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    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Spain's Latest Bailout Plan - Lottery Bonds

Tyler Durden's picture


Just when we thought Europe has already used the kitchen sink and then some in its arsenal of bailout ideas, here comes Spain proving there is always "something else." Bloomberg reports that the insolvent country which is not really insolvent as long as people keep buying its bonds on hopes it is insolvent, is launching "lottery bonds". To wit: Spain to sell bonds through state-run lottery operator to fund regional bailouts, two people familiar with the matter told Bloomberg’s Esteban Duarte and Ben Sills. The issue is part of €6 billion financing through Sociedad Estatal Loterias & Apuestas del Estado which is raising syndicated loan. Loterias official said financing details haven’t been completed. In other words, the national lottery, which as in Spain so everywhere else, is nothing but an added tax on a country's poor population but one which provides at least a tiny hope of a substantial repayment (which never happens for the vast, vast majority of players) so few actually complain about paying it, is about to shift the bailout cost to the nation's poorest. Who benefits? Why Spiderman towel makers of course. And insolvent banks.

In retrospect, it appears this is not exactly a new idea. From Businessweek two months ago:

Spain will use its national lottery, the operator with the biggest jackpot in the world, to provide aid to regional governments as the nation struggles to avoid a second bailout itself.


The state-owned lottery will contribute 6 billion euros ($7.3 billion), taking out a loan against future revenue, to a fund of as much as 18 billion euros to fund redemptions and deficits for regions that request it.


Regions, many of which have been shut out of debt markets for more than a year, will pay a “small spread” above the central government’s yields to borrow from the fund, de Guindos said. The government will demand budget cuts in return from the regions that choose to use the fund, he said.




Loterias & Apuestas del Estado, a debt-free company the government
tried to list on the stock market last year, has operated for almost 250
years in the world’s fourth-largest lottery market. The company’s
annual Christmas draw, known as El Gordo, or the Fat One, had a prize
pool last year of 2.3 billion euros. It had 2.6 billion euros of profit
in 2010, according to the annual report.

And from Dow Jones:

The Spanish government will take out a loan from its national lottery company to finance part of a newly- created fund to help Spanish regions pay debt maturities, Finance Minister Luis de Guindos said Friday, a move aimed at reducing the country's need to tap financial markets for expensive funding.


The regional fund will be run by the central government and will pay out a maximum of 18 billion euros ($22 billion) this year, Mr. De Guindos said at a press conference following the weekly Cabinet meeting. Spain will finance the fund by making Loterias y Apuestas del Estado SA, the most profitable of Spain's publicly-owned companies, take out a EUR6 billion loan, while the rest of the money will come from Spain's Treasury, he said.


The Treasury won't have to alter its issuance calendar as a result of the added financing needs, Mr. De Guindos added.


The fund is a response to repeated pleas for help from cash-strapped regional governments facing billions worth of maturities at a time when they are shut down from capital markets.

What can possibly go wrong: "step right up, play the lottery, win a Spiderman towel."

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Mon, 09/24/2012 - 07:51 | 2823726 ParkAveFlasher
ParkAveFlasher's picture

You gotta be in it, to win it, bitchez!

Mon, 09/24/2012 - 08:01 | 2823745 Sudden Debt
Sudden Debt's picture




Mon, 09/24/2012 - 08:18 | 2823761 GetZeeGold
GetZeeGold's picture




Only costs a buck......that's dead cheap.


Get in it.......to win it!


Mon, 09/24/2012 - 08:20 | 2823771 i-dog
i-dog's picture

Lotteries: A tax on stupidity.

Mon, 09/24/2012 - 08:28 | 2823789 GetZeeGold
GetZeeGold's picture



Gambling.....a tax on people that can't do math.


Mon, 09/24/2012 - 08:38 | 2823801 i-dog
i-dog's picture

Math ... very taxing on most people.

Mon, 09/24/2012 - 08:55 | 2823860 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture



+1.  I've always called it a tax on people who are bad at math.


Mon, 09/24/2012 - 07:54 | 2823728 Sudden Debt
Sudden Debt's picture



Mon, 09/24/2012 - 08:19 | 2823768 razsil
razsil's picture

That's really funny!!! and it's really getting scarry there. The ability of leaders to ignore reality and deal with the core issues is scary. It seems like reality doesn't have anything to do with their decisions and they keep digging a bigger and bigger hole for their countries.

You see it sometime with companies where their leaders just set a goal and they will keep pursuing it regardless of changing circumstances. Like the article - Don’t Begin with the End in Mind - that embrace the concept of a definite goal but also reminds us that it sometime has to change as the business environment changes. It recommends to keep our eyes wide open, but it seems the European leaders eyes are compeltely shut.

Mon, 09/24/2012 - 09:21 | 2823955 kaiserhoff
kaiserhoff's picture

When they are ready to sell Majorca on E-bay, I'm a bidder.

Mon, 09/24/2012 - 09:22 | 2823956 kaiserhoff
kaiserhoff's picture

When they are ready to sell Majorca on E-bay, I'm a bidder.

Mon, 09/24/2012 - 07:54 | 2823731 Harlequin001
Harlequin001's picture

so like, if I win, I get all of Spain's debts?

Cool. Sign me up...

bring on the wheel barrow...

Mon, 09/24/2012 - 08:24 | 2823779 Winston Churchill
Winston Churchill's picture

No,winner gets an insolvent Spanish bank.Your choice.

