Panicked Spanish P.M. Rajoy Says: "This is Not the Apocalypse. We Are Not Going to be Shipwrecked."
June 3, 2012 • 3:52PM

After Spain's Finance Minister Luis de Guindos stated yesterday that "we are on the edge of a precipice," today, Spanish Prime Minister Mariano Rajoy told an economic conference in Sitges, Spain: "We are not at the edge of any precipice. It's not reasonable to feed fears and drag them to the edge of reality. This is not the apocalypse. We are not going to be shipwrecked... Believe me when I tell you that I have reason to think that the monetary union's problems are going to start to be resolved shortly."

Perhaps Rajoy was referring to his own proposal made moments later at Sitges, that a single eurozone authority be created to manage the block's debts, in exchange for nations handing over control of their budgets to "a centralized control of finances" by the EU.

Rajoy's call for calm would be laughable if it weren't so pathetic, since panic is in fact sweeping not only Spain, but international financial markets in general. And for good reason. Consider the following updates on some of the components of the one trillion euro Spanish debt meltdown that is underway:

* Bank debt: Yesterday, the highest number anyone would dare publish as to the size of the bailout needed for the Spanish banks, was 300 billion euros. Today, a UBS investor newsletter estimated that the total is closer to 375 billion. But the Spanish banks, led by the Inter-Alpha Group's Santander Bank, are such notorious fakers and liars about their own assets, that Finance Minister De Guindos had to announce yesterday that the government was hiring four international auditors to review the banks' books — KPMG, Deloitte, Ernst & Young, and PwC — and that the results would be announced by the end of June, one month earlier than previously scheduled, in order to "calm the markets." Spain's ABC newspaper reported that the announcement had not been well received by Spain's bankers.

It's a safe bet that the total bad debt on the books of the Spanish banks is at least twice what is now being admitted.

* Regional government debt: Economics Minister Cristobal Montoro was also trotted out on Friday to announce, amid great fanfare, that for the first quarter of 2012 the 17 regional government budgets had achieved a zero deficit in their budgets. "The sum is zero," Montoro stated triumphantly. But he then had to admit that this was achieved only because the national government paid the regions some 5.176 billion euros ahead of schedule — the payment had been planned for July. Without the early national money, the regions would have had a 0.45% deficit for the first quarter.

It also turns out that the amount of regional debt that is about to blow out is larger than the EIR estimate of 50 billion presented in today's briefing. AFP reports that in the remainder of 2012 the regions have to refinance 36 billion euros, plus they must raise another 15-16 billion euros to cover their public deficits. So that's 52 billion right there. But in addition to that, the national government in mid-May had already taken out a 30 billion-euro line of credit to help towns and regions pay back invoices owed to their vendors. So the regional component is already 82 billion euros — and counting.