Spain's Unpayable Trillion-dollar Hole Calls the Question
June 2, 2012 • 8:30AM

"I don't know if we are on the edge of a precipice, but we are in a very, very difficult situation," Spanish Economy Minister Luis de Guindos stated Thursday night, adding that the future of the euro is at stake in Spain. Spain's Deputy Prime Minister Soraya Saenz de Santamaria huddled with Timothy Geithner and chief IMF tax cheat Cristine Lagarde in Washington, D.C., on Thursday; press reports, that an agreement was reached on the creation of an IMF-EU bailout fund for Spain's banks, were then denied by both the IMF and Treasury, which only lent credence to the report. Geithner agrees, Saenz told the Financial Times, that the next round of bailouts should be given directly to European private banks, instead of using the governments as pass-throughs. Germany is still opposed to that openly hyperinflationary approach.

Gold shot up $50 on Friday morning; yields on Spanish bonds soared, while German, U.S., and UK bonds fell to record lows, with investors actually paying to buy German 2-year notes at negative yields, because it is stupidly being considered "safer" paper.

Adding to the "real sense of impending panic" (the words of a Bank of America "strategist" sitting in London), was the simultaneous report on May 31 from the Bank of Spain that 97 billion euros had fled the Spanish banking system in the first quarter of 2012, 62 billion of it in March alone. That was before the early May nationalization of Bankia.

But what is even more revealing than the total that has fled, is the fact that a full 80% of it was reported to have been pulled out by Spanish and foreign banks — i.e., the banks themselves are trying to jump the sinking ship.

Lyndon LaRouche warned on May 26 that the rate of collapse of the Trans-Atlantic monetarist system is now outrunning the rate of any attempt to salvage it, and there are only two outcomes immediately possible: imposition of Glass-Steagall regulation internationally, or Weimar hyperinflation.

Executive Intelligence Review's rough estimate of what is known of Spain's debts which must be covered in the immediate period ahead makes the point. The total is in the ballpark of one trillion euros, give or take: 600-700 billion for the private banks (300 billion is now being admittedly publicly); about 50 billion for the country's regions (Autonomous Communities), and some 200-250 billion for the national government. In other words, about a quarter of Spain's estimated total public and private debt of four trillion euros, as of the end of 2011.

And, mind you, none of this takes into account the uncharted amounts of derivatives that are piled on top of each of these categories.

Also, no one knows what the actual bad debts are, not least because the private banks are lying through their teeth about their assets, holding repossessed real estate properties on their books at prices way above what they could get if they had to sell them. By such gimmicks, the largest private bank in Spain, London-run Banco Santander, is the biggest real estate property holder in the country! EU spokesman Amadeu Altafaj on Thursday demanded that Spain "come clean" on what the real debt is, and ECB chair Mario Draghi demanded that Spain stop readjusting the amounts needed every day, claiming that to be the cause of the market crisis.

Even were Executive Intelligence Review's one-trillion-dollar ballpark figure is over by a couple of billion, even tens of billions, or even a couple hundred billion — although more than likely, the real total is probably even higher than a trillion — the point is the same: the debt piled on Spain cannot be paid.