Spain cancels huge national lottery sale next month
Spain scrapped plans Wednesday for a titanic listing of the national lottery next month, aimed at raising up to 7.5 billion euros ($10 billion) for depleted state coffers.
The sale of the lottery in October would have been the biggest privatisation in Spain's history.
It formed a key part of government plans to ramp up income and help mop up the red ink in the annual state accounts, which are creating deep concern on global markets.
But the market turmoil, provoked in large part by concerns over how feeble eurozone economies will repay their sovereign debts, made the lottery sale a major gamble.
The government had agreed April 29 to sell up to 30 percent of the state's ownership of the lottery.
"The market situation now is very different to what it was then," the finance ministry said in a statement.
The state body responsible for the sale, "with the due advice, considers that the conditions are not right to guarantee an income that reflects the value" of the lottery," it said.
"The operation can be taken up again when market circumstances make it advisable."
The climbdown came less than two months after the Socialist government brought forward the sale by a month to October, before November 20 elections it is widely expected to lose to the conservative Popular Party.
The sale was formally approved by the cabinet only on Friday -- just five days before its surprise postponement.
The listing of the stake in Loterias y Apuestas del Estado, organiser of the country's famous El Gordo, or the Fat One, Christmas lottery, was expected to bring in 6.5-7.5 billion euros.
The Popular Party, riding high in the polls, had warned Tuesday it would halt huge privatisations of the national lottery and airports if it takes power in the general elections.
"These privatisations must stop," said Cristobal Montoro, the Popular Party's economic coordinator whose name is among those being tipped as future finance minister if the Socialists are ousted.
The privatisations would mean "selling state assets at a loss," said Montoro.
"It is totally unacceptable," he added.
The government also launched in July the process to privatise 49 percent of the airport operator AENA and the Madrid and Barcelona airports, which it expected to bring in at least 5.3 billion euros.
The sale of 90.5 percent of the Madrid and Barcelona airports is scheduled for the end of November.
Spain's government has not given a timetable for the privatisation of AENA although it said in July that the timing and size of the sale would depend on market conditions so as to seek the best valuation.
In a sign of the deep concerns over wild swings on the stock market, Spain and Italy will both extend a ban on short selling of banking and insurance stocks in place since August, the European market supervisor said Wednesday.
In short-selling stocks investors are basically betting that they will fall in price. They borrow the stocks from a broker, sell them and then buy them back later at a hopefully cheaper price to pocket the difference.
Spain has promised to reduce its annual public deficit from the equivalent of 9.2 percent of gross domestic product last year to 6.0 percent of GDP this year, 4.0 percent in 2012 and 3.0 percent -- the EU limit -- in 2013.
It is now scrambling to raise extra money in 2011 to meet those targets -- telling firms to pay tax installments early, lowering state spending on medicines and stimulating new home purchases with a tax cut.
Each year of deficit pushes up overall debt, which grew to 65.2 percent of GDP as of June 30 from 57.2 percent a year earlier.
Earlier this month, the government passed a constitutional reform to limit future budget deficits and curb the accumulated debt, trying to prove its determination never to slide deep into the red again.
© 2011 AFP