Spanish debt

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

Zero Hedge,

Jan 4, 2013

With Spanish 10Y yields hovering at a ‘relatively’ healthy 5%, having been driven inexorably lower on the promise of ECB assistance at some time in the future, the market has become increasingly unsure of just who it is that keeps bidding for this stuff. Well, wonder no longer. As the  WSJ notes,  Spain has been quietly tapping the country’s richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds – with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt. Of course, this is nothing new, the US (and the Irish) have been using quasi-government entities to fund themselves in a mutually-destructive circle-jerk for years – the only difference being there are other buyers in the Treasury market, whereas in Spain the marginal buyer is critical to support the sinking ship. The Spanish defend the use of pension funds to buy bonds as sustainable as long as it can issue bonds – and yet the only way it can actually get the bonds off in the public markets is through using the pension fund assets. The pensioners sum it up perfectly “We are very worried about this, we just don’t know who’s going to pay for the pensions of those who are younger now,” or those who are older we would add.

Via Wall Street Journal: Spain Drains Pension Fund In Borrowing Spree

Spain has been quietly tapping the country’s richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds, raising questions about the fund’s role as guarantor of future pension payouts.

Now the scarcely noticed borrowing spree, carried out amid a prolonged economic crisis, is about to end, because there is little left to take. At least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt, according to official figures, and the government has begun withdrawing cash for emergency payments.

Although the trend has drawn little public attention or controversy, it has become a matter of concern for the relatively few independent financial analysts who study the fund, which is used to guarantee future payments of pensions.

And in other news, and completing the picture, if not the circle jerk, is news from Libremercadothat according to the Spanish Confederantion of Employer Organizations, some 60% of the Spanish companies are now losing money.

Via Google translate:

The President of the Spanish Confederation of Employer Organizations (CEOE) has estimated that “60 percent of the companies are in losses. Thing is that entrepreneurs are more thoughtful and went outside.”

Joan Rosell responds well after being asked if he receives “Spanish citizens too negative” in an interview with the newspaper La Razon, who heads a special titled “2013, the recovery begins,” and says that “social unrest is evident and business world is no exception. ”

The president of the CEOE has considered that the private sector “has already made ??all the restructuring that had to do and the decline in employment in the private sector has virtually stopped. now is the restructuring of the public sector.”

After defining the first year of Mariano Rajoy in government as a year of shock, Rosell has considered that the Spanish economy remains “superfluous fat by many sides.’s Central government, regional and local. Avoid duplication. We are a country hiperregulado “.

It is not exactly clear why google translate had a problem with that last word…

60% of Spanish Companies are Losing Money, Social Unrest Evident; Unemployment Rate Drops

Global Economic Analysis,

3 January, 2012

Via Google translate from Libre Mercado, Joan Rosell, the president of the Spanish Confederation of Employer Organizations (CEOE) has estimated 60% of Spanish Companies are Losing Money.

This is a Mish-modified translation of some key snips. 

 In an interview with the newspaper La Razon, Rosell said that "social unrest is evident and the business world is no exception." 

The private sector "has already made ​​all the restructuring that had to do and the decline in employment in the private sector has virtually stopped. Now is the time for restructuring the public sector."

After defining the first year of Mariano Rajoy's government as a year of shock, Rosell has considered that the Spanish economy has "superfluous fat on many sides: Central government, regional and local. We are a hyper-regulated country".

Still, the CEOE president has identified several dynamic sectors in the economy, such as tourism, and exports (automobile, capital goods, power and chemical), and Rosell points out that Spain is gaining positions and externally against France , Italy or Germany.

Unemployment Rate Drops

According to the Financial Times, Spain's unemployment rate fell in December. This is the first drop in unemployment since July. However, that drop follows heavy job losses in the prior two months. 

 Spain saw a slight drop in the number of registered unemployed in December, in a welcome but most probably fleeting boost to the recession-plagued economy.

According to figures released by the ministry of labour on Thursday, the number of unemployed Spaniards fell by 59,094 between November and December. This followed two months of heavy back-to-back job losses, and left the overall number of unemployed 1.2 per cent lower at just under 4.85m.

December is usually a relatively strong month for the Spanish jobs market, as retailers, restaurants and other service providers bolster their staff ahead of the Christmas season. Even by that standard, however, the past month was exceptionally buoyant: according to Spain’s labour ministry, the drop in the number registered unemployed was the largest on record.

Raj Badiani, an economist with IHS Global Insight, described the December figures as a “rare piece of good news”, but pointed out that the rise in employment was the result of a “temporary fillip to short-term service sector employment”.

Most economists expect the Spanish unemployment rate to remain above 25 per cent in 2013, and for the economy as a whole to endure another year of recession.

Hyper-Regulation with Bloated Public Sector

Here is the problem in a nutshell: Spain is indeed a hyper-regulated economy, with a banking system that is insolvent, a hugely bloated public sector, unemployment over 25%, and youth unemployment over 50%.

Structural problems remain and over half of businesses are losing money. Don't get too excited about a seasonal rebound in hiring.