It Begins: Spanish Region Of Catalonia Demands A Bailout

Tyler Durden's picture

Yesterday we mocked the fact that the Bankia's bailout costs are doubling with each passing day. Today, things just got "Messi-er":

  • SPAIN'S CATALONIA REGION NEEDS GOVERNMENT HELP, RUNNING OUT OF DEBT FINANCING OPTIONS-CATALAN PRESIDENT - RTRS

So... if broke Bankia can rehypothecate Ronaldo, can Barcelona demand delivery of Messi and pledge him as ECB collateral too? Or was he nationalized by the government in retaliation for that whole "Argentina" thing?

From Reuters:

Spain's wealthiest autonomous region, Catalonia, needs financing help from the central government because it is running out of options for refinancing debt this year, Catalan President Artur Mas said on Friday.

 

"We don't care how they do it, but we need to make payments at the end of the month. Your economy can't recover if you can't pay your bills," Mas told a group of reporters from foreign media.

 

The debt burden of Spain's 17 highly devolved regions, and rising bad loans at the country's banks, are both at the heart of the euro zone debt crisis because investors are concerned they could strain finances so much that Spain, the currency bloc's fourth biggest economy, will need an international bailout.

 

Catalonia, which represents one fifth of the Spanish economy, has more than 13 billion euros in debt to refinance this year, as well as its deficit.

 

All of the regions together have 36 billion euros ($45 billion) to refinance this year, as well as an authorised deficit of 15 billion euros.

 

Last year many of the regions financed debt by falling months or even years behind in payments to providers such as street cleaners and hospital equipment suppliers.

 

This year the central government provided them with a special credit facility from the Official Credit Institute, or ICO, to pay providers, of which Catalonia has taken 2 billion euros.

 

The provider credit lines from the ICO run out in June and the central government has pledged to come up with a new mechanism for backing debt from the regions, which have been mostly priced out of international debt markets since the Greek rescue in 2010.

 

Catalonia's Mas, from the centre-right Convergence and Union Party, said he is running out of options. In the past two years Catalonia has placed patriot bonds, at 4.5 percent to 5.0 percent, but he says the capacity for the people of the region to buy such bonds is at its limit.

 

Aquarter of all Catalan savings are already in patriot bonds, he said.

 

The other option would be short-term financing from banks, but Catalonia's neighbour, the region of Valencia, recently paid 7 percent for a six-month loan, a level seen as unsustainable.

 

Catalonia's annual interest payments have already doubled in the last two years, to 2 billion euros this year.

...Oops.

And just because the "perfectly efficient" market completely ignored this news from two days ago:

Back in late March, we pointed out - much to the chagrin of the LTRO-funded Spanish-sovereign-debt-stuffing banks of the tapas-nation - that, in a similarly misleading manner to Greece's 'leverage' the debt-to-GDP data for Spain was significantly higher than official estimates. Once sovereign guarantees, contingent liabilities and their responsibilities to the EU and the ECB were included things got a whole lot uglier. Now, slowly but surely, as reported by Reuters this evening, some of these bilateral guarantees/loans are coming to light. Instead of the expected EUR8 billion of 'regional refinancing' expected for 2012, it turns out there is EUR36 billion and as Reuters notes "the difference is due to bilateral loans from Spanish banks to the regions worth 28 billion euros that were not made public previously" adding that "It could unnerve further investors concerned by the capacity of Spain to curb its public finances and reform its banking sector." Critically this stunning 'discovery' should be worrisome since the plan, given the regions are virtually blocked from public market financing - due to the high cost of funds, was/is for the sovereign to guarantee (there's that word again) their issuance explicitly. Ironically, as de Guindos and Hollande are chummy borrow-and-spendaholic growth-seekers versus Merkel's safe-and-austere determination, so now the Spanish authorities must lend exuberantly to their regions while at the same time demanding deficit targets are met (or else?) - or as one Reuters' source objects: "You can't tell them on one side that they have to be austere and on the other side give them unlimited liquidity". Irony indeed.

Sigh

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dwdollar's picture

Now's their chance to declare independence and start printing their own money.

GetZeeGold's picture

 

 

Spain : It's your money......and we want it now!!!!

 

Colombian Gringo's picture

Homage to Catalonia, part 2:  Send money!

Doña K's picture

Lights out!  

The Euro is no longer viable in its current form.

Print out the Catalonian moneda

MillionDollarBonus_'s picture

I know this is not going to go down well, but somebody has to say it: Why don't these government officials just raise taxes on small businesses?

Small businesses are puttingfar more strain on the government  by violating regulations, not paying their taxes and hiring illegal immigrants at below minimum wage, than they are worth. Why doesn't the Catalonian government simply put its foot down and say enough is enough. The government has an enormous debt to pay, and small businesses are using government roads, hospitals and other services while refusing to comply with regulations. The very least they could do is to contribute more to society and to the leaders that are running the country.

Dr. No's picture

Why dont they just fold up shop and stay at home?

