Spain: What Are Its Funding Needs?

By Matt Phillips

As we’ve mentioned before, Spain is the 600-pound gorilla in the room as we try to weather the the most recent spate of euro worries.

Part of the reason has to do with the size of the funding needs of the euro zone’s fourth largest economy. By “funding needs” we essentially mean the amount of cash the country needs to borrow or rollover to keep the lights on, keep paying government salaries and keep the government functioning.

For instance, Greece’s IMF/EU bailout came about back in May in part because Greece was facing an immediate need to ?go to the bond markets to borrow the 8.5 billion euros. But more broadly, Goldman Sachs analysts at the time pegged Greece’s funding needs at about 150 billion euros over three years.

Analysts at Brockhouse Cooper say in a note out Nov. 23 that the amount of borrowing Spain would need to do to pay for deficits and roll over loans it received in the past is much bigger. :

Spain’s funding needs are far larger than those of Ireland or Greece. Over the next three years, Spain will need approximately EUR 350 billion to roll over existing debt and fund deficits. This figure would probably exceed amounts available through the EFSF after loans are disbursed to Ireland and after subtracting guarantees from the weaker Eurozone members (including Spain itself, as it would not make sense for the country to guarantee its own debt through the EFSF).

The European Financial Stability Facility [EFSF] is the 440 billion euro bailout fund set up this summer by euro-zone governments to try to deal with the more indebted members of the monetary union. You can see, that a 350 billion euro bailout would be a fairly healthy chunk of that. That’s why the sight of those Spanish bond yields blowing out makes the good folks in Brussels rather nervous. As the analysts at Brockhouse Cooper put it: “Bottom line: If Spain finds itself in need of rescue funds, the EFSF will likely not be in a position to provide enough support and some recourse to IMF funds will probably be necessary. As a result, we do not believe that the European debt crisis is over yet.”

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