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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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Mon, 07/11/2011 - 15:33 | 1445007 Silver Dreamer
Silver Dreamer's picture

Always trust the government's figures.

Mon, 07/11/2011 - 15:37 | 1445021 Clueless Economist
Clueless Economist's picture

Damn Spanish Socialists

Mon, 07/11/2011 - 15:45 | 1445064 Ahmeexnal
Ahmeexnal's picture

Hang the Bourbons!!!!!!

Mon, 07/11/2011 - 15:46 | 1445069 idea_hamster
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.

Mon, 07/11/2011 - 17:14 | 1445436 TruthInSunshine
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.

Mon, 07/11/2011 - 15:56 | 1445124 francis_sawyer
francis_sawyer's picture

Send don quixote (joe lavorgna) in there quick!

Mon, 07/11/2011 - 16:11 | 1445209 el Gallinazo
el Gallinazo's picture

¡Holy Toledo!

Mon, 07/11/2011 - 17:13 | 1445434 knukles
knukles's picture

So does this mean Spain Greeced the Yids?

Mon, 07/11/2011 - 18:55 | 1445752 nmewn
nmewn's picture

More than expected!

Mon, 07/11/2011 - 15:35 | 1445009 nope-1004
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.


Mon, 07/11/2011 - 16:04 | 1445175 francis_sawyer
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)...

Mon, 07/11/2011 - 17:58 | 1445566 Rick Blaine
Rick Blaine's picture

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


That one is going on my list.

Mon, 07/11/2011 - 15:33 | 1445011 cossack55
cossack55's picture

Mama Mia!!! Oops. Wrong Piig.

Mon, 07/11/2011 - 15:34 | 1445015 Translational Lift
Translational Lift's picture

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

Mon, 07/11/2011 - 15:39 | 1445023 ThirdCoastSurfer
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

Mon, 07/11/2011 - 16:09 | 1445197 SwingForce
SwingForce's picture

Running of the Bullshit!

(Domino scene from V)

Mon, 07/11/2011 - 16:42 | 1445313 DonnieD
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?

Mon, 07/11/2011 - 15:37 | 1445025 traderjoe
traderjoe's picture

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

Mon, 07/11/2011 - 15:39 | 1445026 WALLST8MY8BALL
WALLST8MY8BALL's picture

That just soured the La Pandorga festival....

Mon, 07/11/2011 - 15:37 | 1445027 101 years and c...
101 years and counting's picture

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

Mon, 07/11/2011 - 15:41 | 1445041 freethinker4now
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... :|

Mon, 07/11/2011 - 15:41 | 1445042 Caveman93
Caveman93's picture

This is going to be neat!

Mon, 07/11/2011 - 15:42 | 1445048 camoes
camoes's picture

Puta madre!

Mon, 07/11/2011 - 15:43 | 1445057 SheepDog-One
SheepDog-One's picture

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

Mon, 07/11/2011 - 15:45 | 1445065 firefighter302
firefighter302's picture

Government being government.



Mon, 07/11/2011 - 15:47 | 1445076 Dick Darlington
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:

Mon, 07/11/2011 - 15:56 | 1445126 ThirdCoastSurfer
ThirdCoastSurfer's picture

Nice addendum. 

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

Mon, 07/11/2011 - 15:49 | 1445082 monopoly
monopoly's picture

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

Mon, 07/11/2011 - 16:00 | 1445151 ThirdCoastSurfer
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). 

Mon, 07/11/2011 - 15:50 | 1445096 gwar5
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%.   



Mon, 07/11/2011 - 16:00 | 1445149 francis_sawyer
francis_sawyer's picture

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

Problem solved!


Mon, 07/11/2011 - 19:26 | 1445840 IQ 145
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.

Mon, 07/11/2011 - 19:13 | 1445803 CompassionateFascist
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.

Mon, 07/11/2011 - 19:13 | 1445804 CompassionateFascist
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.

Mon, 07/11/2011 - 15:51 | 1445099 papaswamp
papaswamp's picture


Mon, 07/11/2011 - 15:52 | 1445104 web bot
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.

