Actual Spanish Financing Needs Part 2

what is the actual spanish deficit

Actual Spanish Financing Needs « DARECONOMICS.

We see that Spain has a ridiculous amount of debt to finance between now and the end of the year (click above for the figures). How does the situation look for 2013?

Spain’s financing needs for 2013 are its budget deficit plus the amount of debt it needs to roll over. The Spanish finance ministry is claiming that it will be able to get its deficit down to about 5.3% of GDP next year. Assuming that GDP does not shrink further, we get a euro amount of €59.25bn (5.3% * €1.18tr).

The IMF projects that Spain will have government debt of 96.5% of GDP in 2013:

http://uk.reuters.com/article/2012/07/16/uk-spain-imf-idUKBRE86F0JR20120716

12.7% of that needs to be rolled over:

http://blogs.cfainstitute.org/investor/2011/11/14/statistics-germane-to-the-european-sovereign-debt-crisis/

Let’s calculate the total financing needs based on these figures assuming €1.18tr in GDP:

.965 debt rate  * 1.18tr =  €1.078tr total debt

Now, we need to refinance 12.7% of that figure

12.7% * 1.078 = €137.02bn debt rollover

And we add that to Spain’s projected budget deficit:

€137.02bn + €59.25bn = €196.27bn

Spain needs to sell €196.27bn in debt just to finance itself next year. The NYT’s numbers are way off; they must be taking the Spanish government at their word rather than fact checking those figures. But wait, there’s more.

If you have been paying attention to the Eurocrisis, you already know that the budget cuts undertaken in an austerity program actually cause the budget deficit to rise.  Spain made deep budget cuts this year, and its deficit rose from a forecast of 4.0% to over 8% now, and this figure is very optimistic:

http://dareconomics.wordpress.com/2012/08/28/spain-will-request-a-bailout/

What happened in Greece with the every increasing budget deficits is happening in Spain. This shouldn’t be surprising, because both countries are the midst of depression. You can also throw Portugal into this club.

Therefore, I posit that next year’s budget deficit will be double the forecast for 10.6%. This means that Spain will need to sell €255.27bn to finance itself next year.

I think Drakel better fire up the printing press now, because it’s going to be a long 16 months in Spain.

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