Spanish Budget for 2013, announced today, will have a ceiling of €126.762 billion
58% of the forecast adjustment in the accounts will be made up of costs (budget cuts), while 42% will come from income (tax). The Government are to freeze the wages of Civil Servants for the third year, but public employees will see a return to the extra Christmas payment. The Government is putting up pensions by 1%, using 3.6 billion € from the Reserve Fund to do so.
The money available for the dependency help program destined for the regional communities will see a 200 million reduction in the budget and fall to 1.087 billion €.
It’s predicted that spending by the Government will be reduced by some €40 billion, an amount more or less equal to the interest the Government is paying on its debt. In comparison last year a budget cut of was €27.3 billion.
(ES) Analysts comment on Spain’s 2013 budget
(EU) European Commissioner Rehn stated that the (Spain) ‘budget included concrete and ambitious measures, well-focused and clear deadlines had been set in various areas’. He added that the new plan of reforms responds to the specific recommendations directed to Spain.
(DE) Brussels has praised the Spanish reforms because they have gone past the EU recommendations.
How to interpret these headlines?
Spanish budget for 2013 included deep spending cuts but it may not be realistic as many analysts have pointed out. The budget is based on a low and sustainable Spanish bond yield, which is only likely under ECB’s OMT program, thus leads us to the conclusion that Spain is preparing for bailout and moving ahead of schedule… As I have pointed out in my previous articles, Spain is likely to meet all conditions of bailout before requesting for bailout, so that PM Rajoy could preserve the image politically that he is not under the control of mother Merkel.
I believe the timing is right at this time, with OMT launched, ESM approved, budget released, and now with the blessings from Brussels, Spain could step up on the timetable and request for a bailout as early as next week.
UPDATE – 12:00pm EST (9/28/12)
(ES) SPAIN RELEASES RESULTS OF BANKING STRESS TEST: BANKING SYSTEM NEEDS €59.3B UNDER STRESSED SCENARIO (GDP decline of 6.5%)
System needs €53.7B when taking into account tax credits and mergers in process
Seven pass stress test, do not need capital:
Bank of Spain: Aid from the public to banks may be much less than the total needs (i.e. banks may raise capital by themselves), but will be determined when banks submit plans in October. Unlikely that the 6.5% GDP drop used in the stress scenario would actually happen. Any haircuts on pref shares will be considered on a bank by bank basis.
Spain Econ Secretary Latorre: Final expectation is for Spain to request €40B total in aid from Europe. Will define the valuation of assets to be transferred to the ‘bad bank’ next week; amount will be conservative.
Spanish Budget Paves The Way For Future Bailout…
September 28, 2012 by Leave a Comment