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Whilst all eyes are on Greece and whether or not it will leave the Euro, the results in Spain have been steadily getting worse
Spain's fourth-largest bank, Bankia, has asked the government for a bailout worth 19bns euros ($24bn; £15bn).
Bankia also restated its results - now saying it made a 2.98bn-euro loss for 2011 rather than the 309m euros in profit it announced in February.
So that's 19bn euro's on top of that plus it now turns out that the region's require 36bn of borrowing rather than the 8bn scheduled, ie 450% more than budget for so Spain already needs to find a further 47bn euro's more than it planned and Spain's borrowing costs are now at 6.26pc
With a country in recession and 24% unemployment,and over 50% youth employment, the question is has the Eurozone the firepower to rescue Spain.
Freeman
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"With a country in recession and 24% unemployment,and over 50% youth employment, the question is has the Eurozone the firepower to rescue Spain. "
East Germany reunification was estimated to be costing E100 billion a year in 2005, 16 years after the process began.
http://www.spiegel.de/international/spiegel/0,1518,373639,00...
How does Spain compare?
Have Fun
Rs3
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East Germany reunification was estimated to be costing E100 billion a year in 2005, 16 years after the process began.
Agreed - in an earlier post I suggested that Germany was a huge beneficiary of the Euro whilst at the same time was effectively "bailing out " East Germany ie they had no objection in principle to shovelling money into a failed economy
The reason I would suggest is that whilst in a domestic context the Bundesbank were confident that they could control the financial corrections needed to ensure that the enlarged Germany would eventually get back to competetiveness in a Euro context they have no confidence that Greece/Spain will do likewise.
The disconnect is between economic and foreign policy - for the Euro the German war guilt means they played along with the European idea but now they have to pay the bills - which they are not keen to do unless they have a similar level of control over financial policy
The ones that really ought to be hanging their heads in shame are those that were cheerleaders for the Euoro in the first place - Blairites and Lib Dems especially
glic
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the question is has the Eurozone the firepower to rescue Spain
Nop! Even if the Germany threw its financial might behind the euro (political suicide for Merkel if she did) this would only be a stop gap. Like many countries in Europe Spain must accept a much lower standard of living in the future - no politicians will impose this (again, political suicide) so eventually the markets will force this upon Europe, and the resulting collapse will be bigger the longer the problem remains unaddressed.
The only solutions that people come up with are to a) print more money and b) find new ways of creating/repackaging debt
More on Spain's regions - they haven't being paying the bills for years:
http://www.telegraph.co.uk/finance/financialcrisis/9290206/C...
Prepare for a breakdown in law and order as economies collapse. The UK government is doing this (or planning to):
The Government is drawing up plans for emergency immigration controls to curb an influx of Greeks and other European Union residents if the euro collapses, the Home Secretary discloses today.
http://www.telegraph.co.uk/news/uknews/immigration/9291493/T...
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Bottle you seem to have left out the way that the private sector normally deals with bad debts. Write offs and insolvency.
The bond vigilantes have so far had a field day imposing cuts that have in turn reduced growth and revenues. The irony is that they ignore their own culpability as the reckless lender and for some reason choose to ignore the other option, default, that reason being of course that those vigilantes make their money flogging the defaulting bonds.
Default is armageddon for the lender, not the borrower.
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Default is armageddon for the lender, not the borrower
That depends of course on whom the lenders are, the big problem is that the so called "flight to Quality" and the stricter requirements imposed on banks and pension funds and other financial institutions means that where the buck stops may not be where we might expect in the light of the fall of Lehman Brothers it was surprising where the fallout actually ended and the consequences might be far from what we might expect ie a Black swan moment
Freeman
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Default is armageddon for the lender, not the borrower
And who are the lenders? Just some far away financiers living on planet Zogg, or the rest of us in Europe?
Bond vigilantes as you put it aren't some faceless people manipulating the rest of us - they are the markets. A bond vigilante is a bond market investor acting on his own behalf, or more likely on behalf of a bank, pension fund, etc.
