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SOLTIMES AUGUST 2012
Spanish cabinet discusses budget
Spain’s implied cost of borrowing remained above 7% on Friday as Prime Minister Mariano Rajoy discussed budget plans with his cabinet.
The government is also due to submit budget plans for 2013 and 2014 to the European Commission later on Friday. Last month, Madrid announced additional spending cuts and tax rises worth 65bn euros ($79bn; £51bn). There are fears that Spain’s shrinking output and indebted banks could force it seek a financial rescue. The yield on Spain’s 10-year bonds was trading at 7.1% early on Friday. If Spain’s borrowing costs remain at this level for long periods of time it would make it unaffordable for the government to service its debts. Greece, Portugal and Ireland all had to seek international bailouts when their borrowing costs hit similar levels.
Effectively, they had to ask the European Union and International Monetary Fund to lend them the money to pay their bills. In June, Spain requested 100bn euros of loans from the EFSF bailout fund to help support its banks, which are struggling with bad debts from loans made in the property sector. However, on Thursday Mr Rajoy said he had not discussed making a request for a full financial bailout with Mario Monti during a visit by his Italian counterpart. But during a joint press conference, Mr Rajoy would not say whether he thought Spain would need to seek a full financial rescue.
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Mr Rajoy’s cabinet discussed fresh spending cuts for next year and 2014.
Happy in the knowledge that they didn’t buy a fly enclosure because they’re going to be nice ‘n’ warm this winter just as they were nice ‘n’ cool this summer!
These will be outlined in a plan due to be submitted to the European Commission later on Friday.
Spain’s Catalonia suspends grants for social services
The government of Catalonia, Spain’s most indebted region, said Tuesday it could not afford to make its grant payments to social institutions such as hospitals and homes for the elderly for July. “It is due to a problem of liquidity,” said a spokeswoman for the Catalan regional government’s economy ministry, adding the situation “will start to return to normal in September.” The government of the northeastern region said it could not say what the total amount of suspended grant payments would be. “We are trying to regulate the payments of some items, so we can’t give a global figure,” the Catalan economy ministry spokeswoman said. But daily newspaper El Pais reported Tuesday that 400 million euros ($490 million) is involved. Around 100,000 employees could be deprived of their salaries for the month of July as a result, according to the Catalan Confederation of Social Services Associations, which groups around 800 associations. It said it was “alarmed” by the measure, adding the health sector was hit badly by spending cuts imposed by the regional government last year. Catalonia, which accounts for about one fourth of Spain’s total economic output, said last week it was studying the possibility of tapping a new central government fund set up to to help regional governments in difficulty. Two other regions, Murcia and Valencia, have also indicated they will seek aid from the fund, worth up to 18 billion euros ($21.9 billion) and which was set up in the middle of July. The debt burden of Spain’s 17 regional governments are at the heart of market fears that the national finances could become so strained that the country may need a full bailout, on top of a 100 billion euro ($123 billion) credit line agreed recently for its banking sector. The Catalan government has cut public sector wages, introduced a one euro charge for each medical prescription and frozen infrastructure investments as it seeks to bring its public deficit under control.
Investors pull record amounts of money out of Spain
Spanish and foreign investors have withdrawn a record 160 billion euros ($195 billion) from the struggling eurozone country this year, reflecting concerns over the economic outlook, official data showed Tuesday. The Bank of Spain said investors took out 163.19 billion euros by end-May, a record amount since such statistics were first compiled in 1990 and compared with aggregate deposits of 14.6 billion euros in the same period last year. The central bank said that in May 2012 alone, withdrawals came to 41.3 billion euros. For all 2011, 68.3 billion euros left the country in search of a safehaven overseas as the Spanish economy slumped deeper into recession. The effect is plain to see, with the Madrid stockmarket down nearly 30 percent so far this year while foreign investor holdings of Spanish debt instruments has plunged to 36.1 percent of the total in June from 56.27 percent a year earlier.
Not without my beer
However hard-pressed families are in Spain with the recession, tax hikes and redundancy, they will not relinquish their daily beer, research has shown. Even where they cut down on holidays, eating out and other non-essential costs, they will still find enough for a cold glass or two, because it is ‘necessary’, according to the
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research. Sitting in a bar with a drink helps Spaniards through the difficult times the country is currently undergoing, particularly if they are with friends, since it gets them out of the house, they say. No financial crisis is serious enough to go without at least one beer a day, say the interviewed parties.
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