Mish's Global Economic Trend Analysis

Spain's Budget Deficit Grew by 35.4% in January to 1.2% of GDP; Spain's Tax Revenue Drops 20% in Face of VAT Hikes
An Offer You Cannot Refuse; EU Passes Law Forcing Countries to Take Bailout; Is Spain the First Target?
Mish Android App on Google Play
Housing Construction in France Lowest in 50 Years; Hollande Responds With Measures to Support Building "For the Public Good"

Spain's Budget Deficit Grew by 35.4% in January to 1.2% of GDP; Spain's Tax Revenue Drops 20% in Face of VAT Hikes

Posted: 12 Mar 2013 04:52 PM PDT

Here's a story you can expect to see in the Wall Street Journal or Financial Times tomorrow. You can read it here today.

Via Google Translate, El Economista reports Spain's Budget Deficit Grew by 35.4% in January to 1.2% of GDP.

The government deficit in terms of national accounts in January reached 12.729 billion euros, equivalent to 1.2% of GDP, representing an increase of 35.4% over January 2012.

According to the budget execution data published in January by the Ministry of Finance website, the cash deficit in January came to 15,252,000, which are the result of a fall in net income of 37% (5.789 billion) and a expenses increased by 15.4% (21.041 billion).

Tax revenues fell 20% to 10.608 billion, among other causes by the accumulation of returns earlier this year, says Finance.

Negative Indirect Tax Collection

In fact, the state's revenue from indirect taxes (VAT and special) was negative at EUR 1.647 billion as a result of increased returns, but maintaining the territorial government had total revenues of 1.530 billion, 29.1% less.

The corporate tax revenue has also resulted in negative returns by 1.131 billion. Revenue from direct taxes (income and companies) fell by 18.2% to 9.078 billion.

In the item of expenditure, there was notable increase of 23.3% from the payment of the interest on the debt, which rose from 6.250 billion in January 2012 to 7.709 billion euros in January 2013. There was also a 10.4% increase in payments by current transfers to 9.474 billion.

Within these transfers, Social Security payments grew by 40.2% (2.334 billion), mainly due to the state budget for 2013 makes a greater contribution to the minimum pension supplements.

In the first month of the year, the central government deficit reached 0.89%. The state deficit target for 2013 is 3.8% of GDP, while the target for the total deficit of Public Administration is 4.5% from 6.7% in 2012, as recently reported by the Ministry of Finance.

Spain must cut its budget deficit to 2.8% in 2014, but it is expected that the European Commission extended the deadline for compliance with this commitment.

Summary

Spain's budget deficit for the month of January was 0.89% not counting regional deficits.
The target for the entire year is 3.8% of GDP.
On that basis, Spain went through 23.42% of its annual budget in a single month.
Spain's deficit target including regions and transfer payment is 4.5% of GDP.
The deficit including regions and transfer payments was 1.2% of GDP.
On that basis, Spain blew 26.67 % of its budget in a single month.
Territorial government revenues declined 29.1%
Income Tax revenue (corporate + personal) fell 18.2%
Social Security payments grew by 40.2%
Overall transfer payments increased 23.3%

Odds of Success Zero Percent

Odds Spain hits its budget target of 4.5% in 2013 is precisely 0.00%.

I believe we have an answer to the question I asked earlier today: Offer You Cannot Refuse; EU Passes Law Forcing Countries to Take Bailout; Is Spain the First Target?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

An Offer You Cannot Refuse; EU Passes Law Forcing Countries to Take Bailout; Is Spain the First Target?

Posted: 12 Mar 2013 11:56 AM PDT

Want a bailout? Need a bailout? Actually, it does not matter what your country wants or needs.

By a 526 to 86 vote, the nannycrats in Brussels just passed a regulation that will require a country to accept a bailout if offered.

Via Google translate from El Economista, Brussels may force a country to ask for a rescue if eurozone threat.

The full European Parliament on Tuesday gave its final approval to the rule giving new powers to the European Commission to monitor national budgets of eurozone countries and even request changes before parliamentary approval. According to this regulation, agreed with the Twenty, Brussels may force a state to ransom.

