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Posts tagged ‘European Financial Stability Facility’

What Next For The Euro-Zone?

By: Victoria_Marklew

The European Union has just completed its 20th “make or break” Summit in a   little over two years, and actually managed to beat expectations. Two key   agreements were reached on June 28-29: expanding the remit of the two bailout   funds – the temporary European Financial Stability Facility (EFSF) and permanent   European Stability Mechanism (ESM) – to include sovereign debt purchases and   eventually direct banking sector support; and creating a unified banking   regulator for the Euro-zone under the auspices of the European Central Bank   (ECB). These apparently-small steps are actually quite far reaching. The Summit   outcome also indicates that, faced with really significant risks – in this case,   unsustainable funding pressures on the Spanish and Italian sovereigns – the   politicians are still willing to make some of the compromises necessary to   support the Euro-zone. In our opinion, this combination of muddle-through and   compromise in the face of crisis will lead to a closer fiscal union over the   coming years. However, we also think that the likelihood that Greece will not be   a member of the Euro-zone by end-2013 has risen to over 60%

fu article at source: http://www.marketoracle.co.uk/Article35461.html

The Problem with the Spailout

By: Money_Morning

First off, last weekend’s 100 billion euro ($126 billion) Spanish bailout has staved off the inevitable for now.

What most people don’t realize, though, is that it actually spells disaster for the euro — there simply isn’t enough liquidity in the system and never has been. 100 billion euros is chump change.

A trillion euros is more like it. Probably more, to be quite candid.

Let me lay out the math that European politicians, whose skill set apparently consists of saying “present,” rather than developing real solutions, can’t be bothered to do.

According to the latest data, the European Stability Mechanism (ESM) and the European Financial Stability Fund (EFSF) have a combined lending capacity of 700 billion euros. If Spain requests the full 100 billion euros it approved last Saturday, this leaves 386.7 billion euros in excess capacity. The EFSF has already committed 213.3 billion euros.(700b euros minus 213.3b euros minus 100b euros equals 386.7 billion euros).

The problem is that Spain and Italy have combined total needs of 620 billion euros in the next two years alone.If you’re doing this math in your head, you’ll quickly realize that’s 233 billion euros more than the total bailout mechanisms now in existence.


Call me crazy, but under the circumstances I don’t understand how European leaders can pursue the same course of sorry-assed lending in Spain that they did in Greece and expect different results. It’s simply irrational.

Don’t get me wrong, I understand why they are trying to pull the wool over everyone’s eyes. But in reality, who’s kidding who?!

The markets know the politicos can do nothing to stem the tide of money flowing out of Spain any more than they could stop money from leaving Ireland, Italy and Greece.

The only practical consideration is preventing an all-out bank run through the front door – never mind that it’s already well underway out the back door.

Frankly, I think they’ve failed on both counts. Deposits in German banks are up 4.4% year over year to 2.17 trillion euros as of April 30th, while deposits in Greece, Ireland and Spain fell 6.5% over the same time frame.

Swiss bank sight deposits have reached five-month highs of 252 billion francs as of June 1, according to the Swiss National Bank. CNBC is reporting that up to 800 million euros ($1 billion) a day is being pulled out of Greek banks alone. Data from Spanish banks related to withdrawals is being closely guarded, but I can’t imagine it’s that much different.

full article at source:http://www.marketoracle.co.uk/Article35152.html

ESM / EFSF : building a bypass to nowhere


Estimates for banking sector needs of Spain alone are running on average around €250 billion, with some sovereign supports, this rises to €370-470 billion. This will more than top the €700 billion hypothetical capacity of EFSF/ESM funding. With full 3 years Exchequer supports, the above mid range estimate can rise to ca €550 billion.

full article at source:http://trueeconomics.blogspot.de/2012/06/1162012-esm-efsf-building-bypass-to.html

Appetiser cost of Greek exit is €155bn for Germany, France: trillions for meat course

Main building of the bank of Greece.

Main building of the bank of Greece. (Photo credit: Wikipedia)


Eric Dor’s team at the IESEG School of Management in Lille has put together a table on the direct costs to Germany and France if Greece is pushed out of the euro.

These assume that relations between Europe and Greece break down in acrimony, with a full-fledged “stuff-you” default on euro liabilities. It assumes a drachma devaluation of 50pc.