Mon, 07/11/2011 - 15:52 | 1445106 moldygoat
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.

Mon, 07/11/2011 - 15:53 | 1445109 AcidRastaHead
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.

Mon, 07/11/2011 - 15:53 | 1445110 savagegoose
savagegoose's picture

that is my dream, that is my quest

to double, the undoubleable double down!


toooooo reaaaachh the unnnnnnn reeeaaacchhaaaable  drrrrrrrrrrreeeaaam


Mon, 07/11/2011 - 15:53 | 1445115 treemagnet
treemagnet's picture

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

Mon, 07/11/2011 - 15:55 | 1445121 johngaltfla
johngaltfla's picture

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


Mon, 07/11/2011 - 15:56 | 1445122 mayhem_korner
mayhem_korner's picture

Spain keepin' its own golf card, eh?

Mon, 07/11/2011 - 15:59 | 1445142 A Man without Q...
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.

Mon, 07/11/2011 - 16:02 | 1445159 carbonmutant
carbonmutant's picture

Stess tests, we need more stress tests...

Mon, 07/11/2011 - 16:03 | 1445161 francis_sawyer
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...


Mon, 07/11/2011 - 16:09 | 1445195 kito
kito's picture

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

Mon, 07/11/2011 - 16:10 | 1445200 speconomist
speconomist's picture

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

Mon, 07/11/2011 - 16:12 | 1445214 youngman
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....

Mon, 07/11/2011 - 16:16 | 1445217 JuicedGamma
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.

Mon, 07/11/2011 - 16:17 | 1445229 speconomist
speconomist's picture

dos equis man? What do you mean?

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

Mon, 07/11/2011 - 16:17 | 1445228 Bansters-in-my-...
Bansters-in-my- feces's picture

Surprise...! Surprise...! Surprise...!

That wern't my belly button.....

Funny Fuck-tards...

Denial is never good.

Mon, 07/11/2011 - 16:21 | 1445246 boricuadigm-shift
boricuadigm-shift's picture

Stress Test?  They need the Chill-Out test!  They can pass the stress test easily, they are all stressed.  Now the Chill-out test they will fail as their culos are cagao! 

Mon, 07/11/2011 - 16:29 | 1445274 Piranhanoia
Piranhanoia's picture

Cual es en su caja?  Finally, an honest interpretation of what our counties and states are looking at. The city breaks, add 10% unemployment. The county, add another 10. Up to an honest 40%+ by then.  Soon enough now the riots will begin and the WPA will be back to rebuild the infrastructure of a suddenly agrarian nation trying to cope with the modernization of factories idle for decades.  If we're lucky.

Mon, 07/11/2011 - 16:35 | 1445293 macholatte
macholatte's picture


 (m l-f z ns)


Misconduct or wrongdoing, especially by a public official. --- wrongdoing or improper or dishonest conduct, especially by a person who holds public office or a position of trust.

See also: Crime




 (m s-f z ns)


Improper and unlawful execution of an act that in itself is lawful and proper. --- a form of wrongdoing, especially the doing of something lawful in an unlawful way so that the rights of others are infringed.

See also: Crime




Mon, 07/11/2011 - 16:41 | 1445310 SAME AS IT EVER WAS

URGENT!-To leaders of all nations: AS you all know the success of the banking "crisis" led to unimaginable wealth. We can now steal every last thing of value the world over with your immediate cooperation in the Nation "debt crisis". Please act totally suprised and unaware of such problems as to not get the peasants-ah...opps-people to angry. With everyones help we can now put the final nail in our long running "project".

Mon, 07/11/2011 - 16:44 | 1445319 Anonymouse
Anonymouse's picture

Spain has a long tradition of discovery.  Beginning with Columbus and Balboa.  This is simply a continuation of a long and proud history.

Mon, 07/11/2011 - 16:51 | 1445346 PulauHantu29
PulauHantu29's picture

Yes, "Why steal Less, when you can steal More?"

