Spain Plunders 90% Of Social Security Fund To Buy Its Own Debt

Tyler Durden's picture

With Spanish 10Y yields hovering at a 'relatively' healthy 5%, having been driven inexorably lower on the promise of ECB assistance at some time in the future, the market has become increasingly unsure of just who it is that keeps bidding for this stuff. Well, wonder no longer. As the WSJ notes, Spain has been quietly tapping the country's richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds - with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt. Of course, this is nothing new, the US (and the Irish) have been using quasi-government entities to fund themselves in a mutually-destructive circle-jerk for years - the only difference being there are other buyers in the Treasury market, whereas in Spain the marginal buyer is critical to support the sinking ship. The Spanish defend the use of pension funds to buy bonds as sustainable as long as it can issue bonds - and yet the only way it can actually get the bonds off in the public markets is through using the pension fund assets. The pensioners sum it up perfectly "We are very worried about this, we just don't know who's going to pay for the pensions of those who are younger now," or those who are older we would add.

Via Wall Street Journal: Spain Drains Pension Fund In Borrowing Spree

Spain has been quietly tapping the country's richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds, raising questions about the fund's role as guarantor of future pension payouts.


Now the scarcely noticed borrowing spree, carried out amid a prolonged economic crisis, is about to end, because there is little left to take. At least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt, according to official figures, and the government has begun withdrawing cash for emergency payments.


Although the trend has drawn little public attention or controversy, it has become a matter of concern for the relatively few independent financial analysts who study the fund, which is used to guarantee future payments of pensions.




In addition, there are worries that Social Security reserves for paying future pensioners are running out much quicker than expected.


In November, the government withdrew €4 billion from the reserve fund to pay pensions, the second time in history it had withdrawn cash. The first time was in September, when it took €3 billion to cover unspecified treasury needs.


Together, the emergency withdrawals surpassed the legal annual limit, so the government temporarily raised the cap.


"We are very worried about this," says Dolores San Martín, president of the largest association of pensioners in Asturias, a small region that has one of the highest percentages of retirees in Spain. "We just don't know who's going to pay for the pensions of those who are younger now."




After the crisis began, some of those countries began using the pension reserves for other contingencies, such covering a drop in foreign demand for their government bonds. Since the collapse of Ireland's property boom, for example, most of its pension fund has been used to buy shares of nationalized banks and real estate for which no foreign buyers could be found.


"Most of the [Spanish] fund is an accounting trick," said Javier Díaz-Giménez, an economics professor in Spain's IESE business school. "The government is lending money to another branch of government."


Spanish officials defend the heavy investment of the Social Security Reserve Fund in their government's high-risk bonds. They say the practice is sustainable as long as Spain can continue borrowing in financial markets, and they predict the economy will start to recover late in 2013, easing the debt crisis.




"With foreign investors staying away from the Spanish debt market, you're going to need all the support you can get from domestic players," said Rubén Segura-Cayuela, an economist with Bank of America-Merrill Lynch.




Spain's commercial banks already have increased their Spanish government-bond portfolio by a factor of six since the start of the crisis in 2008, and now own one-third of government bonds in circulation.


The percentage of Spanish government debt held by the Social Security Reserve Fund stood at 55% in 2008, according to official figures; by the end of 2011 it had risen to 90%. Analysts say the percentage has continued to rise, even as international agencies have lowered Spain's credit ratings.


Spain's continued use of those reserves to buy its own bonds appears to violate a rule set by government decree that mandates their investment only in securities "of high credit quality and a significant degree of liquidity."




But with unemployment now above 25% of the workforce and fewer wage earners paying in, the Social Security System is about €3 billion in deficit, according to government estimates.

And in other news, and completing the picture, if not the circle jerk, is news from Libremercado that according to the Spanish Confederantion of Employer Organizations, some 60% of the Spanish companies are now losing money. Via Google translate:

The President of the Spanish Confederation of Employer Organizations (CEOE) has estimated that "60 percent of the companies are in losses. Thing is that entrepreneurs are more thoughtful and went outside."


