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MADRID, July 24 (Reuters) – Spain’s prime minister said on Tuesday it would take more than a half-billion euros ($540 million) to finance a new regional government with powers to run the economy, cut spending and lower taxes.
Prime Minister Mariano Rajoy, who will be looking to form a new administration in the European Union’s second largest economy after the election next week, said after meeting business leaders that, given Spain’s low growth, he had no choice but to ask for help.
He said the new government would be charged with spending a further 1.6 billion euros this year and increase the share of the tax burden held by companies to more than two-thirds.
The government had already announced three years of tax cuts of 1.8 percent on average, rising to 5 percent in November.
“What I have to tell the (business) community is this: There is no money here. At least half a billion euros will be needed, which, let’s be honest, is rather small,” Rajoy told a business summit.
In return, the Catalan region will need the money only up to 2018, he said.
Rajoy, who said on Monday he might quit if his centre-right coalition, known as the PP, fails to get votes in the May 6 election, has so far received more than 4,000 letters from business leaders who are demanding more help for the region whose economy is just 1.6 percent of GDP.
“A big majority of the business people in the region are against the idea of secession,” Rajoy told the business summit. “What is the alternative?”
The business leaders also told the prime minister that the Catalan government was a big financial basket case, but that his government would have to find a way to make up the difference.
“We expect that our share of the fiscal burden will be reduced by at least another 6 percent,” Rajoy said.
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