Murcia next Spain region in spotlight for aid

Sun Jul 22, 2012 12:08pm EDT
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By Sarah White

MADRID (Reuters) - Tiny Murcia was on course on Sunday to be the second Spanish region to request help from the central government to keep it afloat, as media reported half a dozen local authorities were ready to follow in the footsteps of Valencia.

How Spain's 17 indebted autonomous regions, locked out of international debt markets, refinance 36 billion euros in debt this year has been a major source of concern for investors ever since they missed deficit targets last year.

Spain's central government set up an 18 billion euro ($22 billion) fund earlier this month to ease their funding pain.

Asked in a Q&A newspaper interview whether Murcia planned to tap the fund created, the head of the local government, Ramon Luis Valcarcel, answered "of course", and added that he hoped it would be available for September.

"Nobody should think this money is a gift, the conditions are going to be very tough," he was quoted as telling the paper. "To give you an idea, between 200 to 300 million euros would be asked for. But I don't know yet."

Murcia, with a population of 1.4 million on Spain's hot south-eastern coast, later on Sunday sought to row back from the comments, saying in a statement that it was studying the possibility of using the funding mechanism but had not made a decision.

A statement by the region said that Valcarcel had been talking about "Hispanobonos", another funding mechanism that would involve mutualising regional debt which has been discussed as a possible option for the indebted regions.

But that measure has not yet been put in place and Murcia must repay 430 million euros in loans in the second and third quarters of 2012 with cash running short.   Continued...