The government of Catalonia, Spain’s most indebted region, said Tuesday it could not afford to make its grant payments to social institutions such as hospital and homes for the elderly for July.
“It is due to a problem of liquidity,” said a spokeswoman for the Catalan regional government’s economy ministry, adding the situation “will start to return to normal in September.”
The government of the northeastern region did not say what the total amount of grant money would be suspended but daily newspaper El Pais reported Tuesday that it amounts to 400 million euros ($490 million).
Around 100,000 employees could be deprived of their salaries for the month of July as a result, according to the Confederation of Social Services Associations, which groups around 800 associations.
It said it was “alarmed” by the measure, adding the health sector has already been hit badly by spending cuts imposed by the regional government last year.
Catalonia, which accounts for about one fourth of Spain’s total economic output, said last week it was studying the possibility of tapping a new central government fund set up to to help regional governments in difficulty.
