Spain´s new state fund to provide liquidity to its ailing autonomous regions (ROYAL DECREE LAW 21/2012)

Spain has taken exceptional new measures for the State funding of its ailing autonomous regions, which are suffering acute cashflow problems, with the announcement of new legislation: Royal Decree Law 21/2012 of July 13, «Liquidity measures for public administrations and the financial sector» published in the Official Gazette of July 14.
It is not, as intended by some Autonomous Communities, that the State guarantees the issuing of regional debt by the «hispanobond» formula but to fund them in order to address the outstanding maturities and avoid a muchfeared default. In other words, this is a fullblown «bailout», in which the State provides credit to those Autonomous Regions that need it, in exchange for them undergoing a strict budget plan supervised and controlled by central government. Last resort enforcement measures for compliance are available under Article 155 of the Spanish&nbsp,Constitution.
The proposed system is similar to the suppliers’ payment plan1 created at the beginning of the year, although the goals of the funding&nbsp,are different. Both are exceptional measures&nbsp,approved by the Central Government to assist those Administrations with liquidity problems. This created a legal framework set out in the first additional provision of that Act, to regulate the “additional mechanisms for the financing of the Autonomous Communities and Municipalities”.