THE Eurozone Economics Thread pt 1 (merged) Archived

[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.

[eXpat]

The Bankia story is not going away.
Spain pressured as market weighs Bankia fallout

MADRID (MarketWatch) — Bankia SA shares recovered some of a nearly 30% drop on Monday, but stayed significantly lower as markets got the first chance to react to news of a bigger-than-expected bailout need for the troubled lender and mulled the broader implications for the euro-zone crisis.

Shares of Bankia ES:BKIA -13.38% , which had been suspended Friday ahead of that bailout news and took several minutes to begin trading on Monday, sank to an all-time low of €1.11 at one point, but ended off 13% to €1.36, according to FactSet Research.

On Friday, Bankia said it would need to ask the government for a bailout of €19 billion (around $24 billion), a figure that exceeded some estimates calling for a recapitalization of around €15 billion. The bank, formed of a merger of several savings banks, is a casualty of the collapse of Spain’s housing market that triggered a recession and ignited another leg of the sovereign-debt crisis.

http://www.marketwatch.com/story/spain-pressured-as-market-weighs-bankia-fallout-2012-05-28

[eXpat]

Spain faces 'total emergency' as fear grips markets

Spain is facing the gravest danger since the end of the Franco dictatorship as the country is frozen out of global capital markets and slides towards an epic showdown with Europe.
“We’re in a situation of total emergency, the worst crisis we have ever lived through” said ex-premier Felipe Gonzalez, the country’s elder statesman.

The warning came as the yields on Spanish 10-year bonds spiked to 6.7pc, pushing the “risk premium” over German Bunds to a post-euro high of 540 basis points. The IBEX index of stocks in Madrid fell 2.6pc, the lowest since the dotcom bust in 2003.

Chaos over the €23.5bn rescue of crippled lender Bankia has led to the abrupt resignation of central bank governor Miguel Ángel Fernández Ordóñez, who testified to the senate that he had been muzzled to avoid enflaming events as confidence in the country drains away.

Markets are on tenterhooks as Spanish yields test levels that forced the European Central Bank to respond last November with its €1 trillion liquidity blitz. “Nobody is short Spanish debt right now because they are expecting ECB intervention,” said Andrew Roberts, credit chief at RBS. “If it doesn’t come -- if we take out 6.8pc -- we’re going to see a hyberbolic sell-off,” he said.

http://www.telegraph.co.uk/finance/financialcrisis/9301270/Spain-faces-total-emergency-as-fear-grips-markets.html

[dolanbaker]

http://www.bbc.co.uk/news/business-18278848
Two top economic officials in the European Union have warned of the possible disintegration of the eurozone.
The Commissioner for Economic and Monetary Affairs, Olli Rehn, urged member states to reduce spending and create a more robust rescue fund to prop up countries in financial crisis.
Speaking at a European business summit in Brussels, Mr Rehn said that without action the eurozone could fall apart.

[eXpat]

Wow!
Spanish bailout could reach 100 billion euros: sources

BRUSSELS (Reuters) - A bailout for Spain's teetering banks, once requested by Madrid, could amount to as much as 100 billion euros, two senior EU sources told Reuters on Saturday.

Spain has not yet made a formal request for European aid but it could come during a conference call of euro zone finance ministers, the sources, who were both on an earlier call to discuss the technicalities of a rescue, said.

"A decision on Spain will only be taken ... by the ministers (in a second call). Madrid has not officially asked for help yet," one of the officials said. "The statement will mention 100 billion euros as an upper limit."

The Eurogroup of finance ministers is scheduled to begin its call at 4 p.m. Brussels time (1400 GMT). Earlier, its chairman, Jean-Claude Juncker, called for a "quick solution".

Several EU sources told Reuters on Friday that Madrid was expected to ask the currency bloc for help with recapitalizing its banks this weekend, becoming the fourth country to seek assistance since Europe's debt crisis began.

Asked if he expected Spain to request help, Swedish Prime Minister Fredrik Reinfeldt told public service radio: "I think that is everybody's assessment. There is even talk about amounts up to 80 billion euros."

It is not clear whether bailout numbers will be finalized on Saturday but the International Monetary Fund gave a clear guide to what it thought was needed, saying that under a stress scenario a number of Spanish banks would need to increase capital by 40 billion euros ($50 billion) in total. It advised seeking significantly more than that.

http://news.yahoo.com/merkel-says-eu-ready-act-spain-downgraded-001000399--business.html

[Daniel_Plainview]

Spanish bailout could reach 100 billion euros: sources

A week ago the estimate was €40 billion; then €80 billion; now €100 billion. But that's just phase-1 of the bailout. The total bailout cost will likely be many times €100 billion. One estimate puts the total tab at 800 billion ...

