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| Catalonia's €5bn plea brings Spanish bailout nearer | Catalonia's €5bn plea brings Spanish bailout nearer |
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| Spain's attempts to stave off a full bailout were dealt a blow on Tuesday when the regional government of Catalonia said it needed €5bn (£3.97bn) from a central government rescue fund. | Spain's attempts to stave off a full bailout were dealt a blow on Tuesday when the regional government of Catalonia said it needed €5bn (£3.97bn) from a central government rescue fund. |
| It came as figures showed Spanish banks saw €1 withdrawn for every €20 deposited in July – making it the worst month for deposit flight in 15 years – and Spain's statistics institute revealed the recession was worse than thought, with the economy shrinking at an annual rate of 1.3% in the second quarter. | It came as figures showed Spanish banks saw €1 withdrawn for every €20 deposited in July – making it the worst month for deposit flight in 15 years – and Spain's statistics institute revealed the recession was worse than thought, with the economy shrinking at an annual rate of 1.3% in the second quarter. |
| Catalonia is one of half a dozen regional governments shut out of markets and needing government help to roll over debt and fund budget deficits. Regions have a combined debt of €145bn, with €36bn needing to be refinanced this year. | Catalonia is one of half a dozen regional governments shut out of markets and needing government help to roll over debt and fund budget deficits. Regions have a combined debt of €145bn, with €36bn needing to be refinanced this year. |
| Prime minister Mariano Rajoy's conservative government may eventually take direct control of the region's finances. But regional prime minister Artur Mas, of the Catalan nationalist Convergence and Union coalition, has threatened a snap election if that happens. His spokesman, Francesc Homs, rejected any "political terms" for borrowing the money. | Prime minister Mariano Rajoy's conservative government may eventually take direct control of the region's finances. But regional prime minister Artur Mas, of the Catalan nationalist Convergence and Union coalition, has threatened a snap election if that happens. His spokesman, Francesc Homs, rejected any "political terms" for borrowing the money. |
| A report by the Fedea thinktank predicts Catalonia, which accounts for one fifth of the economy, will miss the 1.5% deficit target set this year, with an expected 2.5% deficit making it the second-worst performing region. Revised figures showed the Spanish recession started three months earlier than previously indicated. "The data shows the recession started in the third quarter of last year," secretary of state for the economy, Fernando Jiménez, admitted. | A report by the Fedea thinktank predicts Catalonia, which accounts for one fifth of the economy, will miss the 1.5% deficit target set this year, with an expected 2.5% deficit making it the second-worst performing region. Revised figures showed the Spanish recession started three months earlier than previously indicated. "The data shows the recession started in the third quarter of last year," secretary of state for the economy, Fernando Jiménez, admitted. |
| "The downturn in the Spanish economy is deeper than previously thought and accelerating," warned Robert O'Daly of the Economist Intelligence Unit. | "The downturn in the Spanish economy is deeper than previously thought and accelerating," warned Robert O'Daly of the Economist Intelligence Unit. |
| Unemployment is already at 25% but the speed at which jobs are disappearing quickened to an average rate of 800,000 jobs a year in the second quarter, according to the statistics institute. | Unemployment is already at 25% but the speed at which jobs are disappearing quickened to an average rate of 800,000 jobs a year in the second quarter, according to the statistics institute. |
| European council president Herman Van Rompuy said on Tuesday it was up to Spain to decide whether to seek eurozone help, after meeting Rajoy in Madrid. Rajoy repeated that he needed more details from the European Central Bank to help him decide. | European council president Herman Van Rompuy said on Tuesday it was up to Spain to decide whether to seek eurozone help, after meeting Rajoy in Madrid. Rajoy repeated that he needed more details from the European Central Bank to help him decide. |
| Sources at the Bank of Spain claimed the sudden drop in deposits was mostly due to banks withdrawing money placed with other entities, but the fall came amid growing consumer anger with retail banks. Tens of thousands of small savers are set to be hit with losses on preference shares they bought in former savings banks that now need bailing out by the eurozone's rescue fund. | Sources at the Bank of Spain claimed the sudden drop in deposits was mostly due to banks withdrawing money placed with other entities, but the fall came amid growing consumer anger with retail banks. Tens of thousands of small savers are set to be hit with losses on preference shares they bought in former savings banks that now need bailing out by the eurozone's rescue fund. |