Defaults on the scale of Spain would start a chain reaction of events the likes of which we haven't seen before. All countries. not just the defaulters would be affected.
If (when) Spain defaults I would rather be living in the UK than Spain, as I suspect you would!
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Bond vigilantes as you put it aren't some faceless people manipulating the rest of us - they are the markets. A bond vigilante is a bond market investor acting on his own behalf, or more likely on behalf of a bank, pension fund, etc.
Defaults on the scale of Spain would start a chain reaction of events the likes of which we haven't seen before. All countries. not just the defaulters would be affected.
If (when) Spain defaults I would rather be living in the UK than Spain, as I suspect you would!
True. For all three paragraphs.
I am not advocating default, the ideolgical vigilantes would just sell some other bond whilst preening in front of their clients that they did their best to "defend" bonds. In reality their ideology (and from the comment above) yours that "the markets" is somehow perfect or fair would yet again have been shown to be false. Indeed you proclaim their judgement as if it were Solomon's, divined from God.
My point was and remains that the ideologs that dominate the bond market, like you earlier, ignore default as an option. Indeed the most likely option if the vigilantes try to enforce too high a threshold of pain on the debtor. The trouble is that since austeruity was imposed upon Greece their economy has shrunk 20% (not all of that down to austerity) and just last month their tax revenues were down 20% on 2011 - already a crisis year.
The fiscal hawks, backed by the bond vigilantes, seem to be doing their best to push nations into default whilst in their rhetoric, like yours they just attack printing money (whilst being content with repackaged debt to pass off to some sucker).They deny even the possibility of default.
Default on Greek debt is more likely than exit from the Euro and it is almost impossible to see a scenario where a country exiting the euro would honour debts in euros, They would default. Indeed Euro exit is relished by righties of roof of its hubristic overreaching ambition, a cause for celebration but exit from the Euro is really code for debt default.
The vigilantes probably know this, they relish the volatility of a Euro breakup and ignore their customer's default pain but worst of all they completely fail to look at themselves as the sainted, perfect, fair, efficient "market" that only meets those aspirations in text books not the real world. They really believe that they are right to try to assert power as mere traders of others investments, They have mis-sold Greek bonds for years, pocketed their percentage, yet now they moan that Greece gave them so much debt to sell on (for a fee). Market hypocrisy driven by ideology and sadly they will be ok, the widows and orpans they are still flogging bonds to for a fee are the one placed at risk not them.
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bottle
Defaults on the scale of Spain would start a chain reaction of events the likes of which we haven't seen before. All countries. not just the defaulters would be affected.
The cost of Greece exiting would exceed the assets of the ECB twice over. The cost of Spain defaulting would be unimaginable. No matter where you live, as this NZ article indicates, there will be repercussions.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&a...
The cost of Greece exiting the euro would be unmanageable and probably exceed the €1 trillion ($1.66 trillion) previously estimated by the Institute of International Finance, says the group's managing director.
"Those who think that Europe, and more broadly the global economy, are really prepared for a Greek exit should think again."
The European Central Bank's exposure to Greek liabilities was more than twice as big as the ECB's capital, said Dallara, who represented banks in their negotiations with the Greek Government on its debt restructuring.
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the ideolgical vigilantes
What is one of these????
In reality their ideology (and from the comment above) yours that "the markets" is somehow perfect or fair would yet again have been shown to be false
Markets are far from perfect, but they are as good as it gets. I don't know what 'fair' means in this context, unless it means lending to risky countries at the same rates as low risk countries (but that's how we got here in the first place isn't it?)
The fiscal hawks, backed by the bond vigilantes, seem to be doing their best to push nations into default whilst in their rhetoric, like yours they just attack printing money (whilst being content with repackaged debt to pass off to some sucker)
Fiscal hawks - love this one richas.
They deny even the possibility of default.
Certainly not me, it was doomed from the start. If you are having a go at ideologues then the idiots who designed the euro
system should be at the front of the queue
The idea that we are all the victim of fiscal hawks and bond vilitates who are capable of bring down not just government but continents is false. The reason that the EU/euro zone is on its knees is simple - we have been left behind when it comes to earning our keep in the world and the social model that many countries now have is too costly. There was a program on debt (CAB I think) on the radio the other day when they told of one man who had maxed out 60 credit cards - some European countries are looking like this.
