Top 10 at 10: The right pain in Spain's bond market; IMF bailout for Spanish?; Croc Dundee's tax rort; Dilbert

Here are my Top 10 links from around the Internet at 10 past 10am.

I welcome your additions and comments below or please send suggestions for Friday's Top 10 at 10 via email to bernard.hickey@interest.co.nz

1. The pain in Spain - Losing a football match is the least of Spain's worries at the moment. Borrowing costs for Spain's government hit a fresh record high overnight of 223 basis points over German bonds on fears its financial system is about implode, the BBC reported.

This widening gap in the bond market marks a drop in confidence in Spain's ability to repay its debts.

The Spanish cabinet has also approved unpopular changes to labour rules. The changes, which include a cut in the level of severence pay, have prompted a call for a general strike in September.

2. Oh so stressful - Ambrose Evans Pritchard at The Telegraph has the latest on the unfolding Spanish crisis within its banking system, including a move to dislcose the results of stress tests for Spain's banks.

Spain has upped the ante in a high-stakes poker game with Germany, pushing for the release of EU stress test results for major banks in a move that risks precipitiating a dramatic escalation of Europe's financial crisis. "We're not afraid of transparency," said the Spanish Banking Association (AEB), saying the full truth would put an end to rumours battering Spain's instutitions.

El Pais reported that the government backs the initiative, putting it on a collision course with Germany which insists on secrecy. The Spanish authorities have little to lose by publishing the data given the near paralysis in the country's debt markets. Funding is frozen for much of the private sector. Francisco Gonzalez, chairman of BBVA, stunned investors earlier this week by admitting that "the majority of the Spanish companies and financial groups are shut out of the international capital markets".

He said the country's external debt had reached €1.5 trillion or 147pc of GDP, much of it on short-term maturities. "This debt has become our most overwhelming problem, since €600bn falls due this year," he said.

3. IMF bailout for Spain? - Meanwhile the drums are beating for a bailout package for Spain and possible IMF intervention. Tyler Durden at Zerohedge points out the head of the IMF is flying to Spain today for urgent talks with the Prime Minister. 

The last time the IMF sent a delegation to a country was on April 15th when the IMF together with representatives from the EU and ECB took a jaunt over to Athens. A month later the country was insolvent. We can't wait for the official denial that this visit has nothing to do with the frozen Spanish liquidity market (like Greece), and that there is nothing to worry about (like Greece), only to end up with a full blown IMF rescue package of the Pyrenean country (just like Greece).

This merely confirms the move in PIIGS spreads which despite the joke that is the market moved 10%+ wider on the day. The next domino is about to fall, and no matter how much rumored collusion between two French banks and the Federal Reserve is injected, the EURUSD is likely about to tank. At this point it is wisest to get out of any EURUSD longs, and finally follow Goldman's "advice."

4. Even in France - The French are notorious for their reluctance to cut entitlements, but even they are looking to increase their retirement age. CNN reports an increase to 62 from 60 is planned. When is New Zealand going to have a debate about lifting our retirement age? John Key's blanket ban on its discussion is obscene from a long term fiscal point of view.

The measure will allow France to save 19 billion euros ($23.3 billion) by 2018, Labor Minister Eric Woerth said.

Thousands of demonstrators protested the measure on the streets of Paris on Tuesday.

Woerth defended the reforms Wednesday, saying it is "imperative" and "a moral obligation" to save France's pension system. "Our main objective is to become balanced," he said. "This does not mean less deficit -- it means zero deficit by 2018."

5. Labour unrest in China - This is one to watch closely. CNN has a nice backgrounder on mounting worker unrest in some of the factories in China. This is a worry for political stability in the most important economy in New Zealand's future. Even the political elite in China are worried. 

China's top leadership has acknowledged the grievances raised in the country's recent outbreak of industrial unrest, in an attempt to soothe the nation's increasingly restive population of migrant workers. Wen Jiabao, China's premier, toured orphanages, low-income households and construction sites in Beijing this week, according to reports carried by the official media on Tuesday.

"We must care for, love and respect migrant workers, especially the new generation of young migrant workers," the official Xinhua news agency quoted Mr Wen as saying to a group of labourers at a new Beijing subway station.

At the same time, the ruling communist party maintained a reporting ban on the third in a series of strikes in southern Guangdong province that have affected the China operations of Honda, the Japanese carmaker.

The Economist also has a good piece on the Chinese labour unrest.

It points to a problem in coming years with labour shortages and rising wages, particularly as the rural poor become richer and the incentives to migrate to the coast become weaker. Where will the Chinese factories go then when their wage advantage has gone?

China’s labour supply is still growing. Its working-age population will increase from almost 977m in 2010 to about 993m in 2015, according to projections issued in December by the US census bureau (see left-hand chart above). But the number of youngsters (15-24-year-olds) entering the labour force will fall by almost 30% over the next ten years.