| Spanish banks can take up to €100bn (£79.7bn) from the fund, but preference shareholders must first bear losses of up to 80%. Many savers who bought the shares thought they were risk-free deposits from high street banks. | Spanish banks can take up to €100bn (£79.7bn) from the fund, but preference shareholders must first bear losses of up to 80%. Many savers who bought the shares thought they were risk-free deposits from high street banks. |
| Mario Draghi, the head of the European Central Bank, abruptly withdrew from delivering a speech in the US next weekend, citing pressure of work as he prepares two important moves on the euro crisis. | Mario Draghi, the head of the European Central Bank, abruptly withdrew from delivering a speech in the US next weekend, citing pressure of work as he prepares two important moves on the euro crisis. |
| Draghi was due to speak at the annual economic policymaking elite gathering at Jackson Hole in Wyoming on Saturday before an audience of global central bankers. But he is preparing to unveil controversial moves next week aimed at pushing down the costs of borrowing for Spain and Italy by launching ECB bond-buying interventions in the financial markets, a policy bitterly criticised by Germany's powerful Bundesbank. | Draghi was due to speak at the annual economic policymaking elite gathering at Jackson Hole in Wyoming on Saturday before an audience of global central bankers. But he is preparing to unveil controversial moves next week aimed at pushing down the costs of borrowing for Spain and Italy by launching ECB bond-buying interventions in the financial markets, a policy bitterly criticised by Germany's powerful Bundesbank. |
| Draghi is also engaged in behind-the-scenes politicking over the shape and powers of a new eurozone bank supervision authority. A few days after Draghi announces the bond-buying policy, following an ECB governing council meeting next week, the European commission is to deliver proposals for the new eurozone bank regulator, calling for the ECB to be given extensive new powers as the key supervisory authority. | Draghi is also engaged in behind-the-scenes politicking over the shape and powers of a new eurozone bank supervision authority. A few days after Draghi announces the bond-buying policy, following an ECB governing council meeting next week, the European commission is to deliver proposals for the new eurozone bank regulator, calling for the ECB to be given extensive new powers as the key supervisory authority. |
| Jörg Asmussen, the German member of the ECB's six-strong executive who has co-drafted the bond-buying scheme for Draghi, disclosed on Monday some of the conditions required to trigger ECB action. | Jörg Asmussen, the German member of the ECB's six-strong executive who has co-drafted the bond-buying scheme for Draghi, disclosed on Monday some of the conditions required to trigger ECB action. |
| The ECB will intervene in the secondary markets to buy bonds with short maturities, he said, but only if the eurozone's bailout funds first became active in the primary markets – in other words directly buying up distressed government bonds. | The ECB will intervene in the secondary markets to buy bonds with short maturities, he said, but only if the eurozone's bailout funds first became active in the primary markets – in other words directly buying up distressed government bonds. |
| That introduces a strong element of politics and likely delays since eurozone governments and finance ministers will need to decide to use the bailout funds before ECB action is triggered. | That introduces a strong element of politics and likely delays since eurozone governments and finance ministers will need to decide to use the bailout funds before ECB action is triggered. |
| Any country benefiting from the bond-buying would need to request a bailout and succumb to eurozone terms, situations that Rajoy and his Italian counterpart, Mario Monti, are anxious to avoid. | Any country benefiting from the bond-buying would need to request a bailout and succumb to eurozone terms, situations that Rajoy and his Italian counterpart, Mario Monti, are anxious to avoid. |
| Asmussen also made clear the ECB was keen to be granted the new banking supervisory powers, but warned the commission in Brussels it would only take on the role on its terms. | Asmussen also made clear the ECB was keen to be granted the new banking supervisory powers, but warned the commission in Brussels it would only take on the role on its terms. |
| "The ECB is ready to accept this responsibility, but under certain conditions," he said. "The ECB has to be given all the instruments needed to carry out the tasks of bank supervision effectively. In particular, that means access to all the necessary information, intervention rights and the right to close down non-viable banks. | "The ECB is ready to accept this responsibility, but under certain conditions," he said. "The ECB has to be given all the instruments needed to carry out the tasks of bank supervision effectively. In particular, that means access to all the necessary information, intervention rights and the right to close down non-viable banks. |
| "Without these minimum tools, the ECB will not take on the responsibility. The risk to the reputation of the institution would be too great." | "Without these minimum tools, the ECB will not take on the responsibility. The risk to the reputation of the institution would be too great." |
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