According to this rule, which goes ahead with 526 votes in favor, 86 against and 66 abstentions, the governments are obliged to send to Brussels its draft budget for next year by 15 October each year.

The EU executive may publish its opinion on the national and even request changes if it believes that deviate from the objectives of consolidation undertaken by each country. However, your request will not be binding.

In addition, the new standard allows Brussels submit to increased surveillance to countries that threaten the stability of the eurozone and even force them to ask for a rescue, with the objective of minimizing their costs.

Surveillance cycle

Vice President of the Commission responsible for Economic Affairs, Olli Rehn, said on Tuesday that the adoption of this standard "will complete the cycle of budgetary surveillance for euro area Member States."

Rehn has argued that if these rules had existed since the birth of the euro "would never have experienced a crisis of such magnitude."

An Offer You Cannot Refuse

Rehn is a liar, a fool, or both. I vote both.

The EU had nothing but praise for Spain when the Spanish housing bubble was brewing. It would not have done anything other than what it did, which is cheerlead the housing boom, just as Bernanke and Greenspan did in the US.

I like the translation "force a state to ransom".

The EU has twice offered Spain a bailout. Spain has rejected the offer twice. The next offer just may be the one that Spain cannot refuse.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Mish Android App on Google Play

Posted: 12 Mar 2013 10:29 AM PDT

I have a new android app that's available on Google Play. You can download it to your android device from a button on the right sidebar of my blog that looks like this:

Just click on that button from an android device to load.

I am reworking my iPhone app and hope to have something out in a couple of weeks or so.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Housing Construction in France Lowest in 50 Years; Hollande Responds With Measures to Support Building "For the Public Good"

Posted: 11 Mar 2013 11:55 PM PDT

Housing starts in France will fall to 280,000-300,000 in 2013, the lowest level in 50 years warns developer Nexity. The government wants 500,000 units per year.

French president Francois Hollande thinks he knows the proper amount of houses that need to be built. Therefore, Hollande confirmed measures to support building quickly.

Here is a Mish-modified translation from Les Echos...

Emergency. This is the word that comes to everyone's lips about building. Housing is at its lowest level since fifty years. François Hollande confirmed in an interview yesterday that "support for building" will be amplified quickly for the "public good".

The Ministry of Housing was happy about yesterday's statements from the Head of State: "This means we are moving towards an ambitious plan". We recall the campaign promise to build 500,000 homes per year, of which 150,000 will be in social housing to offset the increase in the VAT rate.

France is in the midst of a deflating property bubble. Nonetheless, Hollande wants to build more houses anyway. His rationale is interesting. Hollande wants to offset the increase in the VAT, taxes that he hiked.

Hollande is on a mission to wreck France, and he is succeeding spectacularly as the following history shows.

June 8, 2012: Please consider economically insane proposal by French president Francois Hollande "Make Layoffs So Expensive For Companies That It's Not Worth It"

August 13, 2012: In France, Government spending amounts to 55% of total domestic output. For discussion, please see Hollande's Honeymoon is Over; 54% of Voters Unhappy; Unions Promise "War" in September.

November 29, 2012: Given that any clear-thinking person should quickly realize that if companies cannot fire workers they will be extremely reluctant to hire them in the first place, it should be no surprise to discover French Unemployment Highest in 14 Years (And It's Going to Get Much Worse).

December 28, 2012: Economic implosion in France is underway. French Retail Sales Contract 9th Consecutive Month as Cost Inflation Surges

February 6, 2013: Germany Rebounds but ... France Economic Implosion Accelerates; Record Decrease in Service Employment in Italy

February 21, 2013: France Sinks Further Into Gutter; PMI Accelerates to 4-Year Low; "Core" of Europe Now Consists of Germany Only

March 6, 2012: Eurozone Downturn Accelerates Despite German Growth; Divergence to France Widest in 15 Years

For the public good, Hollande ought to resign along with his entire socialist government.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mish's Global Economic Trend Analysis

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