Last updated: February 16. 2013 8:36PM - 65 Views

French President Francois Hollande, left, is greeted by Spain's Prime Minister Mariano Rajoy at the Moncloa Palace in Madrid Thursday Aug. 30, 2012.  Hollande met Rajoy for talks on Spain's economic crisis and the future of the euro. (AP Photo/Paul White)
French President Francois Hollande, left, is greeted by Spain's Prime Minister Mariano Rajoy at the Moncloa Palace in Madrid Thursday Aug. 30, 2012. Hollande met Rajoy for talks on Spain's economic crisis and the future of the euro. (AP Photo/Paul White)
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(AP) Spain's financial problems increased Thursday as one of its cash-strapped regions said it would have to tap a central government rescue fund for 4.5 billion ($5.6 billion) a billion more than previously planned to help it handle its debt.


The announcement by the Valencia's president Alberto Fabra brought to almost 11 billion the amount being sought by just three of the 17 Spanish regional governments from the 18 billion fund set up by the government last month.


The northeastern region of Catalonia said Tuesday it would seek 5.02 billion while southern Murcia intends asking for at least 300 million. Four other regions are also expected to tap the fund.


Spain's regions have a combined debt of 145 billion and some 36 billion must be refinanced this year. Catalonia alone owes more than 42 billion.


Many of the 17 semi-autonomous regions, which can set their own budgets and spending plans, are struggling in the country's double-dip recession. Some of them, which take up almost 40 percent of public money, have overspent and are unable to borrow on financial markets to repay their huge debts.


Catalonia's announcement this week reignited market fears over Spain's overall financial situation and whether it will need a full bailout after all.


Spain's crisis and the future of the euro were to be the center of talks Thursday between Prime Minister Mariano Rajoy and visiting French President Francois Hollande.


Spain's troubles with its regional government, combined with its struggle to contain a crisis in its banking industry, have pushed up the borrowing costs for its debt. The interest rate demanded by investors for key 10-year bonds on the secondary market where issued bonds are traded freely rose 0.12 percentage points Thursday to 6.55 percent. Although lower than a month ago, the rate is edging closer to a level that is considered unsustainable in the long term.


Borrowing rates had edged down in recent weeks after Madrid intimated it might seek some financial aid and the European Central Bank said it might buy Spain's bonds to help ease market pressure.


Associated Press
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