €42 billion, announced that it can no longer get loans on international markets that it needs to support its debt. It will become the third of Spain’s 17 autonomous regions to formally request aid from the government’s €18 billion rescue fund.

Madrid “can’t ignore” the regions’ dire straits, Prime Minister  Rajoy said on Tuesday. Several of Spain’s regions have been locked out of financial markets, forcing Madrid to pledge that it will raid the national lottery fund to fund them.

However, some of the regions suspect that the government in Madrid may use their troubles to centralise more power in the nation’s capital. A spokesman for the region’s government in Barcelona, the capital, said that it would not accept political conditions over budgetary measures “because the money is Catalan money”. Catalonia is a net contributor to the Spanish exchequer, with 8.5 per cent of its annual GDP financing services in other parts of Spain.

The request comes as data from the European Central Bank showed that outflows from Spanish commercial banks reached €74 billion in July, double the previous record. Deposits at Spanish banks fell 4.7 per cent to €1.51 trillion in July.

Spain has not made a formal request for help itself, beyond what it agreed on to recapitalise its banks.

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