Valencia ups request for central government funds to 4.5 billion euros

Valencia premier Alberto Fabra said Thursday that the eastern region will request a further one billion euros from the planned Regional Liquidity Fund (FLR), on top of the 3.5 billion euros it already needs to meet debt maturities.

Earlier this week, Catalonia announced it would be seeking 5.023 billion euros to cover debt obligations due this year. Murcia has requested 300 million euros.

The rise in Spain’s risk premium has cut off the country’s regions from the wholesale debt market. “[The FLR] is a guarantee of being able to obtain the money we planned to raise through debt issues under better conditions,” Fabra said. “In our case, debt issues alone amount to 1.6 billion euros, while maturities due before the end of the year come to two billion. That’s more than 3.5 billion euros.”

Fabra said that extra funds were needed to pay the region’s suppliers. Catalonia on Wednesday also stated that the amount for which it was asking was only to cover maturing debt, and that it was still facing severe problems in paying its suppliers. It urged the central government to set up the FLR as soon as possible — something it is yet to do — to avoid the region facing major liquidity problems.

Fabra also said Valencia urgently needs the 1.6 billion euros in funding it had previously planned to raise in the debt markets.

“This is the money that has not come in, which we need to have to meet payments that are due,” the Valencia premier said. “The longer the delay in [setting up the FLR], the longer we will fail to meet these payments. Until the Liquidity Fund is formally established, the government will need to help us with an advance.”

Fabra said the exact amount of extra funding Valencia requires will depend upon the needs of other regions.

Andalusia also said on Wednesday that it was considering tapping the FLR. The premier of Spain’s biggest region, José Antonio Griñán, on Thursday said it was getting hard for the region to fund itself. “There is a difficult situation in the markets,” he said.

Griñan called for an equitable division of the funds in the FLR. “It’s a fund that is there for everyone and it has to be shared out fairly. It can’t just be for regions that have asked for advances.”

The government has conditioned the receipt of funds from the FLR to regions fulfilling their deficit-reduction targets for this year of 1.5 percent of GDP.

The European Commission said Wednesday that it understood that the 18 billion euros the FLR was to receive would be sufficient to cover the needs of the country’s cash-strapped regions.

Catalonia is the economic powerhouse of Spain, with an economy about the size of Portugal’s. It is also the country’s most indebted region in absolute terms, with outstanding debt of 42 billion euros.