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Posts tagged ‘Spanish Banks’

Spain’s Back In Debt Crisis Mode… And Will Take The EU Down With It

As I noted previous articles, Spain has essentially three options:

1)   Spain goes the “Greek route” of agreeing to   austerity measures in exchange for bailouts (which will implode the   economy).

2)   Prime Minister Rajoy refuses to impose   austerity measures and is removed/ replaced by an EU technocrat who is   pro-austerity measures (like Italy experienced last year)

3)   Spain defaults/ leaves the EU.

Thus far Spanish Prime Minister Rajoy has opted   to go for #1. The end result has been riots, protests, and now the threat of   Spain as a country breaking up. I’ve long averred that Spain will bring about   the break up of the Euro. By the look of things, we’re not far from   this.

To whit, as the above article notes, Germany,   Holland, and Finland have decided to pull back on the promise of a €100 billion   Spanish bank bailout first established in June. These countries are now stating   that this bailout should be included as part of the ESM mega-bailout fund’s   banking program that could take years to implement.

Spain doesn’t have time for this. As I’ve noted   before, Spain is facing a full-scale bank run (Spaniards pulled another €17   billion from Spanish banks in August, bringing the year to date bank run to over   18% of total Spanish bank deposits).

Now add multiple regional bailout requests, as   well as 25% total unemployment to the mix and Spain is an absolute disaster. The Spanish Ibex knows

Congratulations Mario Draghi, you promised   unlimited bond buying and you bought less than one month’s worth of gains for   Spain. If you want proof positive that Central Banks are losing their grip on   things, the above chart is it. The moment we take out that trendline again, it’s   GAME OVER (what more can the ECB promise?)

Remember, Spain is currently drawing over €400   billion from the ECB.

Let’s put this number in perspective… in June   before Spain requested a €100 billion bailout, the country was drawing only €300   billion from the ECB.

Since that time and now, the ECB has promised to   provide unlimited bond buying… and even Germany has indicated it would be open   to some sort of a Spanish bailout…

And yet, Spain is now borrowing even MORE than   it was in June.

This is not progress in any way… if anything it   indicates that things are worsening in the EU’s financial system at a staggering   pace. The powers that be are keeping things calm until after the election… at   which time there will be absolute hell to pay.

“So what?” many investors will ask, “Spain is   nothing in the grand scheme of things.”

Wrong.

full article at source: http://www.marketoracle.co.uk/Article37125.html

 

 

European Bank Run Watch

By Reggie Middleton

As part of my ongoing series which I started in January of 2010 – Pan-European sovereign debt crisis, I detailed the rapidly developing financial malaise in Europe, detailing the risk to the larger more respected western European nations as well as their perceived profligate brethren to the south. One name popped up that analysts and media failed to harp on… Spain – at least back then. Now, people are wondering how Spain will handle its new found (at least to non-BoomBustBlog subscribers) funding crisis. To wit, and as excerpted from The Spain Pain Will Not Wane:

Professional subscribers can now actually download the original Spanish Bond Haircut Model that we used to calculate loss scenarios – Spain maturity extension_010610 (The Man’s conflicted copy). Despite the fact I was probably the most realistically bearish out of the bunch, things have actually gotten materially worse since this model was constructed two years ago, hence it can use a refresh. Alas, it is still quite useful

full article at source:http://boombustblog.com/blog/item/6160-european-bank-run-watch-spaniard-edition

ECB to recommend senior bondholders take losses in the event of a restructuring of Spanish bank debt

English: The European Central Bank. Notice a s...

English: The European Central Bank. Notice a sculpture of the euro sign. (Photo credit: Wikipedia)

The European Central Bank refused to comment today on reports that it had recommended senior bondholders should take losses in the event of a restructuring of Spanish bank debt.

But two officials with knowledge of the ECB’s thinking said it would no longer oppose the forcing of losses on senior bondholders of euro-area banks.
A key condition to imposing losses is if the bank in question is being wound down, one of the officials said. Both of them spoke on condition of anonymity as the talks are confidential.

A report in the Wall Street Journal today said ECB president Mario Draghi advocated imposing losses on senior bondholders issued by “the most severely damaged” Spanish savings banks at a meeting of European Union finance ministers on July 9th.

A spokesman for the Frankfurt-based central bank wouldn’t comment on that discussion. The spokesman said in an e-mail that the ECB’s

full article at source: http://www.irishtimes.com/newspaper/breaking/2012/0716/breaking17.html

An incomplete step towards a Banking Union

The EZ crisis – born as a debt crisis (Greece) – has grown up into a banking crisis (Ireland, Cyprus, Spain, …). This column argues that Spain is symptomatic of larger banking problems, so the EU Summit decisions on banking union are welcome and critical to any long-term solution. Yet someone must pay for Spanish bank losses. Spanish politics is shielding Spanish creditors, European politics is shielding EZ taxpayers, so the Spanish government will pay – and in doing so may go the way of Ireland. This crisis is far from ove

Banks were “international in life, but national in death” in the first couple years of the Global Crisis. Large, internationally-engaged banks had to be rescued by their home government country despite the rescue being in the interest of many nations.

How times change. European banks are now “national in life, but European in death”. In Spain, for example, the banks’ problems were all national – local savings banks (cajas) financed a huge real estate boom. As the boom turned to bust and the losses threaten to overwhelm the capacity of the Spanish state, the problem became European. An Irish-like failure of Spain triggered by a collapse of its banks would threaten the euro’s very survival and this core economic interest of all EZ members (De Grauwe 2012).

The Spanish case is symptomatic of a larger problem

full article at source: http://www.voxeu.org/article/ez-banking-union-who-pays-past-mistakes#.T_iCZVNC38k.twitter

r.

 

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.

Oops.

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

How tiny Finland could bring euro crisis to end

English: Various Euro bills.

English: Various Euro bills. (Photo credit: Wikipedia)

By Matthew Lynn

LONDON (MarketWatch) — The most pressing question about the euro crisis is also the hardest one for anyone to answer. It is easy to analyze why the single currency has gone so badly off the rails, pick apart the flaws in its construction, and identify the mistakes made in the endless bailout packages. But how will the saga eventually resolve itself?

No one can know for sure. There are so many actors on the stage and so many conflicting ambitions and pressures on each of them that every prediction has to be hedged with uncertainty.But here’s how it might come to a head over the summer: a “Spanic,’ followed by a “Quitaly,” followed by a “Fixit.” A fresh panic in Spain, might be followed by rising demands for Italy to quit if it doesn’t get the same terms its Mediterranean neighbor has been offered, followed by a Finnish departure from the euro

full article at source: http://www.marketwatch.com/story/how-tiny-finland-could-bring-euro-crisis-to-end-2012-06-13?link=MW_popular

ESM / EFSF : building a bypass to nowhere

by

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

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