The crisis has pushed local businesses to the brink and put pressure on Prime Minister Mario Rajoy to apply for international assistance, The Wall Street Journal reported Saturday.
Nuria Jarque, a 67-year-old businesswoman with a 25-year history of operating water-treatment plants in Spain, has laid off five workers and cut pay by 50 percent to her nine remaining employees, as her company's revenue has dropped in half in 2012 with the government failing to pay their bills.
"Money is really, really tight, and the suppliers are having to bear it. It is putting a further brake on economic activity," Angel Saz Carranza, a professor at ESADE Business School in Barcelona, told the Journal.
The government's failure to pay bills has sparked civil unrest. Pharmacies in Valencia shut down for much of November in protest of late payments from the government, and workers have mounted strikes street protests.
On average, the government paid bills 80 days late in 2012, compared to 51 days late in 2011, records show.
Jarque said the delayed payments amount to a no-interest loan to the government.
"We regret the payment delays and understand the discontent of those affected. We're working on securing liquidity ... to meet our financial obligations," said a spokesman for Valencia's regional government.
Police: Sword-wielding man demanded free tacos
Puzzle-maker slips 'Murdoch Is Evil' into Rupert Murdoch's Sunday Telegraph