This post rightly points out that Spain needs €40bn to roll over its debt between now and the end of the year. What this post doesn’t take into account is that the in addition to rolling over the debt, this year’s budget deficit is going to be much higher than the Spanish government, the troika or the mainstream media are letting on, which I wrote about last week:
A Spanish budget deficit of about 10% is in the cards for 2012, which implies another €50bn or so in additional financing for the rest of the year. The biggest customer for Spanish sovereign bonds is the Spanish banking system. The run on deposits means that the banks will not be able to purchase as many bonds as forecast just a one month ago.
Spain is effectively shut out of the debt markets for longer maturity bonds, so I bet that Spain sells nothing but short-term bills for the rest of the year in order to forestall a bailout request as along as possible. If this plan works, Spain will still have to request a bailout sometime next year.
One caveat to my analysis, with a full-scale bank run in progress, anything can happen now. Fire up the magic money machine, Super Mario, and get that checkbook out, Angie. They ate all the tapas and drank all the wine, but guess who’s getting stuck with the bill?