Paul Atreides's picture

Outlaw government bonds and private central banks worldwide. It is time for humanity to return to government created gold and silver backed money.

End the fraud, free the markets and free humanity!

john39's picture

One small problem. The banker cabal owns more gold than the rest of the world combined. The parasites must be destroyed or they will remain in control under a gold standard.

Paul Atreides's picture

I agree to some extent but sovereign bonds, government debt and private central banks are the root cause of most the worlds ills. Eliminate the root of the fraud, take away their power, unify humanity and the banker cabals power to influence will be severly reduced. The best way to solve a difficult and very large problem is to break it down to its individual components and solve those components one at a time, the first step is to remove their power.

If you had most of the worlds countries on board with this first step it wouldn't take long to corner a bunch of inbred crotchety old men...there would be no where to run.

You can't stop an idea whos time has come. Honestly if I or someone else started a group and a small website with those 3 simple goals 1. Outlaw Government Debt 2. Eliminate Private Central Banks 3. Return to government created commodity backed money. I think it would gain A LOT of grassroot support globally. It would unify the people under 3 common goals.

The Big Ching-aso's picture

 

 

The Cat-a-lunians have always been suspect crazy effete arrogant pussies with that annoying lisp.

CharlieSDT's picture

I agree, those guys are often faggots.  No offense to homosexuals, please.

 

Although the lisp is more of a Castillian thing.

The Big Ching-aso's picture

 

 

You're right.   I confused them with the Castillians.   Well phuck them too.

bsdetector's picture

MDB's comments sound like "everything would be fine if everyone would pay their fair share." That type of attitude ignores the fact that cronyism and corruption are not being confronted in this milieu. It also ignores the fact that tax collection will not possibly keep up with the cost of servicing the sovereign debts. Economists are stating that a tax increase on the wealthy will not solve our budget problems so how can an increase in tax revenue from small business solve anything? 

Day_Of_The_Tentacle's picture

@Paul: I have come to a similar conclusion, only that the adoption of a pure version of Bill Still's government issued money is naive, when the upcoming trigger for change will be a burning fiat mayhem. In my mind there is no way people will gain confidence in a new pure government issued fiat monetary regime on that backdrop. However, with a Gold (or Gold/Silver) themometer attached, it may be possible to control.

@John: Do we know this to be true, or do we assume that is the case? It doesn't really matter, because at any given time, there could be entities or countries that accumulates a majority stake, and the system must be able to withstand that. How?

This may sound utterly crazy and you can flame me for being stupid all you want. I would rather hear constructive input to why the following would be wrong. It is just a thought experiment.

Principle: Monetary supply must be stable to retain roughly the same purchasing power over long periods of time, but it must be able to fluctuate enough with the economical conditions and size of population to avoid both monetary deflation and inflation. That would require a sophisticated formular with a number of input parameters, one of which is our Gold Themometer.

Assume a Public Gold Exchange, that is physical only, non-margined, 100% assayed, independently and publicly audited, transaction transparency, truly allocated etc. Assume a transaction is Fiat2Gold or Gold2Fiat, where Fiat is not necessarily the same currency. Assume Paul's point 1 and 2 is done. In the example the Treasury issues the fiat currency.

When the Gold price in a given Fiat rises marginally, it would signal that liquidity is drained from the system, because of uncertainty etc. the Treasury for that fiat would then add liquidity marginally to the system to make up for the loss. If the gold price falls, it would signal release of hoarded likvidity, which would make the Treasury drain some of the liquidity. If the Treasury has a gold reserve, the adding and draining can be done by selling or buying state gold, if not it could be done by printing or taking back money via a dynamic monetary tax.

Gold would be a equilibrium meter between the public Treasury and the private sector - and an insurance policy in case the fiat managers gets too creative. Ideally watching the gold tape should be equivalent to watching paint dry.

@John: If the old Banker Cabal wanted to crash the system, they would have to sell their most beloved stash, but that would not give them extra liquidity in the system to drive up other asset classes, because the Treasury would withdraw liquidity incrementally at the same time within the fiat currency attached to the sale. In this way, only true economical value adding activity, would make assets rise in value.

My head has exploded so many times over the past three years, that I am afraid not much is left, but I would like to hear your thoughts, and what I am missing, if you find the above total nonsense. 

Doña K's picture

In commodity backed currency system, word wide growth should not exceed the annual mining of these precious commodities, in order to maintain sustainability.

Each nation can either increase their precious metal holdings when their balance of payments are positive, or decrease them when they are running a negative one.

That's incentive to be fiscally sane in order to stay in the game.  

Oh regional Indian's picture

Awl in Awl, a rather Messi affair, it must be said.

Oh (That is Meestah Oh 2 U!)

CH1's picture

End the fraud, free the markets and free humanity!

Well, yeah, but there's one BIG problem: Who do you expect to do this? Surely not the existing bosses!