Governments all over Europe are now coming up with every imaginative was of creating credit/loans to keep the spending wagon rolling, while the wheels are falling off all around them
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Default on Greek debt is more likely than exit from the Euro and it is almost impossible to see a scenario where a country exiting the euro would honour debts in euros, They would default. Indeed Euro exit is relished by righties of roof of its hubristic overreaching ambition, a cause for celebration but exit from the Euro is really code for debt default.
Is it? Or is it a Stop Loss?
If Greece left the Euro - and the other Eurozone nations took on a significant portion of her debt (in order to protect Eurobonds), then Greece would have defaulted*.
But the lenders would not lose out.
And the remaining Eurozone countries would not have to throw any more money at Greece.
PetraM
*Although that could be done over decades as the Euro-nations could accept a swap for Drachma bonds.
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Bottle, you seem to have missed what my point was.
You missed out an obvious option, default. In fact nobody is advocating accelerated borrowing or going for hyperinflation (though allowing inflation to erode the real value of debt over the medium term is certainly part of the future). Presenting those non existent policy proposals as all that is possible in managing the global crunch is disingenuous, not by you but propigated by the bond vigilates and fiscal hawks.
As it happens the ideologs advocating austerity are often those who have been flogging the bonds or making money from the debt, the bankers that entusiastically entered into reckless lending. Now they want the poor and vulnerable to suffer to make sure they get their cash back (or more often the cash of their clients, its probable that they are trying to shift the misselling blame).
Now instead of mentioning the default option (as you failed to do) they insist that the pain needs to be paid by the most vulnerable in over indebted countries. This rhetoric of "payback time" has its place but it is time the bankers, bond sellers and the rich who have benefited most from the credit boom faced that time.
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If Greece left the Euro - and the other Eurozone nations took on a significant portion of her debt (in order to protect Eurobonds), then Greece would have defaulted*.
But the lenders would not lose out.
And the remaining Eurozone countries would not have to throw any more money at Greece.
What Eurobonds? That is a proposal for new lending, they do not exist and the idea that the rest of the Eurozone would start paying Greek dets just because they are in Euros is fantasy.
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Bottle, you seem to have missed what my point was.
You missed out an obvious option, default
I haven't missed this at all - its the most likely outcome - I thought that I'd made this obvious
Austerity could contain the problem within a country but it won't work. The economic collapse will probably spread, hence the exchange/banking controls that will be required
This rhetoric of "payback time" has its place but it is time the bankers, bond sellers and the rich who have benefited most from the credit boom faced that time.
benefiled most from the credit boom - shouldn't this list of miscreants include the people who spent the money?
You'll blame The Germans next for saving their money and working hard
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benefiled most from the credit boom - shouldn't this list of miscreants include the people who spent the money?
Err yes, and in the case of Spain that is lots of mortgage borrowers and private sector developers not the taxpayer bailing out their banks.
You'll blame The Germans next for saving their money and working hard
Nope, Germans don't really go for mortgages and they have high productivity. The crisis is not the fault of their higher saving rate or high productivity.
The crisis is their fault because they were the chief beneficiaries of the Euro, they have had a decade of a vastly underpriced currency that has made their goods and services far cheaper internationally and so more competitive. They also shipped loads of things like Leopard II tanks to the Greeks on credit.
Via the Euro the Germans have had a windfall gain in their terms of trade which (unsurprisingly) matches the penalty of the overvalued Greek, Italian, Spanish or Irish currency which has in contrast to Germany constrained their export and growth capability. The Germans got the trade benefit, they sold the goods on tick to people borrowing with either an explicit (for armaments) or implicit German credit guarantee. Now they can either prop up the deal that has served them well or watch their customers default. As it happens the deeper the crisis in Greece aet al the lower the Euro goes and the greater the windfall gain for German business so maybe they just need to keep the crisis going along for another few decades and bank the cash from their loans and their exports.
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