Regional government request boost Spanish risk premium

Catalonia, Valencia and Murcia's requests for financial aid exceeds 10 billion euros, which is more than half of the funds in the Regional Government Liquidity Fund dedicated to bailout out struggling regions.

More regions are going to ask for bailout funding, and this foments fear that the fund is not big enough. For this reason, Spain's risk premium has risen during the past few days. Investors are scared that the regions' liquidity shortages mean that they will struggle even more to reach 2012 deficit objectives. Rajoy explained yesterday that the national government knows perfectly well what is causing the regions' liquidity shortages and how much they will need. He said that the fund can adequately finance all of them.

The best remedy against doubt is to know just how much money the regions need.