Spain’s most indebted region Catalonia said on Tuesday that it needed €5 billion (£3.97 billion) emergency financial aid from a central government rescue fund as it struggles to pay for basic services such as hospitals, schools and care homes.
With Catalonia’s debt crisis worth €42 billion (£33 billion), Spain’s efforts to avoid a full bailout has been dented. Catalonia is one among the six regional governments that has turned inoperative on capital markets and needing government assistance to roll over debt and fund budget deficits.
The Catalan government has already cut public-sector wages, introduced a €1 (£0.79) charge for each medical prescription and frozen infrastructure investments as it seeks to bring its public deficit under control. Catalonia’s debt is equivalent to 21% of the region’s gross domestic product.
The Spanish government set up a fund worth €18 billion (£14 billion) to help regional governments deal with financial crunch. Valencia and Murcia regions have already approached the central government seeking financial aid.
The request for financial bailout came as private deposits at Spanish banks dropped at the quickest pace since the launch of the euro and data confirmed the Spanish economy shrank for the third consecutive quarter between April and June.
Francesco Homs, spokesman for the regional government, said that Catalonia would not accept additional political conditions over budgetary measures that have already been agreed upon with Madrid “because the money is Catalan money”. This attitude of the region risks fostering further tension with Spain’s central government after Catalonia boycotted a meeting to set regional budgets in late July.