"Spain on its own could ultimately require a bailout of at least 400 billion and possibly as high as 800 billion, and after Spain we will have have the too big to bail Italy lining up."

And once Spain is attended to, the focus will shift to Italy. By then, Greece and Portugal will need another bailout.

[eXpat]

What is 100 billion euros between friends

Eurozone agrees to lend Spain up to 100 billion euros

(Reuters) - Euro zone finance ministers agreed on Saturday to lend Spain up to 100 billion euros ($125 billion) to shore up its teetering banks and Madrid said it would specify precisely how much it needs once independent audits report in just over a week.

After a 2 1/2-hour conference call of the 17 finance ministers, which several sources described as heated, the Eurogroup and Madrid said the amount of the bailout would be sufficiently large to banish any doubts.

"The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total," a Eurogroup statement said.

Spain said it wanted aid for its banks but would not specify the precise amount until two independent consultancies - Oliver Wyman and Roland Berger - deliver their assessment of the banking sector's capital needs some time before June 21.

"The Spanish government declares its intention to request European financing for the recapitalization of the Spanish banks that need it," Economy Minister Luis de Guindos said at a news conference in Madrid.

He said the amounts needed would be manageable and that the funds requested would amply cover any needs.

http://www.reuters.com/article/2012/06/10/us-eurozone-idUSBRE8530RL20120610

[Ferretlover]

European finance officials have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario should Athens decide to leave the euro.

As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.

The market (civil society) always overwhelms government decrees like this.
http://www.reuters.com/article/2012/06/ ... ZB20120611

[Lore]

That all should just about destroy what ever confidence was left in EU banks.

[Quinny]

Who's exactly paying for this?

ECB? IMF ?? EFSF ??? ESM ????

Anybody know?

[dolanbaker]

Who's exactly paying for this?

ECB? IMF ?? EFSF ??? ESM ????

Anybody know?

Everyone else!

[smiley]

Who's exactly paying for this?

Apparently I am...

The loan is made by the ESM. Since the base capital of the ESM is provided in cash by the separate nations of the EU it is essentially payed for by the taxpayers.

But since this is offered as a preferred loan the chances that the money doesn't come back are slim,

and I guess that if it doesn't, that will be the least of my worries, as this implies some sort of catastrophal event.

Everyone else!

Including you. You just loaned (100 billion * 1.5%/4.5 million Paddies) =333 Euro's to Spain.

[dolanbaker]

Exactly, as I was referring to everyone else except the ECB etc...

[Quinny]

Does the ESM actually exist yet?

Who's exactly paying for this?

Apparently I am...

The loan is made by the ESM. Since the base capital of the ESM is provided in cash by the separate nations of the EU it is essentially payed for by the taxpayers.

But since this is offered as a preferred loan the chances that the money doesn't come back are slim,

and I guess that if it doesn't, that will be the least of my worries, as this implies some sort of catastrophal event.

Everyone else!

Including you. You just loaned (100 billion * 1.5%/4.5 million Paddies) =333 Euro's to Spain.

[Quinny]

It seems that Spain is being bailed out by a concept that doesn't yet exist yet alone have any money.

One of the few countries that have ratified the ESM and one of the major contributors is ..... You guessed it Spain.

I think some of the other Euro nations might just be finding the situation a tad unfair!

http://www.politics.ie/forum/economy/18 ... l-off.html

[dolanbaker]

http://www.bbc.co.uk/news/business-18438402
Germany's deputy finance minister has ruled out "eurobond-lite" plans to pool part of eurozone countries' debt.

Speaking exclusively to the BBC, Secretary of State Steffen Kampeter said "debt is a national responsibility".

"I don't see any strategies where we socialise and redistribute the bad political decisions made by some who are over-indebted."

The German government has already ruled out full "eurobonds" for now.

That may disappoint investors on international markets whose hopes had been raised by reports that the Germany might be inching toward the compromise mutualisation plan.

Looks like Germany is saying Nein! Nein! Nein!
Maybe they're looking ahead to a Euro without the (growing list of) Defaulters clogging up the system, maybe the consequences of a rising Euro, rather than taking on the risks of the weak, is the lesser of two evils.

Separate lifeboats for all, ours will not be tied to your sinking one!