Government cancels state lottery partial sell-off

The government said that its sudden decision to cancel the public offering of 30 percent of the state lottery was "an exercise in responsibility" because the market price was not high enough to guarantee the seven billion euros it wanted to raise to finance Spain's sovereign debt.

Although the surprise move, announced on Wednesday night, pulls the plug on what was going to be the largest IPO in Spanish history, Economy Minister Elena Salgado said that in her opinion, the cancellation provided "an extraordinarily positive" image of Spain.

The government had said it would go ahead with the sale even when the markets were performing worse than now. The Cabinet had approved the operation last Friday, when stocks were being traded at levels below those of this week.

The sale of Loterías y Apuestas del Estado (LAE), famous worldwide for handing out a giant Christmas prize of over two billion euros known as El Gordo (The Fat One), had been in the works since December 2010. Its partial privatization is now postponed "sine die," although Salgado told radio station SER that it will likely happen next year.

"If conditions were met the process could be picked up again, but that is not likely to happen before the elections," she said, in reference to the November 20 general elections that the ruling Socialists are widely expected to lose to the center-right Popular Party, which opposes the sale.

The market indicative price range estimations that banks involved in the sale provided the government with did not come even near the seven billion mark target, government sources said. Spain's debt was over 65 percent of GDP by late June, while the deficit was 9.2 percent last year, far from the three percent target set by Brussels and which Spain hopes to meet by 2013. The proceeds of the planned sale would have been used to pay off debt.

Despite the unrelenting economic crunch, the state lottery continues be a very profitable business that brought in profits of 2.9 billion euros last year, according to LAE's annual report.