Catalan Government will issue bonds to get cash

Citizens will be able to buy treasury bonds of the Catalan Government’s debt worth 1,000 euros each at a 4.75% interest rate. In the framework of the electoral campaign, the Opposition denounced that the Catalan Executive has “its drawers empty, without money”. The Catalan Government has denied this and accused the opposition of being irresponsible in order to get votes.

CNA / Gaspar Pericay Coll / Sarah Garrahan

October 11, 2010 11:54 PM

Barcelona (ACN).- In efforts to diversify sources of funding to pay regular public expenditure and face international financial markets that are speculating with government debts, the Catalan Government has decided to issue treasury bonds. This mean is commonly used by many governments as a way to obtain liquidity and fund its regular expenditure The measure is being wrapped up and will be officially launched in the coming days. The Catalan Ministry of Finance is negotiating the last details with banks in Catalonia, which will sell the bonds to private citizens. Each bond will be for 1,000 euros, with a 4.75% interest rate and a 1-year maturity period. It is the first time that the Catalan Government is using this measure that is commonly used by other public administrations such as the Spanish, US and German governments. The Opposition leader and President of the Centre-Right Catalan Nationalist Party (CiU), Artur Mas, has accused the current government of having “the Catalan Government’s drawers empty, without money”. He has also criticised that citizens have to fund their government in times of crisis and that the Government “will pay an expensive interest rate” of 4.75%. The Catalan Government has denied these accusations, stressing that the Government is not out of cash but just looking for alternative sources of funding in a context of economic crisis.

The Catalan Government reacted against the opposition’s accusations of having emptied “the drawers” and being out of cash. Montserrat Tura, Minister for Justice and number 2 in the upcoming elections for the Catalan Socialist Party (PSC), stated yesterday that “instead of helping and contributing to our collective project of prosperity and coming out of the crisis, they are creating insecurity. Uncertainty when we are speaking about financial issues is bad”. In this line, Joan Ridao, the Secretary General of the Left-Wing Catalan Independence Party (ERC), said, “I would like to ask Artur Mas to stop putting the Catalan Government’s financial health in doubt”. Ridao added, referring to the time when Mas used to be Catalonia’s Prime Minister, “I would like to remind people that when leaving the previous government, he [Artur Mas] said that he was leaving 200 million of surplus but an audit revealed it was 1,200 million in deficit”.

Artur Mas, leader of the CiU and according to all the polls the most likely winner of the upcoming elections, was the first to react to the bond-issuing announcement. In an electoral meeting, referring to the coalition that rules the Catalan Government, Mas stated, “they go to the international markets and find the tap closed. Now they are going to see if Catalan citizens buy these bonds. And they will pay a 4.75% interest rate! I don’t know if someone here works in the financial sector, but paying 4.75% at this very moment means paying a lot. And the situation is what I was telling you: the Catalan Government’s drawers are empty, without money”. The leader of the Catalan branch of the Spanish Conservative People’s Party (PPC), Alicia Sánchez-Camacho, also criticised the current Catalan Government for having spent, according to her, too much money in futile initiatives and “now being without money”.

The Catalan Government met this morning and said that the final details of the initiative are still being discussed. According to the Government’s acting spokesperson and Minister for Social Affairs, Carme Capdevila, next week the Minister for Finance will explain the initiative and give all of the details, which are still being discussed with Catalan banks. Private and savings banks will sell the bonds to private citizens. The Government still has to decide the quantity of bonds, which could be between 1,000 and 2,000 million euros. Capdevila commented that many governments issue treasury bonds to pay their debt, not only in times of crisis but as a regular way to obtain liquidity and fund regular activity.