The only way that gets done - ever - is if we take it upon ourselves and BUILD something better.

Calling out for others to act is to confirm your serfdom.

MeelionDollerBogus's picture

With so many gold & silver scrap outfits, the testing kits ought now to be common. From chemicals to magnetic testing http://www.youtube.com/silvermagnetslide we could mint our OWN gold & silver coin of known purity and forget government minting of ANYTHING. It has intrinsic value unlike bonds & papers so gov adds nothing of value and need not be invited to the party.

BLOTTO's picture

Catalonia = Kosovo in some ways

That is why Spain does not recognize Kosovo's independence...they are going thru same thing with own country in the Catalonia region

Terminus C's picture

1/5 troll attempt.  You went overboard this time MDB., you are trying too hard... more subtlety needed.

Spastica Rex's picture

MDB's trolling makes me think of the "Ow, My Balls!" television program from Idiocracy.

falak pema's picture

the subtlety of MDB's farcical farts is far from lost on you.

tocointhephrase's picture

More like Homer Simpson, I want to buy FB at any price......DOH!

SilverTree's picture

I love to hate you MDB.

~Keep it up - you stick out like a sore thumb.

_ConanTheLibertarian_'s picture

MDB, you can do much better than this. You sound a bit desperate.

LongSoupLine's picture

not your best work MDB...must be the painful distraction of all those FB shares burning a hole in your ass.

tocointhephrase's picture

MDB SMOKES Rocks, there, fixed it for you!

TheFuture_MrGittes's picture

You posted something like this yesterday. As you appear to enjoy recycling, have you considered coprophagy?

MeelionDollerBogus's picture

Silly Rabbit, Trix are for kids!

Raise taxes to 100% for EVERYONE and support efficient big business today!

Forget the little workers and small businesses... they're just inefficient anti-market tax-evaders anyways

What could go wrong?

LOL

 

Sauk Leader's picture

I hope you are referring to that commercial. Hillarious. Maybe they should look for sponsers. Spain, brought to you by Carls Jr. Or maybe they should seek help from Unicef.

Dr. No's picture

Crazy like a fox?  Maybe this is their plan for getting independence!! I mean people now WANT greece to leave.  Texas, are you reading this?

Al Huxley's picture

Texas hasn't been doing the prep-work (ie running up unsustainable debt and deficits).  Looks like California's going to be in a better position to split.

Sauk Leader's picture

Texas would split if it was forced to bail out California.

Bananamerican's picture

are you kidding?

 

Since 2001, the debt load in conservative ("no Taxes") Texas has grown faster than the federal debt.

Texas has been borrowing more than most other states, too. And local entities, from cities to school districts to transit authorities, have been piling it on.

From 2001 to 2010, state debt alone grew from $13.4 billion to $37.8 billion, according to the Texas Bond Review Board. That's an increase of 281 percent. Over the same time, the national debt rose almost 234 percent, with two wars, two tax cuts and stimulus spending.

In Texas you have the worst aspects of a Lib/Neocon governance world.

Handouts unbacked by taxes

Ident 7777 economy's picture

 

 

Bananamerican:

" Since 2001, the debt load in conservative ("no Taxes") Texas has grown faster than the federal debt. "

 

Texas as the cities in Texas (bonds for roads and schools) or the state?

 

Do you know?

El Oregonian's picture

Pompalona- No Bullshit there...

DoChenRollingBearing's picture

This beginning has been going on a long time...

When does it end?

RunningMan's picture

Been wondering that myself. Four years on now (five if you consider the peak as 2007), and we seem to be just now setting up for the next leg. Think another 4-5 years, with the big shift within the next 12-18 months. I've understimated the ability of leaders to duct tape things together as long as they have.

Sudden Debt's picture

When they start digging trenches and passing out bullets and riffles

AUD's picture

I believe that's exactly what they did in Spain in the 1930's.

I also read somewhere that the regions began issuing their own currencies but I don't think they fared any better than that of the Bank of Spain.

Muppet Pimp's picture

Thanks for the solid laugh, I needed that.  My eyes are watering from laughter right now.

DoChenRollingBearing's picture

+ 1

A lot of wasted money spent there in Spain.

 

Spain also spent a LOT of money on solar power, I wonder how that is working out...

The Big Ching-aso's picture

 

 

Ask Leo.   He was our resident expert on unlimited solar energy in the Antartic.

flyingpigg's picture

At least Solar Power in Spain will pay some yield. It might be a low return on investment but it will be definitely higher compared to the "Patriot Bonds". LOL, what a BS.  Since when is someone who throws his Spanish Euro savings in the fireplace a patriot? Better to sponsor the local school or to start your own business hiring locals locals if you want to be patriotic with your money.

Ethics Gradient's picture

If you're worried about it ending soon, you've got 20 minutes to transfer your Greek deposits into a German bank.

Incidentally, it's a bank holiday in Germany on Monday.....

THX 1178's picture

I'm American and what are these "Ronaldos" and Messis"?