Spain threatens to cut Catalonia funds over referendum

Spain's central government on Friday threatened to cut off funds for Catalonia unless the region's administration can prove it is not using state money to prepare a referendum on independence.

Catalonia's pro-independence regional government plans to hold a secession vote in the wealthy northeastern region on October 1, in defiance of Spain's central government in Madrid which has repeatedly said such a vote would violate the constitution.

"Not one euro of Catalan money will go to an illegal referendum that is desired by a handful of people," Spanish government spokesman Inigo Mendez de Vigo said after the government's weekly cabinet meeting.

Spain's central government will tighten its oversight of spending by Catalan authorities by requiring them to provide weekly accounts to show no money is being used to stage the independence vote, he added.

If this new obligation is not respected, Madrid will cut off Catalonia's access to a credit line known as the Autonomous Liquidity Fund that provides extra money to Spain's regional governments, Mendez de Vigo said.

The Autonomous Liquidity Fund was set up by Spain's central government in 2012 to lend money to regions that, because of the country's financial crisis, could not issue debt in financial markets.

Catalonia has received 67 billion euros ($77.5 billion) from the credit line since it was set up, and is expected to collect 3.6 billion euros from it this year, according to Spain's central government.

Catalonia, a region of 7.5 million inhabitants with its own language and customs, has long demanded greater autonomy.

Parties that want the region to break away from Spain won a majority of seats in the regional parliament for the first time in 2015 local elections.

Demands for autonomy have been fuelled by Spain's economic downturn, leading many to resent sending tax money to Madrid to prop up poorer regions.