THE Eurozone Economics Thread pt 1 (merged) Archived

[smiley]

Ok, clearly you are in the mood to argue about nothing,

Wait a second, A few posts earlier you present this article as clear proof of a contangion and the falling apart of Spain. Then when I question the validity of the claims made in the article you suddenly hit the reverse and say that the article equates to nothing.

BTW, what part of " Nunca antes el índice había perdido tanto terreno desde un máximo" you don´t understand?

The part which translates to "intraday". Sorry but you cannot BS yourself out of this one

[Ferretlover]

Even lower...
Fitch downgrades Greek banks after sovereign cut

WASHINGTON — Fitch lowered its ratings of Greek banks Friday in the wake of its cut of the country's sovereign rating.

Fitch put the new rating for the National Bank of Greece, Efg Eurobank Ergasias, Alpha Bank, Piraeus Bank and Agricultural Bank of Greece at CCC, down from B-minus, in the mid-level range for "speculative" or junk bonds. The move came a day after Fitch cut Greece's sovereign rating to CCC, or "vulnerable to default", over the increased risk that the country would be forced to leave the eurozone.

"In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF program of fiscal austerity and structural reform, an exit of Greece from (the eurozone) would be probable, and/or this could be followed by a withdrawal of international support to Greek banks," Fitch said.

article

[dorlomin]

Greeks are claiming Merkel said they should have a referendum on membership. Germans denying she did.

[eXpat]

Ireland 'may need' second bailout

Ireland's bailed-out banks may need as much as €4 billion more loan loss provisions than assumed in stress tests last year, which could "tip the balance in favor" of the country requiring a second aid program, Deutsche Bank said in a report today.

"A new, even modest, increase in capital requirements could deter sovereign investor participation and tip the balance in favor of the sovereign requiring a second loan program," said Deutsche Bank analysts David Lock and Jason Napier.

The government's plan to introduce new personal insolvency laws creates "risks", even as politicians and the financial regulators seek to avoid widespread residential mortgage debt forgiveness, the bank said.

"Although resilient during 2009 and 2010, mortgage arrears have risen sharply over the past year, house prices are continuing to fall, market liquidity is limited, and over half of customers are now in negative equity," said Deutsche Bank analysts in the report.

http://www.irishtimes.com/newspaper/breaking/2012/0518/breaking28.html

[dolanbaker]

Ireland 'may need' second bailout

Ireland's bailed-out banks may need as much as €4 billion more loan loss provisions than assumed in stress tests last year, which could "tip the balance in favor" of the country requiring a second aid program, Deutsche Bank said in a report today.

"A new, even modest, increase in capital requirements could deter sovereign investor participation and tip the balance in favor of the sovereign requiring a second loan program," said Deutsche Bank analysts David Lock and Jason Napier.

The government's plan to introduce new personal insolvency laws creates "risks", even as politicians and the financial regulators seek to avoid widespread residential mortgage debt forgiveness, the bank said.

"Although resilient during 2009 and 2010, mortgage arrears have risen sharply over the past year, house prices are continuing to fall, market liquidity is limited, and over half of customers are now in negative equity," said Deutsche Bank analysts in the report.

http://www.irishtimes.com/newspaper/breaking/2012/0518/breaking28.html

The only thing that's stopping the mortgage arrears issue really becoming a crisis is the fact that many mortgages are on ECB tracker rates and the banks are currently losing on these.

Shift those mortgages onto variable rate and the effect would be disasterous, the default rate would go through the roof. People here can't just walk away like in the US, if they could, many would!

[eXpat]

Europe’s Worst Fear: Spain and Greece Spiral Down Together

LONDON — In a season of nightmare projections for Europe, this one could be the scariest: Greek leaves the euro currency union at the same time Spain’s banking system is collapsing.

In many ways, the market convulsion last week was a test run for those crises, as political deadlock in Greece and mounting fears over the health of Bankia, one of the largest consumer banks in Spain, converged. The credit ratings agency Moody’s Investors Service downgraded the entire Spanish banking sector Thursday.
...
The money available to Europe within its main bailout fund, about €780 billion, or $997 billion, would not be enough to handle the twin calamities of a Greek euro exit and a Spanish banking implosion.

And despite recent statements from Germany and from leaders of the Group of 8 industrialized nations meeting in the United States over the weekend to encourage economic growth in the euro zone, the European tax-paying public may have little desire to continue financing the debt disasters of other countries.

“When you have Greece and Spain happening at the same time, the problem becomes exponential and very, very dangerous,” said Stephen Jen, a former economist at the International Monetary Fund who runs a hedge fund in London. “So far, the policy has been to buy time and build a firewall — but that just makes the cost bigger. There is just no good ending here.”

