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Spanish region denies seeking aid

Jul 23 2012 08:19 AFP

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Madrid - Spain's eastern region of Murcia denied on Sunday that it has decided to tap a recently created emergency loan fund set up by the central government to help cash-strapped regions.

Earlier on Sunday regional daily newspaper La Opinion de Murcia quoted the president of the regional government of Murcia, Ramon Luis Valcarcel, as saying his government would seek "some €200m or €300m" from the fund.

The regional government of Murcia would formally make the request in September, he added according to the newspaper.

But in a statement the regional government of Murcia said it "roundly denies" that it has decided to request money from the fund worth up to €18bn that was set up last week by Madrid.

"Regarding the liquidity fund made available by the state, the regional government has said on numerous occasions that it is studying it, but there is no decision with respect to this," the statement added.

Valcarcel was referring to the need to quickly set up "hispanobonds" - bonds backed jointly by all regions in order to meet debt and deficit payments - during his interview with the newspaper and was not talking about the liquidity fund, the statement said.

The heavily indebted region of Valencia said Friday it would apply for aid from the fund because it cannot find the funds to meet its financial obligations, making it the first Spanish region to decide to tap the fund.

The Valencia regional government did not say how much money it would seek from the fund but daily newspaper El Pais reported Sunday that the amount would be over €2bn.

Spain's 17 regional governments, which fund education and health, are crucial to the country's efforts to slash its public deficits and rein in mushrooming sovereign debt.

They are blamed for two-thirds of Spain's deficit slippage last year, when the country missed its target of keeping the deficit to 6.0 percent of economic output and instead let it slide to 8.9%.

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