Workers are not the only ones who can migrate. Capitalists can also go to where workers are abundant. First, labour-intensive factories will move inland. Eventually they will depart China altogether, just as they left Japan and Taiwan before it. That, after all, is why Honda and Foxconn opened plants there in the first place.

6. Some smoky figures - Eric Crampton at Offsetting Behaviour has done a nice job of fisking the Ministry of Health's figures on the costs of smoking, which were used to justify the recent cigarette excise increase. He reckons their costing of a NZ$1.9 billion health cost is about NZ$1 billion over the real figure.

Crampton got hold of some Ministry of Health documents showing they didn't take into account the fact that smokers die early, therefore saving the health system lots of money in old age. Maybe this is the solution to our looming pension crisis. We need lots of baby-boomers to take up smoking.

I'd be pretty surprised if the stats guy who came up with the number in the first place had any intention that it get out without a whole lot of further work; I'd also be surprised if the more zealous folks who really wanted big numbers over on the tobacco control side of MoH cared much about having a sound number or whether the number had gone through a proper quality assurance process.

They needed a big number to help push the huge increase in tobacco excise taxes: the clean up work can always come later. Shame on whoever at MoH let this politically convenient number out without proper quality assurance. And shame on everyone who repeated the number without thinking for a moment just how MoH managed to add well over a billion dollars to the prior estimate.

7. Ya gotta love a boondoggle - America is finding new ways to pile yet more debt on the massive debt already there, while giving a big slice of profit to the bankers. The latest boondoggle involves a scheme designed to make it easy for state governments to borrow money at cheap Federal government-style interest rates, Julie Creswell at the New York Times reports. You have to wonder about whether these government-backed lending programmes are sustainable. We're about to get one for leaky buildings. They are ripe for gaming and arbitrage by the banks.

The federal government pays 35 percent of the interest costs on the bonds, a huge potential saving. But questions about this multibillion-dollar program are piling up. For one, Wall Street banks are charging larger commissions for selling Build America Bonds than they do for normal municipal bonds, increasing the costs to the states and cities.

For another, the new bonds may be priced too cheaply, enabling quick-footed investors to turn a fast profit as the prices climb, but raising interest costs for taxpayers. Those imbalances have caught the eye of the Internal Revenue Service, which is asking municipalities whether the bonds are being priced and sold correctly.

Alarmed by the uncertainty, Florida, which has sold more than $1.6 billion of Build America Bonds, has retreated from the market. As if all this were not enough, Wall Street banks — which have pocketed hundreds of millions of dollars in fees from the program — are now releasing research reports warning that states’ financial woes may make the bonds less attractive. Some banks are even telling investors how to bet against Build America Bonds.

8. Wall St wins again - The lobbyists have won again in Washington, stripping a provision from financial reform legislation that would have destroyed the business model of the ratings agencies such as Standard and Poor's, Moody's and Fitch, Reuters reports. The guy behind the original proposal to set up a government clearing house to assign structured finance ratings to ratings agencies on a semi-random basis was Al Franken, a comedian.

Negotiators from the House of Representatives and Senate tasked with hammering out a final version of the sweeping reforms agreed to remove a measure that would have set up a new clearinghouse to eliminate perceived conflicts of interest in the ratings industry. Instead, they ordered regulators to study the issue and take action only if they think it is necessary.

The credit-rating industry has been widely criticized for assigning overly rosy ratings to dubious debt offerings that brought Wall Street to its knees during the 2007-2009 financial crisis. "A hoax was perpetrated on the American public and the world public," Democratic Representative Paul Kanjorski said of inflated ratings.

The Senate bill, passed last month, would have set up a new government clearinghouse to assign structured debt offerings to ratings agencies on a semi-random basis. But House negotiators said more information was needed to figure out how to tackle the problem and their Senate counterparts agreed to take a step back. The new provision directs the Securities and Exchange Commission to study the clearinghouse idea then set it up if regulators deem it the best way to eliminate conflicts of interest.

9. 'Come and get me you miserable bastards' - Paul "Crocodile Dundee" Hogan is not such a happy camper these days. The SMH reports Hogan allegedly committed tax fraud by deliberately misleading both Australian and American tax authorities about his residency status. He seemed to be in two places at one. Handy trick that.

According to confidential documents released yesterday, the actor, 70, was allegedly in effect ''stateless'', telling the US authorities he was paying tax in Australia while simultaneously telling the Tax Office he was paying tax in the US.

The details of Hogan's allegedly fraudulent tax arrangements were released yesterday after he lost a High Court battle to keep secret 108 pages of confidential advice from the accountancy firm Ernst & Young and his former accountant Tony Stewart.

In mid-2008, Hogan, who lives in the US and has said he paid Australia more tax than he could have, told the Tax Office to ''come and get me, you miserable bastards''.

10. Totally irrelevant video - Jon Stewart from The Daily Show answers the question: What's covered in heroin and sitting on a pile of gold? He rightly points out the report is a few years old and the war in Afghanistan is now longer than the Vietnam War. This is funny in a slightly painful way. "Up until now we were motivated by revenge. Now it's greed. It's a whole new ball game."