Catalonia Crisis Update

In a sternly worded address to the nation, Spain's King Felipe VI condemned organizers of Catalonia's independence referendum for having put themselves "outside the law" and said the situation in Spain was "extremely serious", calling for unity. In his address, King Felipe VI said Catalan leaders who organized the referendum showed their "disrespect to the powers of the state" adding that "they have broken the democratic principles of the rule of law. 

Carles Puigdemont told the BBC the region will declare independence in a matter of days. In his first interview since the referendum, Carles Puigdemont said his government would "act at the end of this week or the beginning of next". When asked what he would do if the Spanish government were to intervene and take control of Catalonia's government, Puigdemont said it would be "an error which changes everything". 

 Bloomberg added that Rajoy is mulling if, and when, to use Article 155 of the Spanish Constitution to take direct control from the administration in Barcelona. This is the "error that would change everything" referred to by Puigdemont. 

Earlier on Tuesday, Spanish Interior Minister Juan Ignacio Zoido said: "We see how day after day the government of Catalonia is pushing the population to the abyss and inciting rebellion in the streets." He also warned that the central government would take "all measures necessary to stop acts of harassment". 

 Meanwhile, Deputy Prime Minister Soraya Sáenz de Santamaría condemned the "mafia" behavior of those protesters who had earlier gathered around hotels housing Spanish police officers and demanded that they leave.

TO RECAP:

 

Catalonia unable to pay salaries

If Rajoy is opening to a full scale bailout of the Spain the situation is also rapidly deteriorating at regional level, Catalonia on the wealthiest regions of Spain is facing an effective shutdown if bailot money will not be provided soon by the central Spanish government.

El Pais reports Catalonia Will Not Pay Hospitals or Private Centers and 100,000 workers are affected.


Google Translation Below:

This month, the Government of Catalona cannot tackle  payments owed to hospitals, schools, residences, social organizations, and children in care centers and workshops. These are the services provided by entities, public and private, funded by the Government.

The move affects up to 7,500 associations and some 100,000 workers, according to the third sector.

The news that the Government could not meet its commitments this month was confirmed on Monday after several days of negotiations with the affected entities. Sources from the Departments of Health and Welfare explained ten days ago it "could not meet the payments this month." Welfare, however, has ensured that other non-contributory pensions paid or the minimum income.

The Catalan Association of Relief calculated that 63% of companies cannot meet the payroll this month.

This is not the first time that the Government is obliged to defer payment. It happened last September when it could only address 65% of the amount and the rest was paid by the end of the year.

Catolonia asking urgent bail-out to Madrid

News from Spain are becoming every day more surreal and worrying, if Bankia bailout was not enough cause for concern, now Catolonia the most prosperous region of Spain is asking for help to the central Spanish government. For those not accostumed with Spanish politics this is a major event. Catolonia has always been together with the Basque country at the forefront of a nasty fight to get independent from Spain or at minimum to gain exceptional autonomy in handling their affairs, to go back to Spanish central government begging for help can only be justified by a serious deterioration of the country finances, certainly the situation must be dire enough for Catalans to put aside their pride and ask help to the odious Madrid central government. Keep checking the Basque country if they will do the same than Spain is in real danger.


From Reuters:

Spain's wealthiest autonomous region, Catalonia, needs financing help from the central government because it is running out of options for refinancing debt this year, Catalan President Artur Mas said on Friday.

"We don't care how they do it, but we need to make payments at the end of the month. Your economy can't recover if you can't pay your bills," Mas told a group of reporters from foreign media.

The debt burden of Spain's 17 highly devolved regions, and rising bad loans at the country's banks, are both at the heart of the euro zone debt crisis because investors are concerned they could strain finances so much that Spain, the currency bloc's fourth biggest economy, will need an international bailout.

Catalonia, which represents one fifth of the Spanish economy, has more than 13 billion euros in debt to refinance this year, as well as its deficit.

All of the regions together have 36 billion euros ($45 billion) to refinance this year, as well as an authorised deficit of 15 billion euros.

Last year many of the regions financed debt by falling months or even years behind in payments to providers such as street cleaners and hospital equipment suppliers.

This year the central government provided them with a special credit facility from the Official Credit Institute, or ICO, to pay providers, of which Catalonia has taken 2 billion euros.

The provider credit lines from the ICO run out in June and the central government has pledged to come up with a new mechanism for backing debt from the regions, which have been mostly priced out of international debt markets since the Greek rescue in 2010.

Catalonia's Mas, from the centre-right Convergence and Union Party, said he is running out of options. In the past two years Catalonia has placed patriot bonds, at 4.5 percent to 5.0 percent, but he says the capacity for the people of the region to buy such bonds is at its limit.

A quarter of all Catalan savings are already in patriot bonds, he said.

The other option would be short-term financing from banks, but Catalonia's neighbour, the region of Valencia, recently paid 7 percent for a six-month loan, a level seen as unsustainable.

Catalonia's annual interest payments have already doubled in the last two years, to 2 billion euros this year.