If you don’t have the money, and cannot borrow the money, and cannot print the money, what can you do? The easy to understand answer is “you do not pay the bills” at least on time. This has been happening all over Spain, but particularly Madrid.
Via Mish-modified Google translate from Libre Mercado, please consider Hidden Debt Soars Thanks to Mayor Gallardón of Madrid.
Note: Alberto Ruiz-Gallardón is a Spanish politician and former mayor of Madrid.
Local authorities accumulated a total debt of €41.9642 billion euros at the end of last year, €6.545 billion more than in 2011, representing an increase of 18.4% yoy, according to data released Wednesday by the Ministry of Finance.
But the most striking is, once again, that of Madrid. Madrid owes a total of €7.4296 billion in 2012, the most municipal debt Spain. This amount is equivalent to almost 18% of total debt of local authorities, 21% of all municipal debt, nearly half (46.5%) of the debt accumulated provincial capitals, and 63.5% of the debt of the big cities. In fact, Madrid’s debt is six times that of Barcelona (€1.780 billion) and nearly eight of Valencia (€975.7 million euros).
What is most relevant, however, is that Madrid’s debt soared by €1.082 billion in 2012 alone, representing an increase of 17% yoy. This is the largest increase registered by the council since 2006, when it grew by €1.700 billion.
The reason lies in the payment of overdue invoices from suppliers. Alberto Ruiz Gallardón left a legacy to new mayor Ana Botella.
Gallardón was the mayor who accumulated the largest debt to suppliers throughout Spain. Close to €1 billion extra debt was the culmination of financial management of Gallardón, following years of waste and the red in front of City Hall. When Gallardón came into office in 2003, debt amounted to €1.455 billion euros, but when he left office in 2011, debt grew to €6.348, nearly four times more.
Not to worry, the ECB, Brussels, and Prime Minister Rajoy have everything under control. If you have a hard time accepting that, please take another blue pill.
Mike “Mish” Shedlock