Potential losses for the states, including central banks

Upper bound of the losses

Billions €

French State

German State

TARGET2 liabilities of the Bank of Greece




Greek sovereign bonds held by the Eurosystem: SMP



Bilateral loans to Greece in the context of the first programme




Guarantees to bonds issued by the EFSF to provide loans to Greece in the context of the second programme




Guarantees to debts issued by the EFSF in the context of its participation to the “Private Sector Involvement” –restructuration of the Greek debt:“sweetener”



Guarantees to debts issued by the EFSF in the context of its participation to the “Private Sector Involvement” –restructuration of the Greek debt: payment of accrued interest




Guarantees to bonds issued by the EFSF to provide loans to Greece in order to buy back sovereign bonds used by banks as collateral to obtain funding from the Eurosystem







They conclude:

The total losses could reach €66.4bn for France and €89.8bn for Germany. These are upper bounds, but even in the case of a partial default, the losses would be huge.

Assuming that the new national currency would depreciate by 50 per cent against the euro, which is realistic, the losses for French banks would reach €19.8bn. They would reach €4.5bn for German banks.

full article at source: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100017148/appetiser-cost-of-greek-exit-is-e155bn-for-germany-france-trillions-for-meat-course/

According to the ESM, Ireland will have to pay 11,145,400,000

By Stephen Clarke

According to the ESM, Ireland will have to pay 11,145,400,000 as it’s capital subscription. – http://en.wikipedia.org/wiki/European_Stability_Mechanism   The Fiscal Treaty was put in place for “Acceleration of the ESM treaty ratification and entry into force, as well as amendments to it.” – http://en.wikipedia.org/wiki/European_Fiscal_Union   This ESM is serious, if it starts doing what is proposed and asking for money that countries dont have, we could have a European war of Independence on our hands.

http://en.wikipedia.org/wiki/Thirtieth_Amendment_of_the_Constitution_Bill_2012_(Ireland)- This shows the amendment that this treaty will make to our Constitution


Thank you Stephen for your contribution and may I say it’s refressing to know some of our youth are showing an interest in their own future and the future of their country.

Well done

exclusive-german-bankers-give-merkel-ultimatum-either-greece-leaves-the-eurozone-or-germany-must/Latest from the Slog)

With the help of Frankfurt and Parisian sources, US contacts, and German readers of this site, The Slog has been able to put together compelling evidence of Greece being perilously close to ejection from the eurozone. Doubts in Brussels and the IMF, preparations in Berlin – and clauses in the bailout agreement – all point to a German determination to either amputate Greece, or leave the eurozone itself.

If there is a single investor left anywhere on the planet who thinks the Troika bailout of Greece was undertaken with any genuine commitment, then after reading this post, there won’t be. Late yesterday evening (GMT Sunday) I spent some time debating facts, signs and issues with The Slog’s longstanding source, the Bankfurt Maulwurf. This followed a series of  steers from Slog readers and other sources.

I turn first to the bailout agreement itself…where some startling things come to light. For starters, the EFSF (for that’s the principal in this document) is already in breach of it. Early up in the opening clauses, the stability fund undertakes to use funds from its existing budget to bail out Athens. As The Slog showed conclusively last week, this isn’t what happened: the ‘funds’ released were ECB non-cash bonds. The EFSF has yet to find a single investor anywhere to partake in the fund.

full article at source : http://hat4uk.wordpress.com/2012/03/19/exclusive-german-bankers-give-merkel-ultimatum-either-greece-leaves-the-eurozone-or-germany-must/


This is an excelent article thanks to the slog

I have no doubt that Germany is preparing the push Greece and the Irish republic out of the Euro .The latest proposed referendum is in fact the instrument (Stick) they will use on us, as the legal binding financial constraints will crippled the Irish economy and will force us to in effect” default”. Our national yearly budget defect is approx 18 billion but with the imposition of even more austerity measures concealed within this new amended treaty we are in on position financially to honour the proposed financial constraints within the new amended treaty .This treaty was put together in Berlin and has the total interests of Berlin enshrined within it .

