Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Tuesday, 25 September 2012

The fires are starting to burn again

Neatly summed up by FT – Secession crisis heaps pain on Spain

  1. Catalonia has declared snap elections which are supposed to be a proxy referendum on Catalan independence. A welcome distraction from the debt crisis. Not.
  2. Germany, Holland and Finland are preparing to backtrack on letting ESM assume the Spanish bank bailout burden. This would add about 10% to debt-GDP. Unless the Irish situation repeats in Spain. In which case the total bill would be around 40% of GDP
  3. Budget targets have been missed as the usual consequences of austerity start showing up. Tax receipts fell 4.6% (year-to-Aug) and government spending rose 8.9% (year-to-Aug) leading to a central government deficit of 4.77% of GDP (compared to 3.81% in the previous year). The total deficit is expected to miss the full-year target which was supposed to be 4.4% before being unilaterally revised higher by Rajoy to 5.8% and then negotiated down to 5.3% by European “partners” and then revised up to 6.3% post Merkel ambush in July.
  4. There is unrest with protesters clashing with police in Madrid forcing them to fire rubber bullets. With unemployment at 25% and youth unemployment at 53% (next only to Greece) these clashes aren’t going to be isolated incidents.   

1.      A funding gap of €30bn has seemingly opened up. Up from €20bn previously estimated which was already twice as bad as previously estimated. Mein gott.
2.      And the IMF seems to be playing hardball and pressing for OSI as its optimistic targets get blown by reality again.


  1. Lawyers are examining whether firing the Dra-zooka will be an infraction of the prohibition against direct state funding (Article 123 TFEU).
The fires are starting to burn again. Or rather the flames are being noticed again. Quelle surprise.

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