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Spain faces fight to save regions


economy

Spain faces fight to save regions

Spain’s banks are not the only worry for the Madrid government – the country’s overspending regions were largely responsible for Spain missing its deficit reduction targets by a wide margin last year.

The regions are getting close to not being able to repay the money they have borrowed – in many cases from Spanish banks – which would force Madrid to seek a bailout.

Analyst Michael Hewson of CMC Markets said: “Given how long it took them to actually ask for a banking bailout, I certainly wouldn’t put it past them to actually have to be dragged kicking and screaming to the table to actually get a sovereign bailout. But I think the measure for that would be if Spanish bond yields hit 7.5 percent.”

The debt pile for the country’s 17 autonomous regions grew by five billion euros in the first three months of the year to just over 145 billion euros.

Catalonia has the lion’s share followed by the other big regions, Valencia, Madrid and Andalucia.

In recent years the regions have basically not been paying their bills to people who provided them with goods and services.

The central government recently loaned them 27 billion euros through a state credit agency to pay off their bills, but that will not happen again now that Madrid is having difficulty borrowing at affordable rates.

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