Courtesy of Mish.
Monetary magic of borrowing money from trust funds allegedly helps Spain come closer to meeting its budget deficit targets reports Eurointelligence.
Please consider The raiding of Spain’s “pensions piggybank”
Spain drew €5bn from the Social Security reserve fund on Monday, reported Europa Press, and will draw an additional €428M on account of income tax before the end of the month. Presumably this is to help attain the year’s deficit target.
Commentators present this as “raiding the piggybank” of the pension system. Europa Press writes that, in 2012-2013, €23.6bn will have been drawn from the fund, bringing it down to €53.7bn. The original €77bn had been gradually accumulated over the previous decade. For comparison, Spain’s pension outlays are slightly over €100bn a year or roughly 10% of GDP, so the pension [reserve] fund even at its peak was only enough to cover about 9 months’ worth of pensions.
Another source of public consternation has been the fact that 97% of the reserve fund is invested in Spanish public debt, up from 55% in 2008, as described by Expansión earlier this year. Before the crisis sovereign spreads were minimal and the fund was diversified among various Eurozone member states, but in 2009 the government of PM Zapatero started trading higher-rated debt for Spanish debt and the process of rebalancing into Spanish debt was nearly complete by the end of 2012.
Spain Budget Allegedly on Track
On October 29, the Wall Street Journal reported Spain In Line to Meet 2013 Deficit Target
Spain’s Budget Ministry Tuesday said the euro zone’s fourth-largest economy is in line to meet its 2013 deficit target, after the preliminary government budget deficit stood at 4.8% of gross domestic product between January and August.
Spain is seeking to cut its budget deficit to 6.5% of GDP this year from 6.8% of GDP last year, excluding the impact of the banking bailout.
“Our budget targets are perfectly compatible with economic recovery,” said deputy Budget Minister Marta Fernández-Currás.
Spain’s government didn’t provide budget deficit numbers for the first eight months of 2012. Ms. Fernández Currás said this is because recent changes in accounting methods so Spain complies with EU practices make last year’s data non-comparable.
EU Probes Spanish Officials as Concerns Rise Over Budget Data
It seems EU officials (with good reason) are highly skeptical of official pronouncements. After all, and in spite of the fact that Spain’s deficit targets were reduced at least three times in three years, Spain has not yet met a single target.
On November 5, Bloomberg reported EU Probes Spanish Officials as Concerns on Budget Data Escalate
European Union officials made an extraordinary visit to Spain in September that signals escalating concern about the reliability of the country’s budget data….
