Spain will lend as much as 23 billion euros ($30 billion) next year to regional governments that can’t sell debt on their own, adding to the Treasury’s borrowing needs.
The so-called regional liquidity mechanism will provide as much as 18 billion euros this year and that figure will swell to as much as 23 billion euros in 2013, the Madrid-based Treasury said in a presentation on its website today. The debt agency hasn’t yet set out its issuance program for 2013.
The bailout mechanism was created in July as an emergency measure to prevent cash-strapped regions defaulting. Nine of the 17 semi-autonomous states plan to use it this year. Their demand for cash has outstripped what the central government is prepared to offer. Fitch Ratings estimates that Catalonia alone has about 14 billion euros of debt maturing in 2013.
Spanish Budget Minister Cristobal Montoro is trying to extract spending cuts from the regions in exchange for liquidity as he pushes them to slash their deficits by half this year. Some regions are pushing back against central government demands, including Catalonia and the Basque Country, which is locked in a legal battle with the central government over whether it can pay public workers the traditional Christmas bonus this year.
The states’ combined debt has doubled in four years to 151 billion euros, almost 20 percent of Spain’s total borrowing, according to the Bank of Spain. That’s helped swell the overall debt burden, which the European Commission forecasts will jump to 86 percent of GDP this year from 69 percent in 2011.
Only 8.2 percent of regional borrowing this year was done through public debt sales, according to Madrid-based advisory firm Analistas Financieros Internacionales. While the region of Madrid continues to sell debt to investors, states including Andalusia, the most populous, and Catalonia, which has the biggest economy, remain locked out of markets.
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