http://www.zerohedge.com/news/2013-07-22/insolvent-spain-forced-borrow-social-security-fund-pay-pensions
Submitted by Tyler Durden on 07/22/2013 15:56 -0400
Insolvent Spain Forced To "Borrow" From Social Security Fund To Pay Pensions
Spain's slow-motion implosion into an insolvent singularity has been one of the most amusing sideshows for over a year. The chief reason for this is the sheer schizophrenic and absurdist polarity between the sad reality, visible to everyone, and the unprecedented propaganda by the government desperate to paint a rosy picture. While on one hand the economic data shows very clearly the painfully obvious sad ending for this chapter of European integration, it continues to be punctuated almost daily by such amusing confidence games as Spain's Economy Minister de Guindos telling anyone who cares to listen that the labor market is improving "beyond the seasonal pick up" and that Q2 GDP would be close to zero (because 0% GDP is the new killing it). That's the good news. The bad news is that as Reuters reports, and contrary to fairy tales of unicorns and soaring 0% GDP, Spain's government is so insolvent, it was just forced to "borrow" from its social security reserve to fund pension payments.
From Reuters:
Spain tapped its social security reserve fund for the second time in a month on Monday, the Labour Ministry said, to help with extra summer pension payments as unemployment and retirement costs deplete government funds.The government turned to the fund for 3.5 billion euros ($4.6 billion) on July 1 then for a further 1 billion euros on Monday. Spanish pensioners receive two cheques in summer and two over the Christmas holidays.Spain was forced to tap the reserve for the first time last year to help pay pension costs, using some 7 billion euros.Record high unemployment, which hit over 27 percent in the first quarter, and a growing number of retirees on a state pensions have put an unprecedented strain on Spanish social security funds.The fund was worth 59.3 billion euros, or 5.65 percent of gross domestic product, after the operation on Monday, the Ministry said.
And the punchline: virtually all of the "welfare" cash, and at least 97% of the social security pension fund, is invested in Spanish government bonds. In other words, if one country goes, and its people lose all their retirement money most likely leading to riots and a revolution now that there is nothing from the old system left, all countries go.
Think the TBTF banks had it good when they made it so that one failure would lead to defaults for all and a collapse of civilization? Just wait until the reality about sovereign "cross-default" provisions is finally grasped by the broader public...
http://www.guardian.co.uk/business/2013/jul/22/eurozone-crisis-portugal-government-bailout-deal
Closing summary
That's all for the day. Here's a round-up of the main events.
• Portugal's prime minister has pledged to stick to the terms of the country's bailout, after weeks of political turbulence. Pedro Passos Coelho told a press conference that he was committed to the current economic plan, and to rebuilding confidence with the rest of the world.
Passos Coelho also confirmed that his junior coalition partner would take a prime role in negotiating with its troika of lenders. (see 12.03pm onwards).
• There was general relief after Portugal's president announced last night that he would not seek an early general election, following the collapse of talks over a 'National Salvation' government. (see 7.59am)
• Portugal's government bonds strengthened through the day, as traders calculated that its debt was less risky. Shares in Lisbon also rallied. (see 12.12pm for details of the bond rally, and 5pm for the closing market prices).
• But despite the relief, many City experts believe Portugal may need a second aid deal when its bailout runs out. See 8.53am and 10.52am for the latest analysis.
• Spain's prime minister bowed to pressure over its slush fund scandal. Mariano Rajoy said he would answer questios on the issue in the next few weeks. (see 4.22pm onwards)
• In Greece, anger over public sector job cuts has not abated.Teachers held another protest in Athens (photos at 3.04pm), while medical staff are planning a strike on Wednesday (see 2.54pm).
• And the eurozone's debt pile kept growing. Total government borrowing now equals 92.2% of GDP. Greece, Spain, Ireland, Portugal and Cyprus suffered the biggest increases. (See 10.27am onwards).
I'll be back tomorrow. Until then, thanks all and goodnight. GW
http://www.reuters.com/article/2013/07/22/us-italy-doctors-idUSBRE96L0FO20130722
ROME |
(Reuters) - Thousands of doctors went on strike across Italy on Monday to protest against cuts to the country's health service, raising pressure on Prime Minister Enrico Letta's government as it seeks further ways to slash spending.
PM to push ministers on troika targets
Top on the agenda of talks between Samaras and key members of the Cabinet including Deputy Prime Minister Evangelos Venizelos, Finance Minister Yannis Stournaras and Administrative Reform Minister Kyriakos Mitsotakis are the induction of thousands of civil servants into a so-called mobility scheme where they will get reduced pay ahead of transfer or dismissal as well as a plan for restructuring of Hellenic Defense Systems (EAS), the Hellenic Vehicles Industry (ELVO) and the Larco mining company. A new code of conduct for the country’s lawyers is another topic to be discussed. Independent advisers have been given a deadline of the end of August to submit recommendations to the government, which is keen to ensure that the necessary action is taken in time to secure a positive report from troika envoys who are due back in Athens on September 9. The mobility scheme remains the toughest challenge for the government, with teachers staging a protest rally in central Athens on Monday ahead of the scheduled transfer of at least 1,600 educators from their posts. Their action followed similar protests last week by municipal police officers and school janitors. Similar reactions are likely from other sectors as the Greek authorities have committed to the troika to place 25,000 civil servants in the mobility scheme by the year. Already workers in the health sector – one of the next targets in the scheme – have organized protests. Samaras is likely to press ministers to speed up the evaluation of staff at their ministries to ensure the project remains on track. Mitsotakis, who has been tasked with overseeing the civil service overhaul, appealed to his colleagues to join the effort. “I have repeatedly said that the job of administrative reform is being overseen by this ministry but, if we are to hit the targets, all the ministries must be involved.” Greece has also promised the troika it will lay off 4,000 civil servants this year and another 11,000 next year. The dismissal of some 2,600 employees – following last month’s sudden closure of the Hellenic Broadcasting Corporation (ERT) – was supposed to contribute to this target. Samaras subsequently pledged to rehire most of the ERT staff on short-term contracts but the workers remain holed up in the broadcaster’s old headquarters and it remained unclear whether they would apply for the 2,000 temporary positions at a temporary broadcast service that were announced on Monday. The deadline for applications is August 2. |
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