Spain for Dummies
Some weekend reminders of what is going on in Spain. IBEX has been underperforming for quite some time, but let’s us remind you, Spain is not Greece, Spain is the world’s 12th “richest” country. This is the Elephant in the European room, irrespective of what they tell you.
Spain’s public debt surged to a historic record high during the last quarter of 2011, renewing concerns over whether the government will be able to keep its commitment to Brussels to bring down the deficit to 5.3 percent of GDP by the end of the year.
Overall debt last year amounted to 68.5 percent of GDP — 2.5 percentage points higher than the third quarter, according to figures released Friday by the Bank of Spain. That is the highest figure since 1995. The increase was driven by runaway spending in the 17 regions that overshot their budget targets. The central government’s spending also increased 14.6 percent while expenditures in the municipalities remained almost unchanged at 35.420 billion.
The central government’s accumulation of expenses at the end of 2011 is also being blamed for the high debt figure. Spain has some 734 billion euros in obligations.
Meanwhile, Deputy Prime Minister Soraya Sáenz de Santamaría said Friday that municipalities have turned over to the government some 1.9 million invoices for a total amount of 9.58 billion euros they owe to suppliers. (Full El Pais article here.)
More disturbing facts below….
From David McWilliams.
Few indicators could have underscored the inconsistency at the heart of the eurozone than figures yesterday showing Germany’s investor confidence at a 21-month high, while Spain, wracked by 22pc unemployment, gives the EU the two fingers on the fiscal compact.
Here we have Europe’s biggest economy, Germany, cruising ahead and bathed in lots of free capital from the ECB; while Spain, the world’s 12th richest country is in a heap. It is impossible to see how a currency union between such large countries going in such opposite directions can last.
The reason for the difference is that Germany and German investors have benefitted enormously from being a creditor nation over the past 10 years, while Spain — a large version of Ireland — has had a similar property slump and its banks are now bust and all the free money in the world from the ECB isn’t going to make it any better soon. As the wonderfully prescient John Mauldin in his financial newsletter (www.johnmauldin.com) said this week, Spain’s GDP of $1.4trn (€1.07trn), somewhat surprisingly perhaps, puts it just behind oil-rich Russia and Canada and people-rich India.
Spain is a big country. Spain matters. Spain does indeed matter and this is why the move by the Spanish government yesterday to tell the Merkozy where to go is an interesting development.
Full article here.