Is the EC pushing Spain towards a bailout?

[Ephilant]

According to "El Economista", unnamed sources, Catalan has officially asked the Spanish government for "assistance". The largest economy after Madrid, this is bad news for the Spanish Government.
Barcelona has neither formally denied nor confirmed the request for assistance, but said it's "an option".

[Dr. FIVE]

Some posts from the good old days when Golem was blogging about Spanish regional debt in 2010.

http://www.golemxiv.co.uk/2010/08/sp...egional-debts/

During the boom years the regional governments were the ones who worked closely with the regional banks, the Cajas and the property developers. Catalonia alone accounts for one fifth of Spanish GDP.
The regions are massively in debt and their borrowing costs are high or non-existent due to the debt market refusing to lend to them at all. Catalonia has been shut out since March. How much do they actually owe. Hard to say. But a smaller region, Galicia, last month asked the central government if it could delay repaying the €2.6 billion it owes to the central government. The government said no.
Over all the regions have a debt load at about 9% GDP. They have said they will cut this to 2.4% by the end of the year. Which strikes me as about as believable as Spanish building permissions. Now remember this 9% is on twice the spending the National government controls. So if they fail to deliver, which they obviously will, then this blows the entire Spanish recovery out of the water. The only solution for the Spanish government is the one every government has been using – just don’t talk about it. Keep the figures quarantined.

http://www.golemxiv.co.uk/2011/07/ho...int-for-italy/

Everyone has ‘known’ the Spanish regions were lying. Everyone except the Spanish government and Central bank that is who both claimed it was all declared and there was nothing at all to worry about. Spain they loved to say, was not Greece. No it’s not. It’s bigger and much, much worse. Only Italy would be worse for Europe’s banks. And this revelation says to me that Italy might well have worse in store.

How was it done? Easy actually. It’s a trick as old as accounting and Italy is doing it. You hide debts by calling them unpaid invoices. It’s not that someone has defaulted, they just haven’t paid you yet. Which simple logic means you can take what will definitely be a loss and not only put off declaring it as a loss, but actually count it as an asset for as long as you can keep up the charade.

You see until the moment you absolutely cannot hide the truth any more that the debt is not ever going to be repaid, until that moment, when you or the person who owes you is officially audited, you can keep insisting that this is money you are owed and as such it is an asset about to come in. It is very much like saying the parrot is not dead, he’s just resting. Any moment now he’ll get up and give us a blast of song. Any moment… any time now that debt will be paid.

That is what the Spanish regions have been and still are doing and it is what I firmly believe the Italian cities and regions are doing as well.

Would bring a nostalgic tear to your eye, sniff

[C. Flower]

It’s a trick as old as accounting and Italy is doing it. You hide debts by calling them unpaid invoices. It’s not that someone has defaulted, they just haven’t paid you yet.

That would apply to the whole of the Irish banking sector too.

[ang]

Its all OK no need for panic the funamentals are strong - *I Despair*

‏@lindayueh
Joint Spain, German statement: #Spain, Germany say quick implementation of bank bailout needed, yields don't reflect Spain's fundamentals

[MPB]

Civil Servants being allowed to borrow unlimited amounts of money, at the ordinary citizens expense, from Bankers who were paid massive commissions on money they lent, not money they were repaid, was a recipe for disaster.

No personal responsibility on either side. No consequences on either side.

The stupidity of people being allowed to borrow money, they don,.t have any responsibility for repaying, allied to the stupidity of allowing people to lend other peoples money, when they have no responsibility for ensuring it is repaid, is a scandal.

[ang]

Here we go (again) - Reports that Germany urging Spain into €300BN Bailout -

Germany wants Spain formally requested a ransom of 300,000 million euros to solve its serious problem of lack of access to markets.

http://translate.google.de/translate...-de-euros.html

Then the usual it just aint so from Spain -

Spanish government officials says the report that Germany is urging a Spanish bailout is untrue

[ang]

Next up - ECB buying Spanish bonds on behalf of EFSF -

considering direct EFSF purchases of Spanish bonds from Spanish banks; the purchases would be conducted by the ECB on behalf of the EFSF;

http://www.eurointelligence.com/

[morticia]

Lord love a duck, well, at least they can't say we didn't tell them so.