Joan Rosell responds well after being asked if he receives "Spanish citizens too negative" in an interview with the newspaper La Razon, who heads a special titled "2013, the recovery begins," and says that "social unrest is evident and business world is no exception. "


The president of the CEOE has considered that the private sector "has already made ??all the restructuring that had to do and the decline in employment in the private sector has virtually stopped. now is the restructuring of the public sector."


After defining the first year of Mariano Rajoy in government as a year of shock, Rosell has considered that the Spanish economy remains "superfluous fat by many sides.'s Central government, regional and local. Avoid duplication. We are a country hiperregulado ".

It is not exactly clear why google translate had a problem with that last word...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Atomizer's picture

Based on history, Governments go bankrupt and the serfs rebuild. Top corrupt government officials either die while on the run or get brutally assassinated in public display.

Check history, nothing changes except the controlling interests telling themselves, “it won’t happen to us”.

hawk nation's picture

Washington politicians be afraid be very afraid

This is where america is going with 401k's confiscation and any other retirement fund they can steal

I hope they first take over all the endowment funds of the universities

Bunga Bunga's picture

Did anywhere government ever vanish? It's still there, only people in power are replaced.

ShrNfr's picture

Pues, hiperregulando is usually hyphenated as hiper-regulando. The following is the definition of hiper

hiper hypermarket


(fantástico) mega (muy_familiar); wicked (muy_familiar)

wicked has leaked out of English into Spanish. Fantastic, mega (slang), wicked (slang)

hiper-regulando is thus simply wickedly regulated in the slang meaning of wicked, alternatively hyper-regulated as one might expect.

americanspirit's picture

So few of the comments on this thread actually deal with the incredible subject matter. This is the stuff of armed revolution. The Spanish people must rise up and hang every one of these bastards from lamp posts - the ones they don't set on fire. There is  no turning back - this must happen. Who do these assholes think they are?

Then there's America. We just roll over, eat another cheeto, watch the TV, and snooze. Nothing happening here. Fuck us some more - we're so brain-dead we don't even feel it.

Almost Solvent's picture

Big Pharma has us brain-dead for sure.

willwork4food's picture

Whatever. The bastards want to pull shit like nationalizing our 401Ks and I promised my wife I won't be sending Wells Fargo their mortgage check. Mulitiply me by thousands of others and the banks have a real problem.

Terminus C's picture

If you are 'sending them a check (sic)' that means your money is already in the bank... which means they'll just automatically withdraw the money.  Multiply you by thousands and they'll just Corzine the fuck out of all of you.


Notarocketscientist's picture

A more accurate headline:




Anyone want to bet that Spanish govt officials' pension funds are not touched?

exartizo's picture

In a Nutshell:

Spain is using their citizens future entitlements and assets to fund profligate government spending.

So What.

The U.S. has been doing that for years.

Spain is late to the game.

Move along. Nothing to see here.

ebworthen's picture

Riots, war, collapse.

All thanks to the bankers.

I really can't wait for the mobs to hang the SOB's.

willwork4food's picture

Not just the bankers, but the lawmakers that made it possible for the bankers to do their deeds....and I'm with ya, and I'l be carrying the rope and findin' a tree.

I get first dibs.

dark pools of soros's picture

they live far away from the unwashed...  you may get their peons but the nests are out of reach


remember it is never about being rich.. that is static.  it is about creating wealth and these are the people that know how to control people to get them to control others to set up this debt money sham again ever after the great reset

they prey on human vices.. greed, vanity, etc to get everything for promises and threats


cosmyccowboy's picture
no big deal our government has been raiding SS since the 70's and are now robbing the federal pesions!!!
michiganmaven's picture

Does any of this even matter anymore? The whole system is fake but if the entire system is fake then doesnt that make it real? The government can control what it wants by regulations, taxes, or force.... hence why I do NOT want gun laws enhanced... last thing in my opinion keeping us really free... besides not like criminals buy guns legally anyways.

Mr. Hudson's picture

How does owning a gun stop the military from arresting you and taking your property?


dwdollar's picture

If a large group of people carrying guns is so obsolete then why does the US government still have infantrymen?

Mr. Hudson's picture

The military is organized. Individual Americans are not. Unless Americans are unified and organized they will be slaughtered.

dwdollar's picture

I doubt any civil war in America will be organized. Not at first anyway.

willwork4food's picture

You are right, just like the American Revolution wasn't organized, but the British military pissed off enough innocent people that it became a necessity.

