SPAIN’S NORTHEASTERN region of Catalonia, which accounts for one-fifth of the country’s economic output, said yesterday that it had financing needs to meet, while its access to markets has been shut off, but that it had not decided yet whether to ask Madrid for financial help.

On Friday, the eastern region of Valencia became the first to call for aid of about €3.5 billion from a €18 billion government fund being set up to help cover maturing debt costs this year. Analysts say several other of Spain’s 17 autonomous regions could echo Valencia’s request, which triggered a new wave of risk aversion among investors that has brought Spain closer to needing a full-blown international bailout.

Spain’s 10-year yield rose 12 basis points, or 0.12 percentage point, to 7.62 per cent at 5.25pm in London after climbing to 7.636 per cent, the highest since November 1996. Catalonia, Spain’s most indebted region, has debt repayments of €5.76 billion in the second half of the year, with a €2.61 billion bond falling due in November. “We have not made a decision, but we admit that we have liquidity needs, and it has to be the treasury that helps the regions out because that’s who we pay taxes to,” said the spokeswoman for the region’s economy minister, Andreu Mas-Colell.

The regions have until the end of December to decide whether to tap the funds or not, even if most have debt redemption hurdles to meet beforehand.

Catalonia has previously called on the central government to help it with its funding, and campaigned for the last year for the treasury to help its finances through the introduction of hispanobonos, bonds issued by the state for the regions.

But it insisted yesterday it was not ready to tap the bailout fund, and was still looking at the fine print of how the fund would operate. “Until the mechanism is fully implemented, there is no rush to decide,” said the spokeswoman.

The central government funding comes with strict conditions tying recipients to tough deficit limits that many say will be hard to meet as revenues fall and austerity measures bite.

Ms Mas-Colell told BBC radio that Catalonia’s funding relied on the state treasury.

The spokeswoman said the minister had been misinterpreted and that this was not a reference to a specific aid request. – (Reuters)