Catalonia seeks 5 bn euro rescue from Spanish govt

Spain's debt-struck Catalonia region announced Tuesday it is requesting a 5.0-billion-euro ($6.3-billion) rescue from the central government. The northeastern region's government, facing huge repayments due on its 40-billion-euro debt this year, said it would tap an 18-billion-euro liquidity fund set up by Madrid to finance troubled regions. "The government has decided to request participation in the liquidity fund," Catalan government spokesman Francesc Homs told a news conference. But the powerful region, responsible for one-quarter of Spanish economic output and which jealously guards its autonomy, would do so "without accepting political conditions," he said. Prime Minister Mariano Rajoy said Madrid would extend a helping hand to Catalonia. "We will help Catalonia as we help the rest of the regions," Rajoy told a news conference. "The regions are also Spain so the Spanish government will not wash its hands of the regions." The debt burden of Spain's 17 regional governments is a focus of market fears that the nation could be forced to seek a sovereign bailout, on top of a 100-billion-euro rescue loan for its banking sector. Valencia and Murcia have already caved in, saying they, too, will need central government help to finance their operations through the rest of this year. Catalonia's announcement coincided with a visit by European Union president Herman Van Rompuy for the first of a series of meetings held by Rajoy to grapple with the crisis. The premier will host French President Francois Hollande on Thursday and is scheduled to hold talks with German Chancellor Angela Merkel in the Spanish capital on September 6. Catalonia's financing crunch led it to announce July 31 it would suspend paying subsidies in July to hospitals, old age homes and other social services already reeling from sharp budget cuts. The most indebted of Spain's regions, Catalonia is in open conflict with the central government over tough deficit targets that have been imposed on the regions. The Catalan government has already cut public sector wages, introduced a one-euro charge for each medical prescription and frozen infrastructure investments as it seeks to bring its public deficit under control. The region's public deficit was equal to 3.7 percent of economic output last year. This year, repayments due on its accumulated debt amounted to 13.5 billion euros, with 5.8 billion euros yet to be paid in the second half of 2012, Catalan government figures show.