Canarian Weekly
12-10-2012, 11:00
Shock loan for Islands government,*but the Spanish PM is still in denial THE Canary Islands Government has become the sixth Spanish region to seek a bailout from the central government’s rescue fund. It came as quite a shock this week, especially as speculation over whetherSpainwill request a bailout from the European Union is still a hot topic in the international media.
So, while Spanish Prime Minister Mariano Rajoy continues to deny that the nation needs one, the Canaries’ request for a 756.8-million-euro loan from the Autonomous Liquidity Fund (FLA), slipped right under the radar.
Ironically, theCanary Islandshave the lowest debt per capita ratio among the country’s 17 regions, but they need to make up for state budget cuts amounting to 448 million euros.
Canary Islands President Paulino Rivero believes this to be one of the best options because it offers better terms than those of normal financial institutions.
TheFLA, which has resources of 18 billion euros, will exist until the end of the year, said Javier González Ortiz, the region’s Economic Commissioner.
González Ortiz insisted they were using theFLAbecause the funding conditions were more accessible than those currently available in the market, and added: “It is not because the region’s solvency is in doubt.”
He also said the Canaries have the poorest state funding of all regions, but the surprise bailout request takes the total money required by the country’s cash-strapped regions to around 16.3 billion euros.
To finance the 18-billion-euro fund, the Treasury raised 3bn euros through a bond issue, subscribed to by Spanish banks almost entirely. And it plans a 5bn-euro private sale of debt securities in the next week or so.
The rest of the financing will come from a 6bn-euro contribution by the national lottery and a direct injection of four billion euros by the Treasury.
President Rivero says that the 2013 budget will generate more unemployment in the Archipelago and stressed that the Canary Islands Government must use “all tools to fight abuses” by the State.
The new cuts facing theIslands, amounting to 448 million euros, follow on from the April cuts, when Rivero was furious with Prime Minister Rajoy, who went back on his promise not to trim spending for the regions.
At that time, Rivero said he would take “emergency measures to tackle the problem”. But he failed to offer any ideas on how he would solve it.
TheCanary Islandslost around 800m euros in state hand-outs, which was roughly 12% of the total budget cuts for the regions.
Since then, theIslandshave suffered profound effects, resulting from the cuts and the austerity measures introduced by the State, and also by the Canarian Government.
A prime example is the plight of pharmacies across the Archipelago, which are still waiting for the health services to pay their share of the drug costs.
While customers must pay their share on the spot, the lion’s share of the cost is covered by the Government.
Education is also dealing with reduced funds. The regional Ministry of Education has just issued a notice in the Official Gazette of the Canary Islands (BOE), saying that students may now apply for grants for the 2012-2013 academic year.
The announcement is surprising, given that the department led by José Miguel Pérez has not yet paid the aid for the previous year. Thousands of students are still awaiting their 2011-2012 grants.
In the South of theIsland, work has again been halted on the hospital project in El Mojon through lack of payment. The joint venture of companies working on the site has told workers to down tools, and materials have been removed.
Overall, the ailing construction industry has also suffered. The Ministry of Public Infrastructure’s contribution for the Archipelago from the state in the last Budget was far from what was agreed in the Joint Monitoring Committee in 2010.
In just two years, the State Government has cut the Canaries by almost 292 million euros from what was due for 2012 and 2013.
With 414 million agreed in 2010, the Ministry has provided the Canaries with a little over 68 million in 2012 – and only 54 million is expected in 2013.
Canarian Government analysts say that under all of these circumstances, it is little wonder that the region has asked for aid.
In response, Jose Manuel Soria, the Canarian-born Minister of Industry, Energy and Tourism, has warned that the Autonomous Liquidity Fund cannot be used to pay salaries, or for wasteful spending, but to meet debt maturities and prepayments to suppliers.
Soria, many feel, has forgotten his roots and comes down too hard on the Canaries.
However, he did say: “This is a refundable aid”.
It is tracked month by month by the State Audit Office, and also requires implementation of Government measures to improve public-sector management.
In addition, he said, the Royal Decree which created the fund provides for penalties if conditions are breached.
The Industry Minister said he was unaware that the Canaries were about to ask for aid, but confessed: “I sensed it because I had to deal with its debt maturities.”
