Government to extend €10 bln credit to regions

The new Partido Popular government of Spain has extended €10 billion line of credit to support ithe indebted regions, a statement issued by the Ministry of Finance read yesterday.

Last month the government stated how it would offer further financial support to the regions in exchange for their agreement to submit to new budget controls.

The line of credit may even be extended €15 billion and will be used to cover repayments of escalating debts. It will not have an impact on Spain's budget deficit as it will be used to finance debts already in existence.

Spain's financing costs have increased considerably over the past year, and many of the country's 17 regions are now closed to the credit markets entirely.

In January the government was forced to intervene to prevent a default by the Region of Valencia by advancing it some of its regular funding.