Spain To Borrow $267 Billion In 2013 Amid Bank Bailout Fears
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The Spanish government will borrow up to 207.2 billion euros ($266.5 billion) next year in order to cover the cost of bailing out its banks, power system and other eurozone partners, said its Budget Ministry on Sunday, after a stress test revealed last week that the banking industry could require as much as 59.3 billion euros in additional capital in order to survive.
The Spanish government will borrow up to 207.2 billion euros ($266.5 billion) next year in order to cover the cost of bailing out its banks, power system and other eurozone partners, said its Budget Ministry on Sunday, after a stress test revealed last week that the banking industry could require as much as 59.3 billion euros in additional capital in order to survive.
According to a report by Bloomberg, Spain’s Budget Minister Cristobal Montoro forecasted that the nation’s debt would reach 90.5 percent of its GDP by 2013, while the country expects to hit its budget deficit target of 4.5 percent to economic output (from 6.3 percent this year) as well.
The Spanish government however does not intend to tap on European rescue funds for the money, but rather hopes to cover its new financing needs through selling treasury bills (41 percent) and bonds (51 percent).
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Montoro said an additional 13 billion euros in tax hikes and 40.02 billion euros in spending cuts would be enough for Spain to meet its budget deficit target for next year.
Some analysts however warn that the nation’s economic forecast for the next year was overly optimistic, particularly the belief that economy would only shrink by 0.5 percent in 2013.
[quote]“The Achilles’ heel of this budget is the economic outlook,” said Jose Ramon Pin, a professor of public administration at IESE business school in Madrid. “If it proves accurate, the numbers will stack up.”[/quote]According to an Economist survey, most analysts predict that Spain’s growth will contract up to three times more than the government’s forecast. Such a result would Spain to impose even higher spending cuts, or reverse an increase in pension spending, if they wish to meet their target.
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[quote]“Rescuing the banks comes at a big cost,” told Thomas Costerg, an economist at Standard Chartered Plc in London, to Bloomberg. “The upward revision of the ‘all-in’ deficit may fuel fears about next year’s budget deficit targets.”[/quote]Last Friday, an independent banking assessment also concluded that Spanish banks would need up to 59.3 billion euros to stay afloat. Prior to the financial and banking crisis, Spain’s debt to GDP ratio was just under 40 percent.
