Spain postpones partial listing of lottery

AP News
Posted: Sep 29, 2011 6:48 AM
Spain postpones partial listing of lottery

Unfavorable market conditions have forced Spain to abruptly interrupt plans to privatize a third of the state-owned lottery company, an operation with which it had hoped to raise euro7 billion ($9.5 billion).

The surprise decision late Wednesday will deprive the economically struggling nation of badly needed revenue that would have helped pay down its debts.

Spain, the eurozone's fourth largest economy, has been dragged into Europe's debt crisis mire as investors worry that its stagnating economy will make servicing the country's debts more and more difficult.

The government had planned to float 30 percent of Loterias y Apuestas del Estado in mid-October but finance minister Elena Salgado told Spanish National Radio on Thursday that experts handling the planned listing had advised that the markets weren't pricing the company high enough.

Salgado said the company would be put on the market when conditions improved but she declined to give a date.

The decision came less than a week after the government gave the final authorization for the partial listing.

The floatation under current conditions had also been strongly opposed to in recent weeks by the leading conservative opposition Popular Party, which opinion polls suggest will win general elections scheduled for Nov. 20.

The listing would have created one of Spain's largest companies by market value. The 250 year-old company, best known for its lucrative Christmas lottery known as El Gordo, or the fat one, had a profit of euro2.6 billion ($3.54 billion) in 2010, according to its annual report.

Prime Minister Jose Luis Rodriguez Zapatero announced the privatization of the lottery company and 49 percent of the company that runs Spanish airports last December as part of a series of measures designed to reassure markets that Spain was serious about reducing its deficit.

Salgado said the postponement would not affect the partial privatization of the airports.

Spain is struggling to emerge from nearly two years of recession. It has the eurozone's highest jobless rate near 21 percent and a swollen deficit.

Several of the country's regional governments announced big cutbacks Wednesday in a last-minute bid to meet government demands to cut their average deficit from 2.8 percent of regional GDP in 2010 to 1.3 percent this year.

The Balearic Islands announced it was eliminating 92 regional government-run institutions, slashing some 800 jobs, while Navarra said it would slash its spending for 2011 by nearly euro300 million.

The central government is aiming for a deficit of 4.8 percent in 2011 that together with a regional one of 1.3 percent would allow for an overall target of around 6 percent.

Spain has pledged to slash its deficit from 11.2 percent of GDP in 2009 to within the European Union limit of 3 percent by 2013.

Spain's central bank says indicators point to sluggish economic growth for the third quarter, throwing further doubt on the government's target of 1.3 percent economic growth this year.