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Spain Red Cross Launches First-Ever Donations Appeal For Poor

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10/09/12 08:10 AM ET  AP

MADRID -- Spain's Red Cross is launching its first-ever public appeal for donations to help the growing number Spaniards in need of help because of the country's economic crisis.

Spokesman Miguel Angel Rodriguez said Tuesday the agency is looking to round up some (EURO)30 million ($38.87 million) over the next two years to help an extra 300,000 people.

The agency helped some 2 million people in Spain last year, most of who were in need of food or money. Up to now, the Spanish Red Cross' fundraisers have always been directed at helping people in need abroad.

The new campaign, titled "Now More than Ever," begins Wednesday when the organization holds its annual collection day.

Spain is in its second recession in three years with near 25 percent unemployment.

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    During Spain's property boom, the country's 17 semi-autonomous regions raked in unprecedented revenues from building permits and fees. They windfall to finance infrastructure projects and the ranks or public employees swelled. Across Spain, highways, parks, public swimming pools, gleaming government buildings and airports sprung up. Now the property market has collapsed and the regions can no longer afford to pay their bills and manage their debts. The regions' problems have been a focus of investor concern for more than a year, but the fears skyrocketed last Friday when the region of Valencia announced it would be the first to tap a federal fund set up to bail out the hurting regions. Over the weekend, the region of Murcia said it also needed help. More regions are expected to join the queue, threatening to overwhelm the central government. No one knows how much money the regions will need, though leading newspaper El Pais said they have combined debts of (EURO)140 billion and that (EURO)36 billion must be refinanced this year. The fund set up by the government on July 13 will have (EURO)18 billion in capital, part of it raided from the national lottery. If more funds are needed, Spain would either have to issue debt at punishing rates - or ask for a bailout. <em>Protesters carry banners reading "United, let's stop this now" as they demonstrate against the country's near 25 percent unemployment rate and stinging austerity measures introduced by the government, in Madrid, Spain, Saturday, July 21, 2012. (AP Photo/Andres Kudacki)</em>


    While one out of every four Spaniards are unemployed, the rate for job-seekers under 25 stands at 52 percent. Emigration by young adults is on the rise, and companies are taking advantage of new labor reforms that make it cheaper to fire workers. The country is in its second recession in three years. Just as Valencia was announcing its financing needs last Friday, Spain's finance minister revealed that the economic contraction will be deeper than expected in 2013 - meaning an even longer period of economic pain before Spain can hope to start generating jobs again. For this year, the government expects a smaller contraction than previously forecast of 1.5 percent, down from a previous estimate of 1.7. However, instead of economic growth of 0.2 percent for next year, the government now forecasts a contraction of 0.5 percent. <em>A woman begs for alms next to a bank in downtown Barcelona, Spain, Friday June 22, 2012 beside a small sign that reads: 'I have hunger'. (AP Photo/Emilio Morenatti)</em>


    The concerns circling Spain's shaky banks intensified in May when Bankia, the country's fifth-largest lender, unexpectedly announced it would need (EURO)19 billion to cover its toxic property loans and assets. A month later, leaders of the other 16 countries that use the euro crafted a rescue package of up to (EURO)100 billion for Spain's banks. Spain still hasn't put a precise figure on how much the banks will need, denying investors a clear picture of the extent of the problem and whether the (EURO)100 billion is enough to handle it. Those numbers won't start coming out until September when extensive audits and stress tests of each bank are finalized. Friday's announcement by eurozone finance ministers that they had agreed the terms of the bailout hasn't quelled markets. That's because the government is ultimately liable to repay the loans. Europe's financial leaders agreed in principle earlier this month to eventually make loans directly to banks and take the Spanish government out of the equation. But that shift is a long way off - a pan-European banking authority would have to be created first and that could take years. There is also concern that the rules of the bailout mean that eurozone would have to paid back first before other debt is settled. This could leave less money for private investors. <em>Bankia's president, Jose Ignacio Goirigolzarri, fifth from left, during a Bankia shareholders meeting in Valencia, Spain, Friday, June 29, 2012. (AP Photo/Alberto Saiz)</em>


    The bank bailout has only made investors more worried about Spain's financial position. Two-thirds of Spain's government bonds are held by the country's banks, pension funds and insurance companies - that's 50 percent higher than last year. This sharp increase is a sure sign that foreign demand for Spanish debt is falling fast. Market-watchers are concerned that Spain and its banks are dependent on each other: the government is issuing debt, the majority of which is being bought by its banks, only to use the funds from the sale to prop up its banks so that they can buy more government debt. Spain has so far this year issued (EURO)59 billion in bonds out of a total (EURO)86 billion planned for 2012. But as the banks' condition deteriorates, there is growing concern that they won't be able to buy up much more government debt. <em>A demonstrator shows a ten euros note with a stamp reading in Spanish "Banking is like Mordo, they evict and swindle, cancel your bank account" during a demonstration next to a Bankia bank branch in Barcelona, Spain, Saturday June 2, 2012. (AP Photo/Emilio Morenatti)</em>


    Since beating former Socialist Prime Minister Jose Luis Rodriguez Zapatero in the polls late last year, Prime Minister Mariano Rajoy has been introducing successive rounds of austerity measures aimed at preventing the country from being forced into a public finance bailout. Rajoy's latest set of measures has been his most controversial _a steep hike in Spain's sales tax, and the elimination of one of the 14 yearly paychecks that public servants receive. Spain has been spared the level of brutal anti-austerity street violence like that seen in Greece, but got a taste of it on July 11 after Rajoy unveiled the new round of cuts and tax rises. Spanish miners and sympathizers, incensed with the seemingly endless cutbacks and tax hikes, clashed with riot police who fired rubber bullets, injuring 22 demonstrators and 10 officers. The miners said cuts in government mining subsidies will leave them jobless, and many Madrid residents joined in because they believe the problems that the miners face are similar to their economic woes. Off-duty police and firefighters are starting to join in anti-austerity protests by public servants. Officers are prohibited from wearing their uniforms while protesting, but deck themselves out in white shirts to identify themselves, and the firefighters hold their helmets. If future protests come with escalating violence, that would only make investors more nervous about Spain. <em>A demonstrator shout during a protest against the recent austerity measures announced by the Spanish government, in front of the Popular Party in Madrid, Spain, on Friday July 13, 2012. (AP Photo/Andres Kudacki)</em>

Filed by Jessica Prois  |