http://globaleconomicanalysis.blogspot.com/2013/09/men-in-black-return-to-spain-ecb.html
Via translation, El Confidencial reports Brussels Gives Too Much Leeway to Spain and Portugal
ECB complaints of laxity, coupled with missed budget targets means one thing... more tax hikes are on the way.
Via translation, El Economista reports alarm bells ring for tax increases to meet deficit targets.
Mike "Mish" Shedlock
Friday, September 13, 2013 3:17 PM
Men in Black Return to Spain; ECB Complains of Too Much Leeway; Alarm Bells Ring "More Tax Hikes Coming"
Men in Black Return
Via translation, La Vanguardia reports Men in Black Will Examine Bank Bailout on Monday
Via translation, La Vanguardia reports Men in Black Will Examine Bank Bailout on Monday
A mission of experts from the International Monetary Fund (IMF) will arrive in Madrid on 16 September to discuss with government and private sector rescue progress and Spanish banking sector reform, reported a spokeswoman for the international institution.ECB Complains of Too Much Leeway to Spain, Portugal
The IMF and inspectors from the European Commission and European Central Bank (ECB) will investigate if Spain meets the conditions required by the Eurogroup for the bank bailout and to examine the situation of the banks.
The expert mission of the institution headed by Christine Lagarde expects to publish its preliminary conclusions about the 30th of September, while the publication of the final report could take place in early November.
Via translation, El Confidencial reports Brussels Gives Too Much Leeway to Spain and Portugal
The European Central Bank (ECB) today launches a critique of the European Commission for being too lax in their setting requirements for Spain and Portugal. As a result of this laxity, doubt that Spain can meet this year's public deficit limit imposed Brussels (6.5% of GDP this year), despite the improvement seen in the first half of the year, as some fiscal consolidation measures will be relaxed in the latter part of the year.Alarm Bells Ring "More Tax Hikes Coming"
"In several cases, the decrease in average annual structural adjustment required is substantial. For some countries (particularly Portugal and Spain), including cumulative structural adjustment effort has been reduced future the latest recommendations of the EDP (Excessive Deficit Procedure) This could intensify the risks to the sustainability of public finances "are the literal words of the monetary authority in its September monthly bulletin.
"at the end of June 2013, the general government debt stood at around 90% of GDP per year [the highest figure of History], up from 84% at the end of 2012"
ECB complaints of laxity, coupled with missed budget targets means one thing... more tax hikes are on the way.
Via translation, El Economista reports alarm bells ring for tax increases to meet deficit targets.
Data through July triggered an alarm in the government and international agencies, especially the downturn in revenue due to the contraction of social contributions and income tax, which will force Treasury to increase the tax burden to meet the revised deficit target of 6.5% of GDP in 2013 committed to Brussels.Tax hikes will doom whatever slim chance Spain had for an economic recovery (which was not much chance in the first place).
Given this situation the government has already prepared a package of tax increases for 2014 that would help meet the deficit of 5.8 percent committed for next year. A VAT increase would raise health additional 1 billion euros and a 21% VAT tax on notaries would raise 100 million more.
Authorities also ponder more "green taxes" on businesses.
Mike "Mish" Shedlock
The eurozone will decide on the extension of Spanish bailout in November
Brussels is inclined to accompany the program output, against the opinion of the Government
REUTERS-LIVE! - AP
The European institutions covertly-push-but Spain refuses. And the moment of truth is approaching: the Eurogroup (the finance ministers of the eurozone) assessed within just two months the possibility of extending the bank bailout or to agree any additional crutch to avoid surprises with Spain. The European ministers agreed Friday in Vilnius (Lithuania) a date for the crucial test: November 15, left behind after the German elections -that keep Europe in neutral-and begin to glimpse the capital needs Spanish banks, pending an analysis of the European Central Bank promises to be hard and rigorous.
Spain no longer the main euro headache. And the government does not want in any way to resurface the debate was posrescate : discomfort was evident Friday between the Spanish delegation, unable to get to Brussels continue to display deliberately ambiguous about it. After all, almost no one doubts that the European crisis will return with a vengeance for a flank, and Spanish banks and the economy remain vulnerable to the slightest breath of air.