The numbers do look dire.

Stephane Deo, an economist at UBS, estimates that the cost of a Greek exit to European taxpayers would be €225 billion, assuming Greece defaulted on the money it now owes to European public institutions.

But, he says, the real fear is that while that was happening, the slow-motion collapse of Spanish banks from toxic real estate loans could suddenly turn into a fast-moving bank run, as depositors pulled out their money.

With Spanish banks now holding deposits of €2.3 trillion, such a loss of confidence could be disastrous for Spain and for the highly interconnected global banking system. The financial world’s assumption lately has been that it is sufficiently prepared to absorb the consequences of a Greek withdrawal from the euro. But if a Spanish banking collapse were factored in, Europe’s long-dreaded “Lehman moment” might finally arrive. “The scale is just so much bigger, when you talk about Spain,” Mr. Deo said.

Technocrats in Brussels will readily say that what is now keeping them up at night is Spain. They are trying to see beyond the tools that so far have kept a true crisis at bay: the two rounds of low-cost loans that the European Central Bank extended to commercial banks late last year and earlier this one, and the €780 billion bailout fund.

NYTimes

[Timo]

OK, would it be safe at this point to classify South America as the last bastion of economic stability left on the planet? Sure. I know Argentina has had/continues to have its own economic problems, but the overall economic stability of South America is not bound together, ie, the Euro and the EU. If Antarctica had any economy at all, i'd claim that land/ice as being economically stable.

Maybe that's not a bad idea! Doomer's paradise! Antartica! Start our own, independent, autonomous economy, where penguins are used as currency! The primary industry would be pure survival!

[eXpat]

The Mortgage Crisis Hits France Front And Center: Are French Bank Nationalizations Imminent?

If you said some sovereign or corporate issue based out of Spain, Italy, Ireland, Portugal, or even Greece you would be close... but no cigar. No - the bond in question is an issue of Caisse Centrale du Credit Immobilier de France (3CIF), which together with its sister entity CIF Euromortgage (CIFE), is a 100% subsidiary of Credit Immobilier de France Development (CIFD), which as Fitch describes it, is a French "housing loans specialist, with business exclusively directed to France." CIFD is in turn owned by Procivis Group, which just happens to be France's second largest full-service real estate group.

In other words, CIFD, together with its subsidiaries 3CIF and CIFE represent a critical glance into the functioning (or lack thereof) of the French mortgage market. The various CIF mortgage entities are related as per the following Org Chart:
A brief summary on the Procivis Group, of which the CIF entities are a part of, via Fitch (bear with us - this is important):

Business: Mortgage financing in France continues to be predominantly distributed through the biggest retail and saving banks in the country. Specialist banks thus have a modest cumulative market share (10%-12%), but benefit from their wide range of products to maintain their franchise. CIFD offered 15 products at end-2011 and has developed some innovative services (eg, price insurance under which the difference between the sale price and the original price paid by the borrower, if negative, is covered up to EUR40,000 by the insurer). Its specialisation and its strong expertise in the French housing market represent key strengths compared with more global peers, as they enable the group to provide bespoke products to its customers. CIFD extends loans predominantly to private individuals, but also caters for investors' needs

zerohedge
blog
Never mind, since austerity is not the solution, they just need to print, print and everything will be ok

[dsula]

ZH + Alex, it's news not to be taken very seriously.

[dolanbaker]

The mortgage crisis in Ireland is real and will force Irish banks to seek further help.

[eXpat]

The taxpayers have money after all...
Spain plans $11b bank bailout

Spain will recapitalise BFA-Bankia with as much public money as necessary, as the nationalised group needs at least 9 billion euros ($11 billion) to comply with banking rules, Economy Minister Luis de Guindos said.

Two decrees passed this year will require BFA-Bankia to set aside 7.1 billion euros in provisions and 1.9 billion euros as a capital buffer, de Guindos told a parliamentary committee today in Madrid. BFA, the parent company that was seized by the state's FROB rescue fund on May 9, is being valued and the results will be published in mid-June, he said.

“The FROB will cover whatever capital increases may be necessary, using the available instruments that are most appropriate to this type of operation,” de Guindos told lawmakers.

Read more: Plans

[Ferretlover]

Sometimes the right try to simplify things Bloomberg

don't over simplify things. What was that saying? 'Never a lender or borrower be'!!!!!

[cephalotus]

Sometimes the right try to simplify things

http://www.bloomberg.com/news/2012-05-23/merkel-should-know-her-country-has-been-bailed-out-too.html

How about this one?