According to Canarian Government sources, the aid should become available in the next few weeks
More... (http://www.canarianweekly.com/canarian-bailout/)
So, while Spanish Prime Minister Mariano Rajoy continues to deny that the nation needs one, the Canaries’ request for a 756.8-million-euro loan from the Autonomous Liquidity Fund (FLA), slipped right under the radar.
Ironically, theCanary Islandshave the lowest debt per capita ratio among the country’s 17 regions, but they need to make up for state budget cuts amounting to 448 million euros.
Canary Islands President Paulino Rivero believes this to be one of the best options because it offers better terms than those of normal financial institutions.
TheFLA, which has resources of 18 billion euros, will exist until the end of the year, said Javier González Ortiz, the region’s Economic Commissioner.
González Ortiz insisted they were using theFLAbecause the funding conditions were more accessible than those currently available in the market, and added: “It is not because the region’s solvency is in doubt.”
He also said the Canaries have the poorest state funding of all regions, but the surprise bailout request takes the total money required by the country’s cash-strapped regions to around 16.3 billion euros.
To finance the 18-billion-euro fund, the Treasury raised 3bn euros through a bond issue, subscribed to by Spanish banks almost entirely. And it plans a 5bn-euro private sale of debt securities in the next week or so.
The rest of the financing will come from a 6bn-euro contribution by the national lottery and a direct injection of four billion euros by the Treasury.
President Rivero says that the 2013 budget will generate more unemployment in the Archipelago and stressed that the Canary Islands Government must use “all tools to fight abuses” by the State.
The new cuts facing theIslands, amounting to 448 million euros, follow on from the April cuts, when Rivero was furious with Prime Minister Rajoy, who went back on his promise not to trim spending for the regions.
At that time, Rivero said he would take “emergency measures to tackle the problem”. But he failed to offer any ideas on how he would solve it.
TheCanary Islandslost around 800m euros in state hand-outs, which was roughly 12% of the total budget cuts for the regions.
Since then, theIslandshave suffered profound effects, resulting from the cuts and the austerity measures introduced by the State, and also by the Canarian Government.
A prime example is the plight of pharmacies across the Archipelago, which are still waiting for the health services to pay their share of the drug costs.
While customers must pay their share on the spot, the lion’s share of the cost is covered by the Government.
Education is also dealing with reduced funds. The regional Ministry of Education has just issued a notice in the Official Gazette of the Canary Islands (BOE), saying that students may now apply for grants for the 2012-2013 academic year.
The announcement is surprising, given that the department led by José Miguel Pérez has not yet paid the aid for the previous year. Thousands of students are still awaiting their 2011-2012 grants.
In the South of theIsland, work has again been halted on the hospital project in El Mojon through lack of payment. The joint venture of companies working on the site has told workers to down tools, and materials have been removed.
Overall, the ailing construction industry has also suffered. The Ministry of Public Infrastructure’s contribution for the Archipelago from the state in the last Budget was far from what was agreed in the Joint Monitoring Committee in 2010.
In just two years, the State Government has cut the Canaries by almost 292 million euros from what was due for 2012 and 2013.
With 414 million agreed in 2010, the Ministry has provided the Canaries with a little over 68 million in 2012 – and only 54 million is expected in 2013.
Canarian Government analysts say that under all of these circumstances, it is little wonder that the region has asked for aid.
In response, Jose Manuel Soria, the Canarian-born Minister of Industry, Energy and Tourism, has warned that the Autonomous Liquidity Fund cannot be used to pay salaries, or for wasteful spending, but to meet debt maturities and prepayments to suppliers.
Soria, many feel, has forgotten his roots and comes down too hard on the Canaries.
However, he did say: “This is a refundable aid”.
It is tracked month by month by the State Audit Office, and also requires implementation of Government measures to improve public-sector management.
In addition, he said, the Royal Decree which created the fund provides for penalties if conditions are breached.
The Industry Minister said he was unaware that the Canaries were about to ask for aid, but confessed: “I sensed it because I had to deal with its debt maturities.”
According to Canarian Government sources, the aid should become available in the next few weeks
More... (http://www.canarianweekly.com/canarian-bailout/)