How Bad is the European Economy – Greece 2 yr Interest Rates at 45% and Spanish Regional Government Cannot Make Payments

and That’s The Good News

The control of the Spanish regional government Castilla-La Mancha changed from the Socialists to the Popular Party last May, and when it did the Popular Party found that the government had no money.



Spanish Government Facing Angry Creditor



One of the PP’s leaders promptly declared the region “totally bankrupt”. Another likened it to a bailed-out eurozone member by calling it “the Greece of Spanish regions”. He said it owed €2bn to its suppliers, including drugs companies, and would have trouble finding the cash to pay its 76,000 civil servants.



And in the rest of the country

In all, the Spanish public sector is late with an estimated €50bn due to construction companies, suppliers and service providers.

Meanwhile in Greece the interest rates on 2 year Greek debt in the secondary market hit 45%.  And France’s economy has just about stopped growing so the government will implement policies to make it grow even less. 



Agence France-Presse/Getty Images

Customers at a bank in central Athens,

above; many Greeks have been withdrawing

large sums, squeezing banks.



Finland is demanding collateral before it will participate in the next bailout of Greece, which matters because (1) the bailout agreement is must be unanimous, giving each country a veto over any agreement and (2) other countries want to have collateral.

Finland may get non monetary collateral, but first someone has to figure out what that would be, particularly since the Greek government has agreed to sell off most of its valuable assets and thus has nothing with which to provide collateral.

Oh, and part of the Greek solution was for a debt swap with private European banks who in an unexplained burst of stupidity had purchased tens of billions of Greek debt during the last decade.  Now that deal may be coming apart.

When European officials were asked why they could not develop a plan to fix the European economy they replied that they certainly could develop those plans, and had already developed at least 137 so far, with several more on the way as soon as the most recent plans were discredited or shown to be unworkable.

But what about Greek banks?  Well there has been a slow, but steady run on Greek banks, which now has reached the point where the Greek banking system could fail.

Have a nice day Europe.