Aug. 29 - After Spain's wealthiest region, Catalonia, asks for a bailout the Spanish central government rebuffs speculation of a full sovereign rescue. Ivor Bennett reports.
From a distance, Catalonia's a picture of tranquility. But take a closer look and the cracks soon appear. Hospitals and nursing homes have lost state handouts while infrastructure funding has also been frozen - some of the tell-tale signs of austerity biting. Catalonia's request for a 5 billion Euro bailout is no surprise to the region's elderly, who are now taxed one euro for each medical prescription. (SOUNDBITE) (Catalan) PENSIONER ENRIQUETA SAYING: "It is all very bad because ill people need care, but sometimes the authorities just don't take care of them. But that is the way it goes now." Catalonia still finances some construction like this new university campus. But post bailout terms could force the cement mixers to stop turning. Catalonia is the third Spanish region to ask for state help, despite being the wealthiest. With three more expected to follow suit, the Government's 18 billion euro bailout fund is suddenly looking a lot smaller. The regions aren't the only ones with problems. The country's second quarter GDP contraction was much worse than expected although Spain's economy minister insists its finances are under control. (SOUNBITE)(Spanish) SPAIN'S ECONOMY MINISTER LUIS DE GUINDOS, SAYING: "The government knows exactly what the problems of Spanish society are. It has taken measures that have laid the foundation to correct those problems and we have a roadmap which we will continue to apply." But Tuesday's visit from the European Council President was the first in a series by EU leaders. And Manoj Ladwa from TJ Markets says it shows a bailout is edging ever nearer. (SOUNDBITE) (English) MANOJ LADWA HEAD OF TRADING TJ MARKETS, SAYING: "A full blown Spanish bailout is on the books and is increasingly likely. Despite the fact that we're seeing 10-year yields dip back beneath that crucial 7% level, we've got increasingly high unemployment, a property market and banking market that's suffering very badly, and there seems to be little hope for recovery for the Spanish economy." Spirits weren't dampened though at Spain's annual Tomatina festival in Bunol, where 120 tons of ripe tomatoes turned the streets the same colour as the economy. Spain hopes the ECB can stop the rot next week with new measures to help its debt costs. But a crucial longer term bond auction the same day could still leave the country red-faced. Ivor Bennett, Reuters