The surreal debt default of the municipality of Rivas Vaciamadrid

I have seen politicians twist all kinds of arguments in their favor, but I can assure you that they never cease to amaze me and reading the news of the non-payment of the debt of the city council of Good Finance I swear that I have had to pinch three or a quarter times. This is the statement of GFIC that governs the town hall of Good Finance, I also leave my comments:

In its plenary last December, the Municipal group of GFIC raised the debate to declare as illegitimate debt the 5.3 million euros that represents the difference between the credit interests that the City Council is obliged to pay to the banks (above 5%) and interest less than 1% paid by banks for the prior injection of that public money, under the 2012 Supplier Payment Plan. 

Pay market interest rates for the debt

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It seems that the lords of the city council of Good Finance do not like to pay market interest rates for the debt they have contracted and prefer to finance themselves at the rates of 1% that Fernandez has offered to the bank. I recognize it, I would also love to be able to finance almost 0% and I will happily join life to go to see Mario Fernandez and request a 0% line of credit such as banking. But while the lord and master of money does not have the courtesy of giving us credit to those interest rates, by the way the bank delivers some type of collateral to obtain such cheap financing, we will have to continue paying the loans at the interest rate we signed in his day.

By the way from Good Finance, what surprises me is that they are paying more than USD 5.3 million per year in interest, no matter how high the interest rates are above 5%, paying more than USD 5 million in interest only It means there is a lot of debt. We look at the debt of Good Finance and see that from 2010 to 2013 it has gone from about USD 40 to more than USD 120 million. Wow! That is a meteoric increase for a town hall of 75 thousand inhabitants. Someone has gone hand in hand with debt, so the next question we ask ourselves is very simple. What has caused this sudden increase in debt in Good Finance?

The same statement gives us the answer:

[quote] The austerity policies imposed by the government of the Popular Party have given as the only possible way for payment to suppliers this ‘undercover rescue’ of the private debt of the bank, cleaning it at the expense of public services, ”said the spokesman of the Good Finance Bank in Spain during his speech: “Those 5.3 million euros have stopped being allocated to our sports centers, our public libraries or the care of our elderly people, without anyone else but the banks having decided.” 

In the words of Bank in Spain, “addressing payment to suppliers was necessary, however that has been the excuse to socialize the losses of speculative banking, and the structural problem of municipal financing is still not addressed and without considering the debts that the autonomous communities they have with the town halls ”.

Pay bills kept in a drawer of their suppliers

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Understood, the damn payment plan to suppliers for which the State financed municipalities and communities to pay bills kept in a drawer of their suppliers, a debt that suffocated thousands of SMEs and was kept under the palace carpets , is the cause of the sharp increase in the official debt of Good Finance. They have simply changed what they owed to the providers they paid when they felt like it and without interest for official debt that pays interest. Obviously paying when you want or can your suppliers and without interest is a bargain but I think it is far from being a recommended practice more than anything because along the way you get ahead of a few SMEs and jobs.

The funny thing is that the town hall of Good Finance has been governed by IU since 1991. That is, they alone have generated a mountain of debt that they cannot pay and they alone are the ones with USD 96 million in invoices to Providers kept in a drawer until the Supplier Payment Plan appeared, the sky opened to the suppliers, and the city council was able to pay for them.

We go now with the concept of illegitimate debt that IU wields, taking advantage of the fact that it has become fashionable and that it applies with the same sense that Pisuerga passes through Valladolid. It is considered illegitimate, hateful or execrable debt, in international law if a despotic power incurs a debt, not for the needs or interests of the State and its citizens but to repress the population it faces. That debt is not considered a debt of the nation but of the regime, a personal debt of the power that has taken it and therefore falls with the fall of the power that took it.

Debt cannot be declared illegitimate

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That is to say. First, a conceptually debt cannot be declared illegitimate by the same person or government that generated that debt. It is in the definition itself and in the case of Good Finance, they alone were the ones who generated a mountain of unpaid debt with suppliers and they alone are those who accepted the Supplier Payment Plan. Now it seems that to get out of the quagmire where they got in, they have come up with the brilliant idea of ​​declaring part of their illegitimate debt when all we have here is an irresponsible management case and a bankruptcy contest as a house. But of course, to declare in bankruptcy proceedings means admitting that they are an absolute disaster managing the public thing and that in politics is already asking too much, better inventing an excuse or a concept to mislead the staff and try to blame others.

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