A mission of experts from the International Monetary Fund (IMF) will arrive in Madrid on 16 September to discuss with government and private sector rescue progress and Spanish banking sector reform, reported a spokeswoman for the international institution.
The IMF and inspectors from the European Commission and European Central Bank (ECB) will investigate if Spain meets the conditions required by the Eurogroup for the bank bailout and to examine the situation of the banks.
The expert mission of the institution headed by Christine Lagarde expects to publish its preliminary conclusions about the 30th of September, while the publication of the final report could take place in early November.
The European Central Bank (ECB) today launches a critique of the European Commission for being too lax in their setting requirements for Spain and Portugal. As a result of this laxity, doubt that Spain can meet this year’s public deficit limit imposed Brussels (6.5% of GDP this year), despite the improvement seen in the first half of the year, as some fiscal consolidation measures will be relaxed in the latter part of the year.
"In several cases, the decrease in average annual structural adjustment required is substantial. For some countries (particularly Portugal and Spain), including cumulative structural adjustment effort has been reduced future the latest recommendations of the EDP (Excessive Deficit Procedure) This could intensify the risks to the sustainability of public finances "are the literal words of the monetary authority in its September monthly bulletin.
"at the end of June 2013, the general government debt stood at around 90% of GDP per year [the highest figure of History], up from 84% at the end of 2012"
AlarmBells Ring "More TaxHikesComing"
ECB complaints of laxity, coupled with missed budget targets means one thing… more tax hikes are on the way.
Data through July triggered an alarm in the government and international agencies, especially the downturn in revenue due to the contraction of social contributions and income tax, which will force Treasury to increase the tax burden to meet the revised deficit target of 6.5% of GDP in 2013 committed to Brussels.
Given this situation the government has already prepared a package of tax increases for 2014 that would help meet the deficit of 5.8 percent committed for next year. A VAT increase would raise health additional 1 billion euros and a 21% VAT tax on notaries would raise 100 million more.
Authgorities also ponder more "green taxes" on businesses.
Tax hikes will doom whatever slim chance Spain had for an economic recovery (which was not much chance in the first place).
Mike "Mish" Shedlock
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.