Catalan pro-secession parties push for changes to region's debt

Reuters News
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Posted: Nov 07, 2015 10:30 AM

MADRID (Reuters) - Pro-independence parties in Catalonia, which are gearing up for a vote in their local parliament on whether to begin a process to split from Spain, have put forward a motion calling for a partial renegotiation of the region's debt to free up cash.

Parties favouring a breakaway from Spain won a majority of seats in the regional parliament in September, driving up tensions with a fiercely opposed central government in Madrid ahead of a national election in December.

The stand-off is likely to reach new heights on Monday when Catalonia's regional parliament is expected to approve a declaration marking the start of an 18-month process toward independence.

The center-right government of Prime Minister Mariano Rajoy has vowed to block such a move in the courts.

In an amendment to the independence declaration, pro-secession parties are also now proposing that Catalonia should renegotiate its debt pile, focusing on loans where interest rates are highest, to save money and finance social spending.

Northeastern Catalonia is Spain's most indebted region, with nearly 68 billion euros in outstanding borrowings as of the second quarter of this year, according to the Bank of Spain.

More than half of that is owed to Spain's central government, which provided cheap loans to regions shut out of international markets during a recent economic crisis and is still handing out credit lines at advantageous conditions. Catalonia also has outstanding bonds.

The motion presented to Catalonia's parliament did not detail what proportion of the region's borrowings could be affected, though it suggested that bank debt held by domestic creditors would be targeted.

"The future government will establish a calendar of meetings with the heads of resident banks to study the possibility of renegotiating interest payments for social ends," the amendment said.

Catalonia has yet to fully form a government after the September election, amid wrangling within the pro-independence camp on who will act as premier in the region.

Rajoy reiterated on Saturday that his government would seek to invalidate any move toward independence by Catalonia, which would go against Spain's constitution.

"We have the constitution and the law on our side," Rajoy told members of his People's Party at a televised rally.

(Reporting by Sarah White; Editing by Angus MacSwan)