Time to Say Danke

http://www.time.com/time/magazine/artic ... 38,00.html

---

of course Germany has an interest to stabilise its own banks before everything wents down in Greece. I always has been a supporter of the Greece bailout, but I don't understand the Greece people.
Why blame others for your faults.
If you borrow money to buy a new TV and then you are not able to pay back that money, who is to blame. Those that lend you the money? Those that sold you the TV? Or maybe t's your fault because you bought stuff that you couldn't afford?

[Quinny]

If I sell goods to a customer who I know cannot pay it would be immoral (or even illegal) to sell those invoices to someone even if they were making a nice margin on it. The financial sector has been doing this for years. Globally the banking sector has bent us all over the table and made us FUBAR. Austerity for all would be great but it's not happening anywhere.

[eXpat]

Back to Spain:
Bankia shares suspended amid bailout request reports

Trading in shares in Spain's Bankia has been suspended in Madrid.

It asked for them to be suspended ahead of a board meeting this afternoon to reformulate its accounts for 2011 and submit a plan to shore up its finances.

The bank is reported to be due to ask the government for a bailout of more than 15bn euros ($19bn; £12bn).

Also on Friday, there were appeals for help from another Spanish institution: its wealthiest autonomous region, Catalonia.

"We don't care how they do it, but we need to make payments at the end of the month," said Catalan president Artur Mas.

"Your economy can't recover if you can't pay your bills."

Catalonia represents one-fifth of the Spanish economy. It has to take out 13bn euros of loans this year to refinance maturing debt, not to mention funding whatever deficit it has for the current year.

The regions have been having trouble borrowing money commercially, so the central government has given them a special credit facility from the Official Credit Institute (ICO).

Those credit lines run out in June and the government has said it will come up with a new mechanism to provide credit for the regions, but there has been some nervousness amid reports that there is disagreement within the government about what form the guarantees should take.
Part-nationalised bank

Bankia, which is Spain's fourth-largest bank, was part-nationalised two weeks ago because of its problems with bad property debt.

One economist told me that suspending trading in Bankia's shares today "makes sense", given the uncertainty about the bank's position and doubts about how much public money will be lent to the bank to allow it to clean up its bad loans.

Lending money to the bank via a government restructuring fund would be more palatable to the Spanish taxpayer as the government would hope to get the money back in the future.

However, recovering all of the money used to bail out Bankia would be hard given the extent of the bad loans that it has accumulated.

But Spain's economy minister has been at pains to point out that Bankia is a special case and the rest of the Spanish banking system is in better health.

As part of the process, the government injected 4.5bn euros into the bank.

http://www.bbc.co.uk/news/business-18202671
Nothing to see here, says the spanish gov, move along, everything will be fine...

[dolanbaker]

http://www.bbc.co.uk/news/business-18213848
Spain's fourth-largest bank, Bankia, has asked the government for a bailout worth 19bns euros ($24bn; £15bn).

The bank said that the "recapitalisation measures strengthen the group's solvency, liquidity and stability".

Earlier on Friday, trading in Bankia shares was suspended on the Madrid stock exchange while its management put together a restructuring plan.

The bank was part-nationalised because of problems with bad property debt.

Rating agency Standard and Poor's has also lowered the credit rating of Bankia and four other Spanish banks.

[pstarr]

The normally staid New York Times is raising the red flag. The crisis deepens.

In Spain, Bank Transfers Reflect Broader Fears
By LANDON THOMAS Jr. and RAPHAEL MINDER

The possibility of mini-runs on banks spreading from Greece to bigger countries could pose a much greater risk than a Greek exit from the euro zone.

[dolanbaker]

http://www.bbc.co.uk/news/uk-18216538
The Home Office is drawing up contingency plans to cope with a possible big increase in immigration from Greece if the euro collapses.

EU nationals are largely entitled to work anywhere in the single market.

But Home Secretary Theresa May told the Daily Telegraph "work is ongoing" to restrict European immigration in the event of a financial collapse.

Time to dust off the drawbridges, they may need them soon!

[mattduke]

In my opinion the most likely scenario is that they will let Greece go, but that ECB will guarantee deposits in Italian,Spanish,etc banks to halt a more widespread bank run. China is adding a new Greek economy every 11 weeks.

[dissident]

The normally staid New York Times is raising the red flag. The crisis deepens.

In Spain, Bank Transfers Reflect Broader Fears
By LANDON THOMAS Jr. and RAPHAEL MINDER

The possibility of mini-runs on banks spreading from Greece to bigger countries could pose a much greater risk than a Greek exit from the euro zone.

And there you have an obscure admission of the real problem. Risk of bank runs outside of Greece has absolutely nothing to do with Greece's sovereign debt. That risk is produced by other factors which the media avoids discussing like the plague. To paraphrase, Greece is just a perturbation on an unsteady basic state, so the instability can grow drawing available potential energy which is not confined to Greece.