Spanish Region "Discovers" Its Budget Deficit Is Double What Was Previously Thought

Tyler Durden's picture

There was a time when countries would use Goldman's "innovative" currency swaps to hide billions of debt off the books. Those days are gone. Now governments, at both the state and regional level, just outright lie about what their deficit and debt is. Case in point, Spain's Castilla La Mancha region, best known for being the stomping ground for one Don Quixote, where the cities of Toledo and Albacete are located, has just announced that it has "a budget deficit more than twice as large as previously thought, raising new concerns over the true state of regional finances and helping to send Spain's risk premium to new historic highs. Castilla La Mancha President Maria Dolores de Cospedal said her government will present Tuesday the first results of the audit she announced after being elected in nationwide regional and municipal elections on May 22." What? Politicians lying about the state of their finances only for it to be uncovered that things are 100% worse? Say it isn't so. And why on earth couldn't Spain just open a local branch of the BLS: it would have absolutely no problem hiding its manipulated economic data. Too late now...

More on this latest "discovery":

"With the debts we've found unpaid as of June 30, the deficit is much higher than we were told," Ms. Cospedal said in an interview with Onda Cero radio station. "Tomorrow we will see the exact figure... but it will likely be much higher than 4%," added Ms. Cospedal, who is also the No. 2 national official of the opposition Popular Party.

The outgoing regional government of Socialist José Maria Barreda had said Castilla La Mancha had a budget deficit equal to 1.78% of local gross domestic product in April, well in excess of the 1.3%-of-GDP limit for 2011 set by the central government in Madrid for each of Spain's 17 regions.

Roberto Ruiz, UBS strategist in Madrid, said the news on Castilla La Mancha "fanned the flames" of worries over Spanish finances. Largely the result of increased investor unease over Europe's inability to solve Greece's financial problems, Spanish and Italian risk premiums—as measured by the spread of their 10-year government bond yields over the German benchmark—soared to new record highs Monday.

The damage was swift and brutal: "The yield premium investors demanded to hold Spanish paper surpassed three percentage points for the first time since the creation of the euro in 1999."

Granted, Castilla is not big in the grand scheme of things, as it is the least populous region of Spain. "Castilla La Mancha, which reported a 2010 budget deficit of 6.5% of GDP, the highest of all Spanish regions, was already known to have deep financial problems. And it is a relatively small region that accounts for just 3.4% of national GDP. Still, its revelation of a worse-than-expected deficit "shows a dangerous trend," Mr. Ruiz said." The problem is that as everyone knows, there is never one cockroach.

So who's next? Perhaps the bond vigilantes can grant a 1 month reprieve for the next offender if their step up. Of course, the end result will be one and the same anyway. And it does kinda put the whole "modelling" paradigm into question. But at least there is no concern that Europe's stress tests will be credible.

After all, Italy which just blew up, saw all of its banks pass the second, and far more credible version.

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Silver Dreamer's picture

Always trust the government's figures.

idea_hamster's picture

No, no -- this isn't socialism.  It's game theory.

The first conspirator to defect from the cartel always get the biggest reward.

TruthInSunshine's picture

This can happen more easily than some here think because the guy was using one of those scientific calculators, and those things are confusing as hell with all the extra buttons.

francis_sawyer's picture

Send don quixote (joe lavorgna) in there quick!

knukles's picture

So does this mean Spain Greeced the Yids?

nope-1004's picture

Oops.  Minor oversight.


But, Double / Triple / Quadruple.... does it matter?

The number of broken legs on a lame horse is irrelevant.


francis_sawyer's picture

This would never happen here in the US (because here they don't even bother to come up with a budget)...

Rick Blaine's picture

"The number of broken legs on a lame horse is irrelevant."


That one is going on my list.

cossack55's picture

Mama Mia!!! Oops. Wrong Piig.

Translational Lift's picture

HAHAHAHAHAHA........Did I say that the end is near!!??  HAHAHA.......

ThirdCoastSurfer's picture

Is this what they mean by "Running of the Bulls"?

"Castile-La Mancha generates a GDP of €33,077,484,000, 3.4 percent of the Spanish GDP" -Wikipedia

DonnieD's picture

Everything is bullshit. My Verizon FIOS bill is tricks and bullshit. My cell phone bill is indecipherable bullshit. My health insurance is more confusing bullshit. My house equity was obvious bullshit. My 401k and retirement account is super bullshit right about now. Am I missing anything?

traderjoe's picture

A system awash in debt at all levels. One that requires infinite credit growth. Mathmatically destined for failure.

WALLST8MY8BALL's picture

That just soured the La Pandorga festival....

