Floodgates Open As Four More Spanish Regions Seek Bailout; German Nürburgring Faces Bankruptcy
Even as Europe has become an utterly dysfunctional experiment in everything relating to modern economics and monetary theory, it has one redeeming feature: it has proven that the Defection regime under Game Theory is 100% correct. It says that once the defections from an unstable Nash equilibrium begin, there is no stopping until the entire system collapses under its own weight. This is precisely what has happened in Spain, where first Catalunya, then Valencia on Friday, and now virtually everyone else is set to demand a bailout. From Bloomberg: The Balearic Islands and Catalonia are among six Spanish regions that may ask for aid from the central government after Valencia sought a bailout, El Pais reported. Castilla-La-Mancha, Murcia, the Canary Islands and possibly Andalusia are also having difficulty funding themselves and some of these regions are studying plans to tap the recently created emergency-loan fund that Valencia said it would use yesterday, the newspaper said, without citing anyone."
"Spain created the 18 billion-euro ($23 billion) bailout mechanism last week to help cash-strapped regions even as its own access to financial markets narrows." What Spain's perfectly insolvent and highly corrupt regions also know is that the bailout money, like in the case of the ESM, will be sufficient for one, perhaps two, of the applicants. The rest will be out of luck.
Where the bailout money will come from? Ultimately from Germany of course. There is however one minor glitch. Some 80 millions Germans may soon be rather angry to learn that while they are working extra hours to fund the rescue of a few insolvent windmills, their own most legendary racetrack, the Nürburgring, is facing bankruptcy as soon as next week. From Spiegel:
With millions of euros in debts and an inability to pay back its loans, the operator of Germany's fabled Nürburgring racetrack, home to many of the country's Formula One races, could declare bankruptcy next week. It may be the end of the legendary racecourse, which first opened in 1927.
Formula One racing is in the blood of many Germans. The country is home to such car racing legends as Michael and Ralf Shumacher and Sebastian Vettel. And every two years, tens of thousands of Germans descend on the world-famous Nürburgring motorsports complex in the village of Nürburg for Formula One races.
But the days at the fabled track may soon be coming to and end. On Wednesday, the state of Rhineland-Palatinate, which owns the race track, said it would ask the operating company to file for insolvency, and bankruptcy proceedings could begin as early as next week.
The state's governor, Kurt Beck, is blaming the European Commission for not approving a €13-million ($16-million) state aid package in time for a July 31 payment deadline. The consequence, Beck said, "is a very high probability of an insolvency at the end of the month because of insufficient liquidity." After that, orderly bankruptcy proceedings would follow, he said. The state aid envisioned for the track would require EU approval.
Beck said the European Commission, the European Union's executive body, had sent positive signals in recent days that it might approve the aid, but it has now apparently delayed a decision. In recent years, the EU has sought to put a halt to years of giving millions in state aid for the failing race track complex.
Nürburgring is famous in Germany not only as a site that hosts Germany's Formula One races, but also as the location of the massive Rock am Ring music festival, which draws thousands of spectators to see headline music acts every spring.
Since 2007, Formula One races in Germany have alternated biannually between Nürburgring and the Hockenheimring track in the neighboring southern German state of Baden-Württemberg. The planned 2013 race is currently jeopardized by the dispute between Rhineland-Palatinate and the racetrack's operating company.
Nürburgring is one of the world's most famous race tracks. The 25-kilometer long course first opened in 1927. A new track was built in 1984 to accommodate Formula One racing. But in recent years, the future of the massively expensive Formula One race at the site has been in doubt. The state of Rhineland-Palatinate has threatened to reduce the level of subsidies it provides. The June conviction of former banker Gerhard Gribkowsky, who admitted he had accepted $44 million in bribes from Formula One boss Bernie Ecclestone, has also created uncertainty. For weeks now, speculation has been rife that Eccelstone could face corruption charges in Germany.
You want to piss a German off? Stand between them and their local Formula 1 race.