The needs of the Greeks or Irish is nowhere to be seen .We are been lied to and bamboozled into a massive con job .Heads you lose and tails you lose .By agreeing to this ammendemned we are in fact giving the Germans the perfect tool to use to eject us from the EURO. We just cannot agreed to this new treaty as we do not have the financial capacity (either in earnings or savings)

This treaty obliges the Irish to introduce savings over the next 10 years of, at least 6 billion euro each year on top of the existing heavy burden of interest payments on the current national bebt of 122 ++ Billion not to mention the garneted debts of the toxic banks .As it is this debt level is just no sustainable and anybody with an ounce of sense can see we are been setup for a massive fall and we are been asked to supply the banana skin .Wake up Ireland and say no to this fraud.

What happened to a community of free independent states who trade as equals within the common economic area .When did this change to we the Irish becoming financial slaves to gangsters in Europe forcing their gambling debts on to our backs?? The biggest tragedy of Ireland is that we have put our thrust into career G

gombens, political leaches and gutless creeps who are only looking out for their own selfish interests. The current government are no better that the Fianna Fail gangsters who sold off our country. As for Labour they have betrayed the very name they carry and have shown themselves to be just as corrupt and ready to lie down with dogs that are tearing the flesh of the bones of the overburdened taxpayers of this sorry country .Shame on every one of them!

Comments from Eurocalypse, the resident BoomBustBlog credit trading guru…


By ReggieMiddleton:

Trendline broken in French bonds ,today again Italy coming in but France is still moving out… hardly surprising.  Just as i said… and stocks i think will break out up, even if that seems contradictory.

Update: I wrote this this morning. Markets react really fast. Huge move in French yields today. See charts on Mish blog. The declining trend line broken now 10yr 3.47. 3.75 or even 4.00 in a matter of few days. 4.80 is where France starts to spiral out like Italy, Greece, etc… Now the ECB monetizes massively or its massive defaults. Time is running out. My 2 cent guess is EFSF won’t even have time to do anything significant before the ECB steps in massively…

picsay-1319726495The most important development is that the Eurocalypse is in full panic mode and Italy blowing up. The inferno machine is now running full speed and there is little way back for it to now. When Italian bonds yields rise 70bp a day, roughly getting hit 4% in price, worse than stock indexes, its game over. VAR is too high, all traders, portfolio managers MUST exit, ECB is the only real bid in size (for how long ?); and sooner or later Italy has to show the white flag and ask for a bailout

full article at source: http://boombustblog.com/BoomBustBlog/The-Eurocalypse-Rant-The-Consequences-of-Foolish-Monetary-Policy.html

Europe plots deep Greek writedown

A draft statement from an emergency euro zone summit on  Wednesday, obtained by Reuters, outlined two options to leverage the 440 billion  euro ($600 billion) fund designed to shore up heavily indebted states and thwart  market attacks.If the draft is adopted with little change, the second summit in four days  will have sketched broad intentions but failed to produce a detailed master plan  to scale up the fund, recapitalize banks and reduce Greek debt to a sustainable level.

full article at source:http://www.reuters.com/article/2011/10/26/us-eurozone-idUSTRE79I0IC20111026

Joseph Stiglitz: Austerity not the way to go for Europe

Most economists thought that when the  euro was put together, it was an incomplete task. They’d taken out too many  adjustment mechanisms and had not put anything in its place.

One of the things that makes the American common currency work across the
country is we have a common fiscal authority and high migration – we’re willing
to allow North Dakota to become empty.

In Europe, there’s no fiscal authority, migration is more difficult and most
of the countries are not willing to let themselves become empty. So the
framework for allowing for an effective common currency is not there.

Now you might be able to make up for the deficiencies in one part by
strengthening another part, for instance by having a stronger fiscal authority.
But they don’t have that.

full article at source: http://www.bbc.co.uk/news/business-15110053

What the G20 can do to solve the eurozone crisis

The following article was brought to our attention .


You cannot remove the fragilities in Europe’s banking system without solving  the sovereign debt crisis… and you cannot solve the debt crisis without  stabilising the banks. This much has finally been recognised by the Group of 20 finance ministers  at their meetings in Paris over the weekend.

full article at source:http://blogs.ft.com/the-a-list/2011/10/17/how-the-g20-can-solve-the-eurozone-crisis/#axzz1b2sm6UsX

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