That's the Wall Street Motto now. No need to go for an MBA...learn rhetoric....propaganda...spin....and look good and smile in front of the cameras please...


Mon, 07/11/2011 - 17:14 | 1445437 DNB-sore
DNB-sore's picture

For example when Spain was a developing country (to EU standards) a lot of people from my country got involved investing in development. Houses and infrastructure. Smart ones bailed out 3-4 years ago. I wonder how much debt is owned to these

Mon, 07/11/2011 - 17:27 | 1445479 overmedicatedun...
overmedicatedundersexed's picture

spain your next

Mon, 07/11/2011 - 17:25 | 1445483 jm
jm's picture


So this region is running a deficit 0.48% over projected.  How is this anything more than noise?

Why are we assuming the kingdom is on the hook for it?


Let's say they are on the hook for phantom debt everyone has lied about.  Assume all regions and cajas add 10% to the national debt, which I think is too high, but whatever.  The debt to GDP becomes 75%.  Nothing incredible.

Now let's say spreads blow out to 10% on their 5Y (again: extreme) and they have to up issuance = 30% of existing debt (reasonable based on assumptions) in the next 12 months.

Spain is still only paying around 15% of revenue to interest payments.

If I'm wrong, I'm wrong, but point out the flaw here.

Mon, 07/11/2011 - 17:43 | 1445536 Bolweevil
Bolweevil's picture

Moral hazard? No, wait. Pathological lying! Final answer, pathological lying.

Mon, 07/11/2011 - 18:17 | 1445628 jm
jm's picture

I'm not lying.  These numbers are publically available.  If you think my assumptions are unrealistic, what do you propose?

I'm open to criticism.

Mon, 07/11/2011 - 19:17 | 1445818 Bolweevil
Bolweevil's picture

No! Sorry, your #'s are spot on IMHO the problem is that if they're just admitting they were 100% wrong this time who is to say your worst case scenario is now 30% of revenue and with their (under reported?) unemployment rate when does debt servicing bring them TO THEIR KNEES! (emphasis mine)

Mon, 07/11/2011 - 19:25 | 1445834 jm
jm's picture

While I think unemployment is the biggest problem for the people fo Spain, it is not the core problem for this smaller debt servicing issue.

The issues in this narrow focus are interest rate and amount needed to finance.  I'm not sure where "totally screwed" lies on the continuum, because there is a subjective quality to it.  Compare Latvia to Greece and see the difference between a hero at Ragnarok and a deadbeat passed-out drunk on Olympus.

Even given these disclosures which aren't unexpected, Spain is not near "totally screwed".



Mon, 07/11/2011 - 19:36 | 1445883 IQ 145
IQ 145's picture

 No, actually you have a good point, I think. The great thing about Spain is it was already backward and depressed; they're kind of used to it. There's not that far to fall, and so forth. Lots, and lots of really cheap houses available. Bring your own income; they don't actually have an economy.

Mon, 07/11/2011 - 17:28 | 1445491 Bolweevil
Bolweevil's picture

Spain: "I'm pregnant"
Boyfriend: "Oh, shit."
Spain: "It's not yours."
Boyfriend: "Oh. Shit."

Mon, 07/11/2011 - 18:10 | 1445612 DaveyJones
DaveyJones's picture

"There was a time when countries would use Goldman's "innovative" currency swaps"

Hopefully, one day we will say "there was a time when countries would use Goldman"

Tue, 07/12/2011 - 02:00 | 1446861 Urban Redneck
Urban Redneck's picture

Bizzaro World-

"With the debts we've found unpaid as of June 30"

Real World-

unpaid debt = default

unpaid lenders send collectors to the borrower (either with wingtips or guns) 


Tue, 07/12/2011 - 07:38 | 1447132 HedgetBedgadget
HedgetBedgadget's picture

This says it all.


You can see clearly who the net receivers of the EU were during the last 2 decades, and who were the main backers of this union.

All that money, spent on housing in Spain and Ireland. I wonder what Portugal did with the money, coz' we all know what the Greeks did.


Funny how you can fatten a pig, but it will never be a horse.


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