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Thursday, May 31, 2012 11:42 AM

New Confusion Over Hispanbonos and Regional Debt: Spanish Regional Government Accounting Postponed, Press Conference by Montoro is Postponed; Regional Government Debt Issuance Method Unclear

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My friend Bran who lives in Spain writes ...

Hello Mish

There is new confusion over hispabonos and regional accounting. Spanish regional government accounting has been delayed, a press conference by Montoro is delayed, and the joint government/regional government debt issuance method is still not completely clear.

Hispabonos are central government guarantees of regional debt. The regional governments want central guarantees because without them, interest rates will skyrocket.

Presentation of Accounting Postponed

Courtesy of Google Translate from El Economista: The Government postponed the presentation of the accounts of the CCAA's first quarter
The Ministry of Finance has decided to postpone the press conference that he would publish the budget execution of the regions for the first quarter of the year in the National Accounts. Montoro endorse autonomy and park each issue of 'hispanobonos.

The hearing, scheduled for 17:00 am today, was postponed because Cristobal Montoro "presented tomorrow to the Council of Ministers a report on the evolution of these data," the statement sent by the Department.


Predictably, Montoro will also benefit the Council of Ministers to discuss a new system of funding helps communities, claimed in a while.

Autonomy asked directly the implementation of hispanobonos, although the executive has never been convinced of this option by the risk that the cost encareciera Treasury issues and weaken the 'rating' of Spain.

The most reasonable for the Department led by Montoro endorse passes through debt issues of the autonomous communities individually and provided they meet the deficit target and the corresponding recovery plan.

This would be a personal guarantee, conditional and voluntary, which should be specifically requested by a community and to be granted for specific purposes on condition that the community complies with the deficit.
Regional Governments Press for Hispanbonos

The clear gist is regional governments are in severe trouble, probably much worse than reported.

Delays are needed to present the facts to the Spanish central government which is now pressed by regional authorities once again to guarantee regional debt.

Hispanbonos Already a Done Deal?

Interestingly RTE News reported yesterday in Debt premium on Spanish bonds hits euro-era high that hispanbonos were already a done deal.
Spain's government said it would approve the issuing of joint bonds -- "hispanobonos" -- by the 17 regional governments next Friday, so as to make it cheaper for them to finance their debts.

"The goal is to reduce the pressure on the regions, which is often greater than the pressure on the state in general, with some regions not able to borrow on the market," a spokeswoman for the Economy Ministry said.

Spain's 17 regional governments have suffered a plunge in tax revenues and soaring debt since the collapse of a decade-long property boom in 2008, and they are struggling to pay suppliers.

Bankia's board on Friday asked the state to inject €19 billion to help it abide by more stringent capital rules, in addition to €4.465 billion invested by the state earlier this month.

Spanish media said other troubled banks could need yet another €30 billion.

Providing a grim backdrop, the Bank of Spain issued a report predicting Spain's recession, which began in the last quarter of 2011, would continue at least until mid-2012.

Official data also showed retail sales plummeted 9.8% in April, the steepest monthly drop in since the statistical series began in 2003.

Despite the downturn, Spain's government says it is determined to press ahead with an austerity programme to slash the deficit to 3.0% of economic output by 2013 from 8.9% last year.
Hispanbonos may (and should) trigger additional debt downgrades of Spanish sovereign debt and send yields higher. However, without guarantees, regional governments are going to have an exceptionally difficult time financing new debt and rolling over existing debt as well.

Mike "Mish" Shedlock
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