Betting in Spain on budget cuts to stop the spread of debt

Spain has the budget cuts and the national appetite for their bonds to build a firewall against the spread as Prime Minister José Luis Rodríguez Zapatero, has warned investors that lost money betting against the nation's debt.

Spain, which has the euro region's third largest budget deficit, said that no further action to protect themselves from the debt crisis worsens Europe after cutting the gap from the central government budget by almost 50 percent and domestication of regional spending. Providing support is about half of the Spanish debt remains at home, rather than in Ireland or Portugal, which offers a line of defense against changes in the moods of foreign investors.

"I have to warn investors that short sales are going to Spain to be wrong and go against their own interests," Zapatero said in an interview with radio station RAC1 based in Barcelona today. The "completely" ruled that Spain needs a bailout.

Spain is trying to distance itself from other so-called peripheral countries after Ireland's request for a European rescue plan triggered a settlement bond market that pushed yields to the highest Spanish in eight years. The risk for Europe is that Spain's economy is twice as large as that of Greece, Ireland and Portugal combined, ie the euro zone of 750 million euros (994 billion) bailout fund may not be enough large.

Shrinking deficit

"I find it easier to argue in favor of Spain for six months because the data now shows the deficit is falling," said Gilles Moec, economist at Deutsche Bank AG in London. "Spain is in a very different" from Portugal and Ireland.

central government budget deficit was reduced by 47 percent in the first 10 months of last year. That compares with a decline of 30 percent in Greece and an increase of 1.8 percent in Portugal. Ireland's deficit is growing at an estimated 32 percent of gross domestic product this year in costs to shore up their banks, causing the ransom demand is fueling the spread.

In the case of Spain, about half of the debt remains in the country, limiting the impact of foreign investors avoid bonds of countries with high deficits. That compares with 17 percent in Portugal, according to estimates by the agency debt. The Irish Finance Ministry said on 24 November that about 85 percent of their bonds are held abroad.

The goodness of investors?

"The advantage is that Spain has a large base of domestic buyer for its bonds, ie the banks," said Joachim Fels, global economist at co-president of Morgan Stanley in a November 24 interview on Television. "Portugal's problem is that 80 percent of its debt is in foreign hands, so you have to rely on the kindness of foreign investors and there is much kindness to the left."

Spanish banks have a "very different" given the country's bonds to foreign investors and "more faith in the thinking of today is a buying opportunity for Spanish debt," said Banco de Sabadell SA President Josep Oliu a conference in Madrid yesterday afternoon.

Spain's Socialist government has put online for regional governments that have enjoyed increasing autonomy from Madrid since the return to democracy in 1978, announced Nov. 24 that it will publish quarterly reports, the harmonized budget for the first time. The regions are on track to meet budget goals this year, the finance minister, Elena Salgado, said.

Regional Transparency

"They're coming around to see the need for greater transparency, which is important," said Angel de la Fuente, an economist at the National Institute of Economic Analysis Council, who has written books on the regional economy.

Some regions have been frozen debt markets this year. You put a pause in spending, said Jose Carlos Diez, chief economist Intermoney SA in Madrid, Spain's largest bond dealer. "Not that I wanted to happen is that they could not," he said in an interview.

However, news of the region did little to tame the rising costs by Spanish interests. Spain 10-year bond yield rose to 5.243 percent today, pushing the spread over German debt equivalent to euro was a record of 258 points.

Spanish bonds extended declines after the Financial Times Deutschland reported that the European Central Bank and most of the states of the euro-region are calling on Portugal to tap the rescue fund to ensure that Spain also have to seek help. The comments followed Bundesbank President Axel Weber, the night of 24 November that if the rescue fund of 750 billion euros is not enough to calm markets, "will have to be increased."

Smaller Fund

Steven Major, global head of fixed income research at HSBC Holdings Plc in London, said in a report of 08 November that the fund, financed by the EU and the International Monetary Fund may not be enough.

In practice, the EU can only be able to deploy € 367 000 000 000 of its quota of 440 million euros of European Financial Stability Fund, said. That is because the increase EFSF ransom money for the bond issue and should set aside plenty of cash to ensure an AAA credit rating, said Mayor. A rescue would require three years of Portugal and Spain would need € 51500000000 € 351 000 000 000, of HSBC, said.

"The big elephant in the room of Spain, which is too big to fail and too big to be rescued," said Nouriel Roubini, professor at New York University who predicted the global financial crisis, in an interview Nov. 23. "In a sense, however, Spain is in a better place."

Too big to bail?

Asked if his size would prevent a rescue of the EU, the Bank of Spain, the chief economist Jose Luis Malo de Molina, said yesterday that "systemic importance" of a country like Spain "strengthens the incentives and encouragement for the rest of the countries to be prepared to help if necessary. "said market tensions can become a" self-fulfilling prophecy. "

The Spanish government has repeatedly stated in foreign aid, does not face the first of its 45 million euros in bond repayments until April next year. It has two bond auctions scheduled for December, and the deputy finance minister, José Manuel Campa, said in an interview Nov. 24 that the spending cuts and revenue higher than expected government funding "very comfortable."

Campa said that there is no need for additional measures to curb the spread and instead, Spain must demonstrate their commitment to the implementation of budget cuts and structural changes already announced to reduce the deficit to 6 percent of GDP next year 11 percent in 2009. The goal is "unconditional" he said.