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Catalonia will not be ransomed, rescued nor bailed out

July 24, 2012: 2:30 PM ET

Catalonia may be the latest Spanish region to ask for help paying its debts.

Catalonia appears poised to become the latest Spanish region to ask the central government for help paying its public debts, but the locals are not calling it a bailout.

The development, if confirmed, would make Catalonia the largest of Spain's 17 autonomous communities to request financial assistance from Madrid.

On Friday, Valencia became the first region to announce plans to tap the 18 billion euro fund Spain recently created to support its regional governments. Murcia, however, denied reports Sunday that it too would seek a bailout. Meanwhile, a report in Expansión Tuesday suggested that Aragón, another region, may also be gearing up to request financial support, but wants to know more about the conditions.

There are at least four other regions that could end up asking for money from the central government. While the amounts could be relatively small, analysts say the regions face a combined 15 billion euros of bond redemptions during the second half of the year.

That potential liability has added to concerns that Spain will be the latest, and largest, euro area nation to seek a full-blown rescue from the European Union and International Monetary Fund. Spain is counting on up to 100 billion euros from the eurozone bailout fund to shore up its banks, but it remains to be seen if it will get the money in time to satisfy the bond market.

Related: Spain struggles to fund itself

A spokesperson in the Catalan economy ministry told CNN the region will "probably" need to access the rescue fund, although the Catalonians argue that doing so would not qualify as a bailout. That's because the fund is backed by Spanish taxpayers, including those in Catalonia.

"We have not asked for any bailout," the Catalonia government said on Twitter, adding that a decision to request funds will depend on a vote in the Catalan senate.

In fact, the tweet contained the word "rescat," which could be translated as either "rescue" or "ransom," according to catalandictionary.org. But in this context, the word can be understood as "bailout," according one Catalan speaker.

However, the claim was undermined  by the region's economy minister, who told the BBC that Catalonia "has no other bank than the government of Spain."

Related: Spanish bank bailout moves forward

The mixed signals stem from the complicated political relationship between Madrid and Barcelona, the capital of Catalonia, notes Antonia Barroso, an analyst at political research firm EurasiaGroup.

"A direct intervention in Catalonia would cause a huge political headache for the central government as it would lead to early elections in the region," Barroso wrote in a report.

At the same time, the nationalist Convergence and Union party, which currently holds power in Catalonia, may be wary of the strings attached to any financial support.

The right-wing government of Spanish Prime Minister Mariano Rajoy has passed laws that would force regions that apply for funds to comply with deficit targets. "This is delaying the application for funds from a number of regional governments, which fear their powers may be limited," said Barroso.

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Ben Rooney
Ben Rooney
Staff writer, CNNMoney

Ben Rooney is a staff writer for CNNMoney. He covers the European debt crisis and other international finance stories, in addition to writing about stocks, bonds, investing and other Wall Street-related news. Follow Ben on Twitter: @ben_rooney

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