Spanish councils cannot pay their bills or workers

So runs the report in this morning's DT despite the previous days report of Chinese support for Spanish sovereign bonds the majority of councils in Andalucia are insolvent or in deep crisis. One mayor claimed he and his councillors had not been paid for two years. If that is true then you don't have to look far for the cause of bribery and corruption in Spanish land deals.

A large part of the reason is that the slump in construction and property development has led to a 30% drop in council revenue. Total council debt is a small, 3%, fraction of GDP but as AEP points out and I have flogged to death the real danger is political. Prolonged slumps cause social tensions and breed extremism.

Also in Spain an RBS report claims Spanish banks need  at least 50bn€ of fresh capital to pass the most lenient stress test. Psst, wanna buy shares in a Spanish bank? It looks like Spain will have to start soon drawing on the much trumpeted EU/IMF package but hold on that was for Greece a much smaller economy.

As AEP reports, and I have often opined, 'What matters in the end is how club Med copes with the pain of wage cuts and debt deflation year after year.'

To finish on a cheerful note wee George reports a triumph over the EU. The Ecofin council yesterday decided that the banking regulator will be based in London. This was always the plan except nobody told our useless MEPs who voted yesterday to site it in Frankfurt. Ah well that's one thing we can all agree on, MEPs are a waste of space.