Who are you Mr. Hudson? You trying to scare us?

IridiumRebel's picture erosion and not clash.

MeelionDollerBogus's picture

a) because soldiers get chicken-shit about having half their men come back dead entering every single home with anyone at any time shooting back from blind spots

b) because it's worse when you're invading your own country

Military is a BLUNT tool. It's easy as fuck to FLATTEN an area. That also kind of ruins the PURPOSE of taking the land. If they want food, house, gold, silver, whatever's inside, they have to not destroy it all to pieces with heavy armory shelling. Right? Right.

That's why in Iraq soldiers keep going DOOR TO DOOR not demolishing everything. They want to recover what they can of the country to be a new colony to Uncle Sam.

Owning is not enough, of course, you must be sure how to maintain & shoot with enough accuracy under stress. Keep practicing.

Best advice, actually, is don't live in the USA anymore. It's time to run or overthrow, is how it looks from all the news coming across the border.

Mr. Hudson's picture

Bankers read these comments and giggle. They should be shuddering.

willwork4food's picture

Congress have been reading these comments and are shuddering. Why do you think they purchased 1.6 Billion rounds?


Zwelgje's picture

I am glad you feel good about yourself.


Powder's picture

I have to quote Dilbert's pointy-haired boss by exclaiming, "GAH! DUH!"

Herkimer Jerkimer's picture



How do we know the US isn't doing this?




CheapBastard's picture

"I'll gladly pay you back Thursday, for 90% of your pension today."


"I promise."

Lord Of Finance's picture

Ha ha!!!! I forgot about that cartoon!


You just settled it 'Cheap Bastard'. What we have here is global 'Wimpy economics.'

jonjon831983's picture

"That's as good as money sir! Those are IOUs! Go ahead and add it up! Every cents' accounted for!"


Lord Of Finance's picture

These policy makers are dumb. The human population is even dumber.

          It's a 'dumb and dumber' economic policy in a truly mad, mad world

TheObsoleteMan's picture

The poster attached to this story shows two men rolling up their sleeves, and then mentions a "circle jerk". No, more in tune with the situation {and the picture}, should be a mention of "fisted". Because that is exactly what pensioners are going to get from their trusted gubmint, fisted right up the, well, you know.

Lord Of Finance's picture

"Spain. Who in the world taught you to do this stuff."


"It was you Uncle Sam! I learned it by watching you!"

MeelionDollerBogus's picture


"These are your bonds"

"These are your bonds on heroin"

"Any questions?"

coffee SAFELY on the side table not yet in mouth... that was a close one

blindman's picture

does anyone know what the core problem is?
if you do you may have one last chance to
escape hell on earth by organising and, not
writing to but, showing up at the door of your
representative in government and educating that
person on what the core problem is and demanding
they do their job and correct the
error in their thinking and operation immediately
as "our" survival depends on a functioning system.
that would be the way to resolve the problem
before it is too late.
we live within a system and it exists to promote
survival. some may argue with that but it is
the way cultures throughout history have sustained
themselves , survived. the current system was
conceived to replace slavery and the cheep labor
it provided. it was conceived by the super rich to
make them super richer. it is a usurious ponzi scheme
cloaked in tortured probabilities and extractions.
it is not a money system anymore. repudiate the debts
i say, jubilee, before adherence to the fraud makes
us all good , law abiding, quiet and obedient,
and that to the bobble heads on the reading cue
cards, skinny and starving dead people.
it is either that or continue to let the imbeciles and
thieves rule by looting and fraud until the starvation
and homelessness destroy everything. the time has come
to use what you know concerning the core problem and
teach it to the levers of power as they have assumed
the position by virtue of their charismatic, popular
and gregarious nature. imho.
something to think about? you enjoy free speech not
because any government grants the privilege but
because it is your duty and right to speak the truth
you know to the unknowing, distracted and fatally
confused among us; to those who claim to represent
you in a legal way. if you fail to do it you are cheating
and will be punished by the gods of free speech and they
will haunt you with fears of experimenting with verbs,
the most colorful class of your vocabulary. you will
become stunted in body and mind and no one wants that
except the sick bankers.
good luck, i know you can do it and we are all counting
on you. and thank you

blindman's picture

what is all this about buying what is already your own?
if it is their debt why don't they just feed it
and groom it? if they don't like it they can then drown it
in the well. who would ever buy their own debt?
it is just a ridiculous nonsensical play of words.
goldman sacks must have invented the term, or george
orwell? that is the problem with the plural nouns ,
they quickly become unexamined gibberish, like in europe
re nations and the fed and the states.

