Previously we noted that, just as expected, the weakest PIIGS - Portugal and Ireland - wasted no time to start rumblings about a "suddenly slowing economy" in the aftermath of the Greek bail out which achieved nothing but to delay contagion by 48 hours (we won't bother readers with the blow out in Italian bond yields any more), and to unleash demands by everyone else to get the same concessions, in essence pushing Europe into an even deeper hole, forcing Golum Van Rompuystiltskin to say he was only kidding about the 4-5x EFSF leverage: he really meant 45x. Confirming that the tsunami of demands has been unleashed is today's announcement from the Bank of Spain that not only was Q3 GDP flat (read: negative), but that the deficit target for the year would not be achieved. Google translated from Expansion: "The Bank of Spain says the Spanish economic growth was zero in the third quarter from the previous quarter and warns that there are significant risks that may prevent achieving the deficit target this year. The Bank of Spain said that the information available for the third quarter suggests that the pattern of decline shown in the previous quarter "would have continued in the middle months of the year, in an environment marked by the deepening crisis of sovereign debt euro area." Truly nobody could have seen this coming, yet it is odd how it was casually slipped in broader discussion three short days after the Greek bailout.
The Bank of Spain admitted that absent for that mysterious exporting force (somehow everyone in the world is exporting to someone: just who is importing?) the country would be in a recession:
The report said domestic demand would have experienced a further decline in the third quarter (with a GDP contribution of -0.8 percentage points from April to June period), reflecting the contraction of the components of public spending and the path still down in residential investment, while household consumption and business investment showed little progress.
Instead, "net exports remained a mainstay of the economy and increased its contribution to GDP growth (up 0.8 percentage points) due to the dynamism of exports of goods and tourism.
Yet what is more troubling for the country is that it has indicated it will miss deficit targets for the year: an event which will have implications on both its rating and the treatment of the ECB vis-a-vis the SMP's purchases of its bonds.
The deficit target at risk
"current trends indicate the existence of risk of occurrence of a deviation from the deficit target of 6% of GDP in 2011, as a result of weak tax collection and spending of inertia, mainly in the area of the CCAA, "says the Bank of Spain.
The agency explains that "the magnitude of the deviation is within the margins that can be corrected through proper management of budget implementation in the remainder of exercise."
In any case, "if the budget execution data in the coming months indicate the likelihood of these risks materialize, it would be necessary to adopt additional measures in line with the unconditional nature of the commitment by the Government in meeting the fiscal targets and the close scrutiny to which public finances are subject amid the current sovereign debt crisis ", defends the organization headed by Fernandez Ordonez.
And by additional measures, the country means incite further protest once more cuts are announced, which in turn will lead the country to demand debt cut concessions in order to appeas the "angry mob" in the process getting another rerun of Greece.
The only question we have now is: when will the 4 out of 4, Italy, finally make its anticipated appearance on the concessions-demanding bandwagon and tell Europe to take it or leave it... and but "it", we mean a 25%-50% haircut on its debt.