Prompted by World Headlines
The Greek Finance Minister is scheduled to table a revised draft 2013 budget today. The budget calls for Greek economic contraction of 4.5% in 2013, and is said to potentially result in a 2013 surplus of about 0.5% of Greece’s 2013 forecast GDP. This revised budget apparently will be voted on by November 11, prior to further bailout advances that are currently still under negotiation.
The financial turnaround suggested by this revised budget seems hardly realistic to me given the current Greek economic circumstances – but then I say that without having seen the details on exactly how Greece’s economy can contract by 4.5% while its Federal budget simultaneously comes into a slight surplus.
Topical Reference: Budget provides for 4.5% contraction, from ekathimerini, October 30, 2012 – reading time 4 minutes, thinking time longer.
Spain: Continuing economic deterioration, no bailout request yet
Spain’s National Statistics Institute said Monday that retail sales fell 11% year/year in September, and the Bank of Spain last week said it expected that Q3 would show the 5th quarterly GDP drop in a row. Further, when asked Monday whether Spain would seek a credit line from the eurozone’s rescue fund Prime Minister Mariano Rajoy is reported as saying that would happen “when I think it is in the interests of Spain”.
Mr. Rajoy, now 57 years old, was appointed Prime Minister of Spain in December 2011, is a career politician, and has been Chairman of the conservative (right of center) People’s Party of Spain since 2004. As I see things:
in the end, Spain will either have to ‘go its separate way from the Eurozone’, which seems impractical and not at all likely to happen unless financial bailout terms with EU and other financing partners can’t be agreed;
on one hand, Mr. Rajoy’s delay tactics make sense given the ongoing discussions with Greece that very likely will have to be concluded one way or the other in the next two weeks. On the other hand, if Spain’s economic condition (and hence that of its banks) is deteriorating significantly during the delay period, that will no doubt influence the outcome of negotiations;
negotiations over Spain’s financial needs likely will begin immediately following the outcome of the ongoing Greek negotiations; and,
the financial markets likely are not ‘pricing in’ what could be a bad Spain–specific and World-contagion economic outcome when those negotiations finally do occur.
Ian R. Campbell, FCA, FCBV, is a recognized Canadian business valuation authority who shares his perspective about the economy, mining and the oil & gas industry on each trading day. Ian is also the founder of Stock Research Portal, which provides stock market data, analysis and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. Note: The Commentary and information above is provided ‘AS IS’ and solely for informational purposes, not for trading purposes or advice.
