Thursday, January 10, 2013

Spain Has Been Financing Its Debt By Raiding Its Pension Fund

So How’s That Austerity Policy Working Europe?

To listen to European economic and political leaders their policies towards Spain, Greece, Portugal and Italy are what will turn those economies around and make prosperity widespread in southern Europe.  The reality, Greece is slightly worst than a disaster and Spain is headed that way. 

The latest news on Spain, the government is raiding the country’s pension funds for money.

Spain has been quietly tapping the country's richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds, raising questions about the fund's role as guarantor of future pension payouts.

Now the scarcely noticed borrowing spree, carried out amid a prolonged economic crisis, is about to end, because there is little left to take. At least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt, according to official figures, and the government has begun withdrawing cash for emergency payments.

So, what this says is that since the Spanish economy is so weak, the policy imposed on it by Conservative European leaders is so wrong, and results of that policy are so devastating that the only recourse to the government is to borrow from its pension fund. 

Now in the U. S. the government does borrow from the Social Security Fund.  What’s the difference?  The U. S. government debt is the gold standard, the best in the world, the safest in the world.  The Spanish government debt, thanks to European policy, well anyone who thinks Spain can survive without a massive European bailout in the next 6 to 36 months go right ahead and invest.  Good luck to you.

No comments:

Post a Comment