Element's picture



Spot on ... but I have a feeling other 'bond', ... er, ... 'holders', are going to require something ... more ... um, ... tangible ... in the form of a 'different' ... er, ... fiat next time ...

Whole thing is a bit odd really.

But what has even greater mystique is the 'selling' of ship loads of 'energy' to 'China', to get 'paid' for it in 'Chinese' digits. Or else we give them our digits, so they can 'pay us back' with our own digits! Which we like, and which are subtly different from other digits. the point of this escapes me for the moment but apparently if the digits build up too much this then causes all sorts of imaginary chaos to occur. And this leaves a 'market economy' somewhat demoralized, or strangely rather crippled, as now they find they can't, or rather, don't get up at 5AM every morning, to do battle with each other to swap more digits. So I'm not too sure what that's about exactly. But perhaps a smaller number of persons should get up even earlier and do battle for much longer? And as it turns out this is in fact the general consensus practice for how to deal with recalcitrant digits. But alas, the results are a bit of a mixed-bag. Also note, that at such times it's been observed that verbs tend to under-perform with inverse proportionality to the recalcitrance of digits. Which is a curious relationship, and may be an important pointer to what's really going on.


blindman's picture

the dance of the recalcitrant digits
and verbs ! sounds like an epic in the
making, a psychological thriller of treadmills
and fast automobiles marketed on information
highways so clogged up that the drivers have
to exit their vehicles and crawl on the
pavement in search of water . 2013 is going to
be a very odd year, that is my forecast.

Manipuflation's picture

Just a piss pounding of the PM's so far on the overnight.  Quite a combined effort I should say.  No sale here.

cxp's picture

Capital3x says we are headed for a mid month fall in risk markets

lemarche's picture

hiperregulado=hyperregulated. probably because does not exist as a single word in the dictionnary

lemarche's picture

Aint that sweet? you buy your own debt at high yields, knowing that you have the power to ask for a rescue that will smash rates on that debt and that you will make a killing on that prop trade???

SURPRISED they did not buy MORE YET !

rivoniaboy's picture

We are so screwed!

Aurora Ex Machina's picture

"We just don't know who's going to pay for the pensions of those who are younger now."

Yes, well, that's kind of the deal: the entire point of a "legacy" is handing down something worth running / owning. Societies fall into this. Thanks.

And I'm mostly looking at Corporations for this responsibility; yes, you, Walmart with your State funded job creation and so on.

"60 percent of the companies are in losses. Thing is that entrepreneurs are more thoughtful and went outside."

Well, that's your Oates moment right there.


Anyone else feel that it's time for a nice cup of tea and a mature discussion of this entire "work" model? Public Sector was stuffed to the gills to provide high % employment (and we can all see the problems inherent with >50% of your workforce being paid by the other 50%), and SMEs got shafted to entice the large Corporations, while places such as Saud destroy their own interior fabric by shoving the SWF profits into stability. 21st Century; why are we working on the 19th / early 20th C production / work models? They're clearly not working anymore.

Time for the new Marx / Keynes / Hayek / Mises; old models no longer apply, part of the trouble is being stuck in the past. And colonialism 2.0 in Africa isn't really the way forward.


Btw, still fairly convinced the real target is SWFs; JP Morgan's "six best men to Scylla" play is obviously a reference to the PIIGS [and France?], I'd put money on them wanting the EU being forced at some point to back-stop all the printing with SWFs of member states, with them & GS running in with their greedy little paws. But, that's all pure hypotheticated guesswork.

jubber's picture

IBEX positive nothing to see here

Catullus's picture

Don't worry: we're defaulting on ourselves.

Arturo's picture

This pretty much summarizes the situation:

Monedas's picture

North Koreans don't need no bath salts to eat faces .... they have found that hunger is more than sufficient to whet their appetites to stuff face !