One of the biggest headlines that floated under the radar late last week was the announcement by Spain that its budget deficit would soar well higher than the expected 6% of economic output and instead be at 8% of GDP, which while ignored by the broader media was certainly noted by the EURUSD which tumbled on the news. Probably the most humorous response came from the neo-feudal viceroy of the PIIGS Olli Rehn who was displeased. From Reuters [7]: "The European Commission regretted missed fiscal targets announced in Spain on Friday, but hailed the government's announcement of an austerity plan intended to slash the Spanish public deficit. "I regret the sizable fiscal slippage" to a deficit of 8.0 percent of GDP instead of 6.0 percent initially targeted, Economic Affairs Commissioner Olli Rehn said, while welcoming the new measures announced from Madrid." We in turn regret that a year after adopting so-called austerity, Spain still has not understood that it means cutting the deficit, not blowing it up. Because just like in Greece, sooner or later the Germans will come knocking and demanding every last shred of sovereign independence from its bevy of debt/bailout slaves. Unfortunately today's news will not help: in another piece of news that many hope slip under the low volume radar, the government just said that the revised number could well be re-revised even worse as soon as a few days later.
From Reuters [8]:
Spain's public deficit could have exceeeded the 8 percent of gross domestic product forecast by the new centre-right government on Friday, the Economy Minister Luis de Guindos said on Monday.
The original deficit target for last year was 6 percent of GDP, but the conservatives said last week that the target had been missed due to higher-than-expected shortfalls by the regions, the central government and the social security system.
The new government had a very aggressive reform agenda planned for the next few weeks and months, Guindos added during a radio interview.
Bottom line- Spain is certainly not the last to confirm that Europeans are adopting "austerity" only on paper. When it comes to actual practice, let someone else bite the bullet, or suffer the rain of Molotov cocktails, whichever comes first.