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Spain Cannot Afford Defense Budget (Sound Familiar?).

  • Written by Syndicated Publisher 41 Comments41 Comments Comments
    August 15, 2011

    If you need proof that Spain cannot possibly stay within austerity limits mandated by the ECB, please consider the following Google Translation (modified by me for readability) of an article on El Pais:Defense Department Renegotiating a 26 Billion Debt it Cannot Afford to Pay

    If the homeowner stops paying the mortgage, the bank will not hesitate in foreclosure. But if the Ministry of Defence does not pay the installments of a battleship, a tank or a fighter, who will dare to seize?

    The situation may seem surreal, but it is real.

    Principle Programs

    The overall bill called special programs of weapons – 19 weapons systems that mostly incorporate new technologies – totals 30 billion, around 3% of Spanish GDP, of which Defence has so far paid just under 5 billion.

    Companies should be paid the remaining 26 billion in installments through 2025, but defense officials themselves acknowledge that this is impossible without a drastic increase in the budget, which is unthinkable that Spain has set a priority to reduce the deficit 6% at the end of this year and 3% in 2013 (with 2010 data, the deficit of all government is 9.2% of GDP).

    Already in 2011 the Ministry of Defence has been in serious trouble to meet their obligations.

    It’s a cyclical problem but the situation is worse in the future. Defence sources said they would not have enough money even if there were no additional expenditures through 2025.

    In his appearance before Congress last October to present the budget this year, Secretary of State for Defence, Constantino Mendez , already referred to in the starkest terms the policy has led to this situation. “We should not have purchased weapons we are not going to use for scenarios of confrontation that do not exist and, more seriously, with money that we did have then and do not have now.”

    Is US Really Any Different?

    Look at those Spanish tanks, ships, planes, and submarines. Is Spain preparing for an invasion from France? Portugal? Italy via the Mediterranean Sea?

    The US military budget situation is similar but the amounts are orders of magnitude greater.

    Is the US threatened by Canada or Mexico? Cuba via the Gulf of Mexico?

    If not, “We should not have purchased weapons we are not going to use for scenarios of confrontation that do not exist and, more seriously, with money that we did have then and do not have now.”

    Stupid Wars and US Sponsored Torture

    In a stupid war that should never have been fought, US citizens were tortured in Iraq with tactics approved by Donald Rumsfeld.

    For an explanation as to how that happened please consider U.S. Circuit Judge Upholds Right of Two US Citizens, Tortured in Iraq, to Sue Former Defense Secretary Rumsfeld for Torture.

    Is WWII Coming Again?

    What pray tell are countries doing with all these needless weapons? Preparing for another WWII?

    Mike “Mish” Shedlock


    Shared Under Licence

    Mish’s Global Economic Trend Analysis: Spain Cannot Pay €26 Billion Defense Budget, Effectively Issues IOUs to Keep Within Stated Austerity Measures.

    Images: Flickr (licence)

    About The Author

    Mike Shedlock / Mish 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 Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.