Junqueras expects green light from Montoro to pass long-term debts of 100 million
The Government of the Generalitat is pending several weeks of an authorization from the Council of Ministers to convert long-term debt short credit BBVA for about 100 million euros, as confirmed by several sources consulted.
This loan has now expired and therefore is generating default interest , much higher than that applied on a normal loan, given the impossibility of the Generalitat to face it at the time of expiration. The same sources have indicated that this is not the only credit or the only financial institution that has been found in this situation, nor will it be the last case.
The contacts between the Department of Economy of the Generalitat, which is headed by Vice President Oriol Junqueras, and the Ministry of Finance, whose head is Cristóbal Montoro, are fluid and a satisfactory solution is expected for this matter in the coming days, according to sources involved. Sources close to the Department of Economy have ruled out that this postponement in payment, despite having an economic cost, will cause additional problems of magnitude in the finances of the Generalitat.
No new long-term loans without authorization from the State Government
The solution for this new financial burden of the Generalitat is to convert these BBVA loans that are now short-term, that is, with a maximum maturity of one year, in long-term financing. But for this it is necessary to have the formal and formal plan of the central Government. The regulations of the Autonomous Liquidity Fund (FLA), through which the State Treasury assumes since 2012 the debts of the autonomous communities that have been left without access to the markets, forces those who have accepted the mechanism, and Catalonia leads the list, not to issue new long-term loans without express authorization from the State Government.
In fact, this authorization implies practically an assumption of the debt by the Treasury. Once the green light is formalized and credit terms change, the FLA, which can only assume the long-term indebtedness of the autonomous communities of both foreign and Spanish banks, will be at the time of the new expiration. Become the owner of this new debt. The Generalitat has in the short term around 10% of its total debt, about 6,000 million over 63,500 million.
According to the sources informed on the matter, the central government argues that its current situation in functions complicates the resolution of this type of decision.
But in the meantime, once the credit goes into default, the calendar starts running. After 90 days in this situation, the banking regulations oblige the financial institution, in this case the BBVA, to make provisions, with the consequent increase in the cost of this financial operation, both for the bank and for the Catalan administration. Amen of the unrest that causes in the rest of the banking entities with which the Catalan administration maintains credit relationships.
The FLA, created by the Government in 2012, has disbursed 62,773 million euros in its three years of effectiveness, 60% of which have been earmarked for the direct payment of debt maturities and interest.
According to the latest official data, at the end of last year the FLA had in its accounts credits that Catalonia had received for 42,500 million euros, 58% of the total debt. Certainly the most voluminous figure of all the Spanish autonomous communities, but not the highest percentage. For Andalusia, the proportion was 62%, and that of Valencia, 67%, to name just two significant examples. Forecasts indicate that by the end of this 2016, the central government will already have more than 70% of Catalonia’s debt with banks and international markets.
One of the first tasks to be assumed by a new Government in Spain, now or after a possible election, will be precisely what treatment to give to these debts of the Autonomous Communities with the FLA. At the end of 2014, Montoro proposed to Mariano Rajoy to start a program of progressive eliminations of this debt, recognizing that once it is in the hands of the State, its future collection is very doubtful. Rajoy, advised by Luis de Guindos, the Minister of Economy, who feared that Brussels would welcome the measure as an outburst of fiscal indiscipline, chose to freeze the measure. In exchange, it was decided to apply a zero interest rate to the debt during the past year. Recently, the communities of Andalusia and Valencia, have claimed that removes. And it is assumed that both the PSOE and the PP will apply such measures in the next term.