Catalonia, Spain's most indebted region, said Tuesday it could not pay subsidies in July to hospitals, old age homes and other social services already reeling from sharp budget cuts.
"It is due to a problem of liquidity," said a spokeswoman for the Catalan regional government's economy ministry, adding that the situation "will start to return to normal in September."
Catalonia last week said it was considering tapping a new central government fund worth up to 18 billion euros ($22 billion) set up to help regional governments in difficulty.
But it is in conflict with the central government over tough deficit and debt targets imposed on the regions.
In protest, the Catalan government boycotted a meeting with Budget Minister Cristobal Montoro in Madrid Tuesday at which regional finance officials approved the government's debt limits for the regions.
The Catalan government would not say how much money in grants it would not be able to pay, but left-leaning daily El Pais put the figure at 400 million euros.
The measure prompted outrage among social services agencies in this northeastern region, which accounts for about a quarter of Spain's total economic output.
About 100,000 workers could be deprived of their salaries for the month of July, according to the Catalan Confederation of Social Services Associations, which groups around 800 such bodies.
"There is a feeling of disappointment and worry," said the association's director, Laia Grabulosa, adding that the agencies that are affected "provide basic services to very fragile people".
http://news.xin.msn.com/en/business/spains-catalonia-suspends-social-service-payments-2
Let’s Stop Kidding Ourselves and Look at the REAL Math Behind Spain
ECB's Draghi faces leadership test over euro pledge
Aug 2 (Reuters) - European Central Bank President Mario Draghi faces intense pressure from investors, European leaders and even the United States to deliver on Thursday on his pledge to do whatever it takes to save the euro.Draghi will face the biggest test of his nine months' leadership of the central bank when it meets later in the day, and any signs that he overplayed his hand when making the pledge a week ago could see markets punish the euro zone.
The ECB has little margin for error to maintain its credibility and avoid bond yields climbing in the indebted countries on the euro zone periphery.
The market's faith in Draghi will be tested before the 1230 GMT post-meeting press conference by a Spanish bond auction that could see its debt costs rise.
"Draghi has unfortunately painted himself into a corner," JP Morgan analyst Pavan Wadhwa said in a conference call.
"The ECB does need to demonstrate its credibility ... Otherwise Draghi will lose face completely."
http://www.reuters.com/article/2012/08/02/ecb-rates-idUSL6E8J1JXK20120802
Bundesbank ties ECB’s hands on delivering euro zone aid
The Bundesbank has been appalled by the ECB’s interventions in the government bond market, its costly efforts to prop up ailing banks, and the enormous expansion of its balance sheet, arguing that the central bank risks becoming a tool for the direct financing of government budgets.
http://www.theglobeandmail.com/report-on-business/bundesbank-ties-ecbs-hands-on-delivering-euro-zone-aid/article4456882/?cmpid=rss1
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