101 years and counting's picture

her life insurance carrier just dropped her due to associated risk.

freethinker4now's picture

We are all good Europeans here in Ireland, we will pay our debts no matter what pain it brings. First Europe, second Ireland for I am a true Europhile... :|

Caveman93's picture

This is going to be neat!

SheepDog-One's picture

Well I'm SURE theyve learned their lesson THIS time! Now go eat your peas!

firefighter302's picture

Government being government.



Dick Darlington's picture

Anyone remember Catalonia? Economy of the size of Portugal. All the news has been shrugged off by the group thinking bus full of pundits and bankers but maybe this time it will come back to bite their arses off.

First, they missed last years target:

Second, they will miss this years target:

ThirdCoastSurfer's picture

Nice addendum. 

"GDP of Catalonia was €216.9 billion, the highest in Spain"

monopoly's picture

Now this is starting to get interesting. Check out FAZ. And C going back to 5...:). No position.

ThirdCoastSurfer's picture

Yeah, but then there's the volume. POMO may be dead but the plunge protection team now owns most of the remaining equity positions (only half kidding). 

gwar5's picture

Deficit bigger than Spain imagined? Who saw that coming? Muy bien, they're just like Obama!

Who knew that wasting $3 Trillion putting street cred on Obama's marxist posing would leave him a gaping budget hole the size of the Grand Canyon? 

Obama's big vision was to copy Spain's miserably failed socialista green jobs march into insolvency. Mission accomplished Presidente Obama!  Hide the decline and hide the deficits while you're at it.

Spanish "progress": Bankruptcy with the unemployment already at 22%.   



francis_sawyer's picture

Quick... Send FLOTUS and her merry band of french fry eating fatties on another trip to Alhambra...

Problem solved!


IQ 145's picture

 LOL! eh; stop, you;'re cracking me up. Seriously (?), Spain has a housing over-build, over hang, that represents a fully developed human speculative frenzy; like tulipmania. Spain had a budget surplus in 2007, (fiscal), of 2%. This was entirely due to waterfalls of currency pouring into the country from banks all over the map to finance the frantic made construction of everything everywhere, and then a couple of more, just for good measure. By 2008 they were back to a normal -14% defecit. The Banks turned off the let's build something theme; and all the immigrant construction workers from all over easter Europe went home; and what's left is a big bubble gum bubble with no obvious means of support. Spain has a long tragic history; but the Euro is going to have a mercifully short tragic history.

CompassionateFascist's picture

You mean they tell the truth about unemployment in Spain? Because 22% is about the real # for USA....which, by this time next year, will seem like prosperity.

CompassionateFascist's picture

You mean they tell the truth about unemployment in Spain? Because 22% is about the real # for USA....which, by this time next year, will seem like prosperity.

web bot's picture

Is this starting to smell like July 2008... when only a couple of hundred people across the globe started to pick up on the fact that something wasn't right....?

Pre 2008, the world worked great... now it looks like everything is starting to really, really come apart.

moldygoat's picture

Kind of reminds me of Rumsfeld anouncing 2.3 trillion is missing. A little terror or cyber attack would help all this be forgotten.

AcidRastaHead's picture

This likely won't be the only example of a new government taking over and finding the previous admin has not been forthcoming with financials.

savagegoose's picture

that is my dream, that is my quest

to double, the undoubleable double down!


toooooo reaaaachh the unnnnnnn reeeaaacchhaaaable  drrrrrrrrrrreeeaaam


treemagnet's picture

Maybe a third round of stress tests will do the trick....but they have to read the instructions properly.

johngaltfla's picture

I wonder how long it will be until we start "discovering" how many municipalities and counties lied about their numbers.


mayhem_korner's picture

Spain keepin' its own golf card, eh?

A Man without Qualities's picture

The brilliant Edward Hugh has been covering the "hidden" debt in Spanish regions for a long time.  Frankly, these revisions should come as no surprise.

carbonmutant's picture

Stess tests, we need more stress tests...

francis_sawyer's picture

They'd better keep a close eye on all the Germans washing up on Ibizia...

They may mean business this time...


kito's picture

spooky action at a distance...................

speconomist's picture

Tyler I sent you something exactly like this post about the city of Sevilla one month and a half ago.

youngman's picture

and California has missed its income projections the last two know the projections that they used to make their smoke and mirror budget deal....

JuicedGamma's picture

Now you know what the dos equis man has been doing in his free time, and it ain't playing hide the sausage.

speconomist's picture

dos equis man? What do you mean?

Could it be that Spanish people always ask for 2x of something??