The Eurogroup chairman Jeroen Dijsselbloem and Vice President of the Commission, Olli Rehn, has said that it is too early to comment on the possibility of helping countries with bailout programs are about to expire, such as Ireland and Spain. The European sources consulted agree on the need to "accompany" those countries to achieve a successful exit the bailout and avoid mishaps that result in yet another escalation of the crisis.
Madrid refuses to accept the extension or any extra help: the government did not want to see or painting of black men , and as rain in May needs a success to alleviate other waterways. "Spain will enter the environment of the legislation that applies to the countries they leave behind their programs," said the minister sharply Luis de Guindos. At the Eurogroup meeting, defended the nascent recovery Guindos, financial restructuring and improvement in the markets: An all goes well which clearly reflects the Spanish position.
The final decision rests with the Government. But also depends on other factors. One: the capital requirements of banks (a mystery, despite successive and ongoing financial reforms injection of public funds). Two: the pressure imposed by the partners and the ECB runs once opened parentheses German elections. Three: the possibility that problems arise in other countries, with the resulting infection. And four: the strength (or otherwise) of the nascent recovery. Brussels also recalls that Spain will remain under supervision of the troika until it returns 75% of the bank bailout, even without any additional help.
The crisis has not disappeared, but Europe and Spain believe they have enchanted the serpent. "The recovery is in sight," he said this week the president of the Commission, José Manuel Barroso . The same view of Spain the Executive. But just trust anyone, apparently tamed crisis still poison: "There is a green shoot, but we are not to hold parties," said Jörg Asmussen, the ECB. Guindos also stressed that the recovery "will be established in the second half of the year and in 2014", an improvement linked "to the reforms he has made Spain" and the successful bank bailout.
The full Eurogroup applauds the improvement in banking with 41.300 million provided by the partners. European sources, however, say the risk of turbulence, with a focus on Italy. And do not hide their desire to give Spain some support when the program expires, through some of the formulas available in the stability mechanism. In favor of this possibility is the potential role of the ECB: allow the Eurobanco buy Spanish debt in case of danger. In contrast, the high cost associated with such insurance policy against fire in the markets.
In the background, Spain finally pursues stay in the background after a tough year. Economic Office sources insist that Italy is now the problem , with a potentially dangerous political crisis in sight , adding that the ECB will uncover problems in banking in the same Italy and other large countries than in Spain . Nor eurozone there just homework: several capitals, led by Berlin and with the amazing support of Madrid, yesterday gave a serious warning about the project of the Commission for the resolution mechanism to close unviable banks. Germany is afraid to scratch his pocket and tries to delay the startup with legal arguments.Start the year in Europe, but some things do not change one iota.
Spain’s public debt already exceeds target for full year
Level of indebtedness rose to 92 percent of GDP in first half
EL PAÍS Madrid 13 SEP 2013 - 15:06 CET
Spain’s public debt exceeded the government’s target for the full year in the first half as the country struggled to make inroads into the public deficit amid a prolonged recession and as the Treasury took advantage of favorable market conditions to frontload debt emissions.
According to figures released Friday by the Bank of Spain, the total outstanding debt of all of the country’s public administrations amounted to 942.758 billion euros at the end of June, equivalent to 92.2 percent of GDP. The government’s target for the whole of 2013 was for a debt-to-GDP ratio of 91.6 percent.
Debt levels in the first half were up 17.2 percent on the same period a year earlier. The increase is largely due to the central administration, which saw its debt rise 20.3 percent in the period January-June from a year earlier to 818.375 billion euros, equivalent to 80.1 percent of GDP.
The Treasury has already issued 80 percent of its target for medium- to long-term debt for the year as Spain’s risk premium narrowed to levels last seen in 2011.
The debt of the country’s regions rose 14.8 percent in the first half to 193.296 billion euros, equivalent to 18.9 percent, compared with a target for the full year of 19.1 percent.
Spain’s outstanding debt is now projected to surpass the average in the euro zone for the first time since the single currency was created. Over the past 18 months it has risen from 70.4 percent of GDP to the current level of 92.2 percent as the government failed to make the expected progress in trimming the public deficit.
The European Central bank on Thursday questioned the government’s ability to make its deficit-reduction target for this year of 6.5 percent, without an increase in tax revenues in the second half of the year.
The economy remained in recession in the second quarter of the year, although the contraction narrowed to 0.1 percent on a quarterly basis. The government believes the economy has now bottomed out and is predicting modest growth from the third quarter.
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