This is making our lot look positively organised. I am also not clear any more as to why the reluctance to go for the bailout. The only practical difference seems to be a lower interest rate with the bailout as the markets force austerity anyway.

Spain is banjaxed anyway, though. They had high unemployment prior to the crisis, no sovereign wealth fund, and the same banking bubble.

Time to clear the decks and sort the mess out, methinks. But just letting the banks go isn't that simple. Sure, ordinary savers would lose their shirts but the bond holders would be finally burnt. Fine. Problem is that businesses would lose their money, the ability to pay people and invest, so overnight, you're looking at 80% unemployment... And the state will be able to pay the public sector after that?? I don't think so.

Banks; can't live with 'em, but can't survive without them either. Unless we revert to the spud as the basic unit of currency, and most of us are too unfit to dig for those, too

[Ogiol]

Id just like to clarify a few issues which are affecting the present spanish situation.

The regions you speak of, were designated during the 'transition' and created, in effect, to dilute the perception of catalonia and the basque country being seperate cultural/historical entities. Therefore we have the situation of a quasi-federal state, with hitherto non historical 'autonomous communities' such as la rioja, castilla la mancha and murcia.
As was mentioned earlier, catalonia is the second biggest economic autonomous community, next to madrid (into which money has been ploughed over the last 30 years). What was not mentioned though that catalonia has continuously given twice as much as it recieves to the central government during those 30 years of democracy, something that has given rise to the long term call for fiscal autonomy, such as is the case with the basque country.
The stated aim of this catalan government has been to achieve this fiscal autonomy, therefore many see the recent call for a catalan bailout as a strategy of the catalan government in order to attain this fiscal independence. (and if not, to further bolster public opinion in favour of independence*).

Another thing id like to point out is that the 2 autonomous communities that have called for a bailout are valencia and murcia, both dominated completely by the right-wing PP (Rajoys party) since 1995. Indeed rajoy said at the start of his term that he would like to follow the valencian economic model (crazyness, i know). Those two regions are commonly believed to be the most corrupt of all, especially valencia with loads of polititians having already been brought to the courts on corruption (gurtel, etc), manily stemming from the utter destruction of their coastlines by cowboy builders in cahoots with the cowboy polititians.

*the last poll conducted by the CIS (spanish redc) put pro catalan independence on 51% while only 22% definitely opposed it.

[Ogiol]

Interesting article in the irish times today by paddy woodsworth about the catalan situation with spain. He debates whether it catalan calls for a bailout is just a ploy to achieve fiscal autonomy or they actually are just in a really bad situation. He seems to favour the latter but i have a feeling he is coming from a 'madrid centred position', mainly because he calls the call for fiscal autonomy 'controversial' when it is supported by every catalan party across the board (but not in madrid obviously) and then goes on to translate the catalan presidents name to spanish. Good one paddy

Anyway the article is good but i dont support his claim that the catalan position is contradictory. He says that claims for fiscal autonomy is contradictory to admission that they depend on madrid for economic survival. Indeed it seems the most rational position because if they had fiscal autonomy they would have loads more income (25%+) which would go a long way to solving their liquidity crisis.

Anyway, ye can judge for yourselves.

http://www.irishtimes.com/newspaper/...320880925.html

[PaddyJoe]

Here we go..

BRUSSELS | Fri Jul 27, 2012 7:43am EDT
(Reuters) - Spain has for the first time conceded it might need a full EU/IMF bailout worth 300 billion euros ($366 billion) if its borrowing costs remain unsustainably high, a euro zone official said.
Economy Minister Luis de Guindos brought up the issue with German counterpart Wolfgang Schaeuble in a meeting in Berlin last Tuesday as Spain's borrowing costs soared past 7.6 percent, the source said.

http://www.reuters.com/article/2012/...86Q0JS20120727

[riposte]

That explains Draghi's rush to the podium to promise anything to save the Euro.

[C. Flower]

Spain says it doesn't need a bailout.

http://www.marketwatch.com/story/spa...-pm-2012-07-27

[ang]

Update -

@lindayueh

#Spain started discussing full-blown bailout of €300bn in addition to rescue of the Spanish banking sector of €100bn: BNA cites EU officials

[Ephilant]

Schauble says "There is nothing to these speculations"

http://uk.reuters.com/article/2012/0...86R0HL20120728

good cop-bad cop, cat and mouse, or simply talking through the wrong orifice?