Tag Archives: Spain

Opening Quotes: Throwing Dummies

You had a sense their was a rabbit lurking in the hat, but the timing and extent on Friday’s ‘relief rally’ surprised me. And, superficially, it seemed justified.

Then there’s the  reality.

FT’s Wolfgang Munchau  – consistently ahead of the curve – claims: ‘The Real Victor in Brussels was Merkel.’

Unfortunately I believe he makes he makes a compelling argument. Strip away the political victory laps and what really happen?

Germany’s liabilities are unchanged.

The ESM has no banking license.

Italy hasn’t really gained anything.

The move towards euro-wide banking supervision (& Spainish recaps) will be torturous.

Conclusion: Merkel stands over her ‘not in my lifetime’ Eurobonds pledge, the ESM is seriously overloaded and by the way – where on earth does the growth come from?

Germany – and remember Merkel is <rightly> contemptuous – has bought the market some time but this could be THE rally to sell.

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Opening Quotes: Resisting Europeanisation

The pressure is on.

Geithner expects lots more.

But lest we doubt it – huge – justifiable? – German resistance remains.

Joseph Joffe (Editor of Die Weit) – FT Editorial:

“When Helmut Kohl went to Maastricht in 1992, he thought he could “Germanise” Europe by imposing fiscal and monetary restraint on the rest. Now, the crisis countries want to “Europeanise” Germany: spend, inflate and pay. Germany must cheapen credit for all and shoulder the risk alone. It all adds up to a moral hazard that will perpetuate the maladies of the eurozone.”

“Berlin has already failed once in “Germanising” the eurozone via fiscal probity and reform. Why would Club Med mend its ways as long as Germany is such a good “europayer”? If it doesn’t, the eurozone can look forward to bankruptcy and decay.”

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Opening Quotes: ‘Repeating Irish Mistakes’

The football was bad enough, but this is NOT a good result for Ireland.

Strip away Rajoy’s posturing – I don’t see how this changes anything.
The EU/IMF – the Germanic core – as still loading the banking clean-up costs directly upon the periphery. It hasn’t worked. It won’ work.

Its another FUDGE and – unless the markets call them out – it seriously deflates momentum towards a euro-wide deposit guarantees &/or ESM bank recapitalizations.

Not good.

FT.com: ‘Europe buys itself some time’

The key dysfunction of the euro, however, is not addressed. Rather than sever the lethal embrace between stressed sovereign debt and weak banking systems, a cash advance to bail out banks with taxpayer funds adds to the burden of Madrid’s public finances. If the state of Spanish banks is much worse than expected, this action could amount to lending the country rope with which to hang itself – repeating the Irish mistake.

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Opening Quotes: You think $FB is bad?

This is beginning to remind me of Anglo Irish – the worst bank in the world EVER!

FT: ‘Pressure on Madrid to probe Bankia’s fall’

Bankia, a merger of seven savings banks, saw about 60 per cent of the shares in its stock market listing last summer sold to individual savers, who have since lost 72 per cent of their investment as of close on Wednesday. The listing was endorsed by the government at the time, the Bank of Spain and the country’s stock market regulator.

“It is quite sad – these people really did not understand what was happening to the bank, and what the dilution would be after the nationalisation,” said one Madrid investment banker.

Of course they didn’t.

But isn’t that the point?

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Realities: Spain Makes It’s (& Ireland’s) Stand

ECB rejects Madrid’s ‘Bankia plan’ but we’re edging closer to dealing with THE issue.

From the FT:

“Senior government officials in Madrid argue that bailouts in Portugal, Greece and Ireland have been catastrophic and Spain will not compromise on its refusal to accept a similar form of intervention.”


Spain have cards to play, and being Irish I’d advise them to play them hard.
Accepting the full <sovereign> cost of their banking resolution will cripple them.
I hope Rajoy makes a <retroactive> stand for all of us.
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Opening Quotes – Hope & The Distraction



Its a distraction.

There are far more pressing concerns.

Rajoy is right.

Europe needs some form of banking resolution (recapitalization) & credible bank deposit guarantee NOW.


Mariano Rajoy, the Spanish prime minister, called for eurozone leaders to focus on measures that would have a much swifter effect, saying that eurobonds would “need time” to be implemented.

“I believe that right now, it’s much more urgent to resolve the problems of financial stability,” he said after the Nato summit in Chicago. “[Financial stability] can be achieved quickly, doesn’t need debates or long discussions or studies or regulation, which is going to take two or three years to take effect. This is a decision which can take effect within 24 hours.”

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Opening Quotes: Blindingly Obvious? It is NOW!

If I get (got) it …..

It really is (was) …..

Times up.

FT: Phillip Stephens – ‘The last chance to save the euro’

“The clock is now showing one minute to midnight. Greece is probably beyond saving. The early signs of bank runs in Spain and other peripheral economies suggest the virus of contagion is taking hold even before Athens makes up its mind in a second general election. Policy makers have less time than they thought only a few days ago.”

“The central point – blindingly obvious but lost to the cacophony – is that what matters is the mix and sequencing of policy choices. Deficit-reduction depends on growth, but growth is sustainable only in the context of preprogrammed fiscal discipline. Thinking in terms of binary choices is self-defeating: when the discussion turns to Keynes versus Hayek, the game is lost.”

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Opening Quotes: The Reality Games

Slow motion Irish deja vue:

FT: ‘Spain to spend billions on bank rescue’

One adviser to Spanish banks and government agencies said that if the amount Madrid injected into Bankia ws not sufficient, and did not involve a much improved management of its bad assets, then the plan risked achieving little.

“Just injecting capital would be the equivalent of rearranging the deck chairs on the Titanic,” the person said. “I think Spain has not admitted to itself just how weak some of its banks actually are and how serious the situation is.”

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Opening Quotes: Irish Acceptance; Spainish Denial

Bloomberg: ‘Madness in Spain lingers as Ireland chases recovery’

Long article …..

And whatever about Ireland’s ‘recovery’ ….

Would make you very fearful about Spain.

They haven’t even begun to deal with the fallout.

“Spain, Europe’s fifth-largest economy, is the current focus of attempts to contain the region’s sovereign debt crisis, as Prime Minister Mariano Rajoy struggles to quell speculation it will need a bailout. Developers are showing similar optimism. They continue to build even with 2 million homes vacant around the country, new airports that never saw a single flight being mothballed, and property appraisers and banks reporting values have fallen only about 22 percent, said Encinar, who estimates the real decline is probably at least twice that.”


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Opening Quotes – Going NAMA

Spain  is going (Irish style) NAMA.

And from our experience:

– It may crystalize the collective ‘hole’ in the banks balance sheets.

– It will require serious re-capitalization euros.

– It won’t revive the property market.

– The banks will carry on de-leveraging regardless of whatever promises are made.

– And – without fiscal adjustment – the ‘real’ economy will continue to contract – for years to come.

FT: ‘Span in talks over ‘bad bank’ scheme’

“Government officials insist that the government-sponsored scheme should not be called a bad bank, because it will not be a bank and participating lenders will be able to park assets in it only if they have set aside sufficient bad loan provisions, independently valued.

That raises the question of how it will help banks trying to raise provisions for other loans and strengthen their capital. One official said it would relieve banks of the burden of trying to sell homes and let them focus on their core business of providing credit to the private sector. Bank executives who favour the idea say it is better than a rescue for the banking system financed by the state or the EU.”

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