Catalonia Asks Central Government for €9bn Bailout

Last Updated: 30, January 2013

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Catalonia has formally requested 9 billion euros ($12.3 billion) from a bailout fund created by Spain to save its financially beleaguered regions, as well as a lower deficit reduction target. Just two months ago, the industrious but indebted region in northern Spain had pushed for a referendum on independence, believing it would be financially and economically better off without the rest of Spain.

The request also comes less than a week after the Catalonia parliament approved a largely symbolic declaration of sovereignty, setting up a potential showdown with Madrid which has vowed to block any future referendum on self-determination.

Of the total amount, 7.7 billion euros will be used to pay down maturing debt, and the remainder will be set aside to meet its 2013 deficit reduction target of 0.7 percent imposed by the Spanish government. This adds to the 5 billion euros the region initially requested from Madrid in August last year.

The regional government also requested that its deficit reduction target be reduced if pressure on the central government to slash the national deficit eases.

Spain’s regional liquidity fund, set up last year to provide money to regions unable to borrow on the international market as a result of the financial crisis, has 23 billion euros at its disposal this year, raised from the treasury, national banks and the national lottery. The government has pledged to raise more money if necessary.

Catalonia, which accounts for around a fifth of Spain’s economic output, has blamed the government for its financial difficulties, which has boosted separatist sentiments in the region.

“For me, it’s something sentimental I got from my father,” salesman Miquel Blas, 35, told Reuters of his attachment to the idea of Catalan independence. “But the real support for independence has come with the crisis.”

The pro-independence lobby asserts that the region contributes more than it receives from state coffers – a difference 16 billion euros to be exact – as a result of a complex tax system. If freed from the tax burden of belonging to Spain, the pro-independence movement believes it could invest in its own production and better manage its economy.

Recent polls suggest Catalonians are evenly divided over independence. Majority, however, are against a breakaway if it means the region could be shut out of the European Union.

The independence movement has undoubtedly met with strong resistance from the Spanish government led by Prime Minister Mariano Rajoy, and argues that a referendum would be unconstitutional.

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