Mon, 09/24/2012 - 07:53 | 2823732 Beam Me Up Scotty
Beam Me Up Scotty's picture

At least it's voluntary

Mon, 09/24/2012 - 07:55 | 2823733 razorthin
razorthin's picture

MegaTrillions - coming to a banana republic near you.

Mon, 09/24/2012 - 07:59 | 2823738 ParkAveFlasher
ParkAveFlasher's picture

I've been waiting for someone to mention the word "trillionaire" ...

Mon, 09/24/2012 - 09:23 | 2823963 kaiserhoff
kaiserhoff's picture

So maybe $10,000/acre farm land is dirt cheap;)

Mon, 09/24/2012 - 08:00 | 2823741 Dr Benway
Dr Benway's picture

Borrowing from future gambling to fund bailouts?!


Sounds like an Onion headline, LOL

Mon, 09/24/2012 - 08:01 | 2823743 Frastric
Frastric's picture

When crisis turns into comedy and farce...

Mon, 09/24/2012 - 08:19 | 2823767 GetZeeGold
GetZeeGold's picture



Hosted by Vanna White.


Mon, 09/24/2012 - 08:57 | 2823870 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture



And when farce turns into tears and bitterness.


Mon, 09/24/2012 - 08:09 | 2823744 timbo_em
timbo_em's picture

Key question: will those lottery bonds be seen as eligible collateral by the ECB. If this is the case the it's another form of kicking the can down the road at the expense of a more bitter endgame.

If the ECB says nein, it's a worthless yet funny attempt.

Mon, 09/24/2012 - 09:00 | 2823881 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture



Tulip bulbs! Tulip bulbs! Gitcher Tulip bulbs here!

Mon, 09/24/2012 - 08:02 | 2823747 lsbumblebee
lsbumblebee's picture

I wonder if they have scratch-offs.

Mon, 09/24/2012 - 08:20 | 2823769 GetZeeGold
GetZeeGold's picture



You can scratch and sniff........but I wouldn't reco it.


Mon, 09/24/2012 - 08:04 | 2823748 TIMBEEER
TIMBEEER's picture

As I was visting Finland last week the whole country was talking about only two things; massive layoffs in all sectors. The economy is nosediving. The other thing was that the Dancing with the Stars 2012 is to start this week. So, all is well in Euroland, and especially in those countries that are left to pay the bill (Germany, Netherlands, Finland.)

Mon, 09/24/2012 - 08:08 | 2823754 wcvarones
wcvarones's picture

Schwarzenegger tried to securitize future California lottery revenues.


The idea was too stupid even for California.

Mon, 09/24/2012 - 08:08 | 2823755 Thought criminal
Thought criminal's picture

Is it All Fool's Day again or something?

Mon, 09/24/2012 - 09:03 | 2823892 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture



Every day is All Fools Day nowadays. But ain't we got fun!


Gitcher tulip bulbs here!


Mon, 09/24/2012 - 08:09 | 2823757 Vegetius
Vegetius's picture

Bunga Bunga!!

Mon, 09/24/2012 - 08:14 | 2823758 LULZBank
LULZBank's picture

Lets scrape the barrel...

Whats next... Bailout Stripper joints? "Do it for the country"

Mon, 09/24/2012 - 09:09 | 2823915 Shevva
Shevva's picture

Thanks I've now got a picture of Merkel on a pole.

Mon, 09/24/2012 - 08:17 | 2823765 butchee
butchee's picture

Will the payouts be in Pesetas?

Mon, 09/24/2012 - 08:26 | 2823783 Bokkenrijder
Bokkenrijder's picture

As opposed to "El Gordo," this new lottery scheme will probably be known as "La Flaca."



Mon, 09/24/2012 - 08:44 | 2823821 i-dog
i-dog's picture

... or "El Esquileo"

Mon, 09/24/2012 - 08:46 | 2823832 BigDeuceLittleToilet
BigDeuceLittleToilet's picture


Mon, 09/24/2012 - 08:52 | 2823843 agNau
agNau's picture

Old news.
Only the name has changed.

Mon, 09/24/2012 - 09:05 | 2823899 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture



Got a twofer on tulip bulbs today! Gitcher tulip bulbs here!

New lamps for old! New lamps for old!


Mon, 09/24/2012 - 09:22 | 2823960 Seasmoke
Seasmoke's picture

Just don't forget to check the lump payment so you can buy gold and silver at today's price!

Mon, 09/24/2012 - 09:26 | 2823974 Grand Supercycle
Grand Supercycle's picture


Due to recent central bank intervention and short covering spikes, these daily charts are extremely overextended and significant correction expected very soon:




Mon, 09/24/2012 - 11:12 | 2824349 Colonel Klink
Colonel Klink's picture

When things get serious, you have to gamble!

Mon, 09/24/2012 - 12:32 | 2824693 Joebloinvestor
Joebloinvestor's picture


The "fix-all" for every financial fiasco.

I lost "faith" when Calif LIED to get a lottery passed.

They said at first proceeds were to "supplement" the education system, then the proceeds replaced the budget.

Just increases the spread between the poor and wealthy.


Mon, 09/24/2012 - 16:31 | 2825659 SmittyinLA
SmittyinLA's picture

California already does this on the front end and back end, bankers will loan to winners and the state which will gladly finance those deferred winnings, this only gets to be a problem when the state state runs out of "sucker investers" willing to finnance future lottery revenue-which has already been spent. 

They're OK as long as the current winners can still collect their discounted fiat winnings.

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