Spain Plunders 90% Of Social Security Fund To Buy Own Debt.

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This topic contains 3 replies, has 4 voices, and was last updated by Profile photo of Anonymous Anonymous 3 years, 11 months ago.

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  • #57209
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    A great Zerohedge scare story – they’ve predicted imminent meltdown in the Eurozone for some time now, so the article makes sense in that context.
    Given the bonds have been paying higher interest (although this has been coming down lately) it’s actually a potential profitable move.

    From that article..

    “With foreign investors staying away from the Spanish debt market, you’re going to need all the support you can get from domestic players,” said Rubén Segura-Cayuela, an economist with Bank of America-Merrill Lynch.

    Seems Rubén is a tad out-of-date. Of course if this situation were to reverse permanently then there could be a potential Euro-exit..but with the country now running a current account surplus, it looks less likely.
    http://uk.reuters.com/article/2012/12/28/uk-spain-current-account-idUKBRE8BR06920121228

    (Reuters) – Foreign investors put more money into Spain in October than they took out, marking the second month running the country has benefited from an influx of capital.

    http://www.bloomberg.com/news/2012-10-31/spain-posts-second-current-account-surplus-as-investors-return.html

  • #114401
    Profile photo of Chopera
    Chopera
    Participant

    WSJ now reporting it: http://online.wsj.com/article/SB10001424127887323374504578217384062120520.html?mod=europe_home

    As DBMarcos implies, this might turn out to be a smart move – they’ve bought the bonds on the cheap and eventually the ECB will either have to buy them at a higher price or Spain will leave the euro (it won’t be the latter). On the other hand, by buying them they might have been keeping the bonds artificially high. Either way, the situation whereby a government uses public funds to buy it’s debt because nobody else will is playing with fire.

  • #114412
    Profile photo of logan
    logan
    Participant

    This is a process designed to stave off a full bailout which everyone knows Spain needs but will not agree to under the current conditions. Once they have bled the government coffers dry what then? One more accounting trick? They cannot continue running a nations economy by plundering future generations future.

    As I see it it is only a matter of time before a bailout and further austerity measures take place.

    The government hopes that in late 2013 the economy may start a recovery. It’s wishful thinking. There are few signs the economy is poised for recovery. The Spanish service sector which contributes 60% of GDP continues to contract to 44.3 on the PMI. Anything below 50 indicates continued recession. Exports are improving but recovery will not come from that. There was a slight improvement in the unemployment figures in December by 1.2% but that was largely due to extra staff being hired over Christmas.

    There is therefore no cause for optimism as much as we all would love to see it.

  • #114415
    Profile photo of Anonymous
    Anonymous
    Participant

    They are doing what Japan has done for a very long time. The problem is whats going to happen when the money runs out of the social security fund? Just kicking it down the road again.

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