In this blog post
I wrote that Spain had a minimum hole of €18.5bn that was not financed through debt sales and speculated that a draw down of cash, not paying suppliers and accounting tricks filled the gap for 2012. The mainstream media backs this speculation with the cold, hard facts.
From 2005 to 2011, the composition of Spain’s social security trust fund changed from 20% domestic debt to 90%. Only about €6.5bn of €65bn remains invested outside of Spanish government debt as of 2011. Today, I’d bet that the entire amount is now held in SGBs.
If Spain did purchase an additional €6.5bn in SGBs for the fund, a €12bn hole still needs to be financed from 2012. Could this entire amount be covered by delaying payments to suppliers? Yes, in fact, Spain’s various layers of government are in arrears €18.1bn and late by an average of 80 days up from 51 days in 2011.
These tricks will not be available for 2013. The social security trust fund has virtually no free assets left to invest for 2013. Payments to suppliers can only be postponed for so long. Greece is the leader in this category behind 112 days in payments to its suppliers. Spain can delay payments another month before reaching the Greek zone and fill a few billion euro hole in the process.
Just because Spain will not be able to avail itself of these fudges in 2013 does not mean the tricks are over. The Spanish government must sell €241bn to finance itself, and it will create new accounting tricks as it becomes more desperate over the coming months.