skip to main |
skip to sidebar
Because of the huge news day we had yesterday, Spain asking for bailout got lost amongst the chaos. Make no mistake: This is a big story. CNN Money via The Extinction Protocol. Post:
June 25, 2012 – SPAIN - The Spanish government made a formal request to the Eurogroup on Monday for up to €62 billion ($77 billion) in financial aid for its troubled banking sector. “I have the honor to write to you, in the name of the Spanish government, to formally request financial assistance for the recapitalization of the Spanish banks that require it,” wrote Economy Minister Luis de Guindos, in a letter to Eurogroup president Jean-Claude Juncker. In a worst case scenario, Wyman found that Spanish banks would need between €51 billion and €62 billion in additional capital. Berger estimated the banks would need €51.8 billion. The auditors used stress tests similar to those conducted by the International Monetary Fund, which said last month that banks need to raise €40 billion. The Spanish government did not specify the exact amount it would need. The uncertainty around Spanish banks has raised speculation that Spain will need a bailout similar to those given to Greece, Ireland and Portugal. Investors are also worried about how Spain’s problems will impact Italy. The fear is that bailing out Spain would drain the euro area’s crisis resources and leave Italy without a safety net. The leaders of the four biggest eurozone economies agreed Friday on a plan to boost economic growth in the troubled currency union. Without going into detail, the leaders said they agreed on a set of growth-enhancing policies equal to about €125 billion, or 1% of eurozone gross domestic product.
Spain's GDP is bigger than Greece, Ireland, and Portugal together. Spain very well could be the Eurozone's Tipping Point into collapse.
Dark, yes; But Doomy? Yes, well; That too.. The Economic Collapse, via The Extinction Protocol. First and last paragraphs:
June 20, 2012 – ECONOMY – Yes, it is officially time to start freaking out about the global economy. The European financial system is falling apart and it is going to go down hard. If Europe was going to be saved, it would have happened by now. The big money insiders have already pulled their funds from vulnerable positions and they are ready to ride the coming chaos out. Over the next few months, the slow motion train-wrecks currently unfolding in Europe will continue to play out and things will likely really start really heating up in the fall, once summer vacations are over.
And: Restated for effect..
German Chancellor Angela Merkel has declared that Germany will not budge at all on the terms of the Greek bailout. If you are looking for some kind of a global financial miracle; you can stop watching. If European leaders had a master plan to save Europe, they would have shown it by now. The entire house of cards is starting to come down and things are going to get really messy. A lot of people both in the United States and in Europe are going to lose their jobs and their homes over the next few years. It is likely that the next recession will be even more painful than the last one was.
Our global financial inter-connected-ness will come as a big shock to many people. Also shocking will be the lack of preventative monetary firewalls that could have averted this looming crisis.
Hey! You live; You learn!; You know?
Interesting theory as to how the Eurozone may spin down/spin out of control and implode/explode.. The Extinction Protocol. Excerpts:
Here’s how the Eurozone crisis 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 fellow Mediterranean country has been offered, followed by a Finnish departure from the euro that might finally bring the whole saga to a climax. It would be a rough ride — and you wouldn’t want to be holding many assets other than dollars or gold or possibly Swiss francs while it was playing itself out. But at least it might bring a resolution to the crisis. Almost a quarter of the euro’s 17 members have now needed outside help, and Cyprus will probably join the list soon. It is hardly a great record for a monetary experiment, which, let us remember, was meant to bring greater stability — not less. So how could this play out over the summer. Here’s how the sequence might work: First, the Spanic (for a panic in Spain). We’ve just seen one rescue package for the troubled Spanish banks. But who says 100 billion euros is enough? This is a country that is sliding into deep recession, and where the government is cutting spending fast — which is only going to deepen the recession.
..
Imagine how that is going to feel to the Italians. The Spanish get borrow money at half what it costs them — and this at a time when very high borrowing cost are pushing your country into the fifth recession since the nation joined the single currency. Worse, Italy has to stump up around 22% of the Spanish rescue — borrowing money at 6% to give to its neighbors at 3%. That isn’t going to go down well. Finally a Fixit (for a Finnish exit). The crisis will finally come to a head when one country decides to get out. Finland is the most likely. Why? Because it is a small nation with a strong economy. It is easy to head for the door. Finland would be better off on the first day, just as Estonia was when it decided to leave the ill-fated ruble zone created after the collapse of the old Soviet Union. It doesn’t particularly have to worry about the impact on the European Union, in the way that Germany would if it opted out. If a country such as that leaves, it is effectively game over, but no one can really say that of a tiny place such as Finland. And it has a strong anti-euro political grouping; the True Finns scored well in the last election and may well improve their position in the polls. Finland is already demanding collateral for its portion of the Spanish loan. That could well turn into a deal-breaker — no collateral, so we’re out of here. Once one country leaves, it is much easier for the next to leave, in much the same way as it is easier to be the second person to leave a really bad party than the first.
(Emphasis from the article)European Banks will be wiped out: Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) loss if the euro crisis results in the single currency bloc breaking apart, according to one of the first in depth analyses of what might happen if the eurozone disintegrates. The analysis by Credit Suisse estimates that up to 58% of the value of Europe’s banks could be wiped out by the departure of the “peripheral” countries – Greece, Ireland, Italy, Portugal and Spain – from the eurozone. Even if the single currency remains intact some €1.3tn of credit could be sucked out of the system as banks retrench to their home markets, unwinding years of financial integration, the Credit Suisse analysis warns his represents as much as 10% of the credit in the financial system. “We find that a Greek exit could be manageable … but in a peripheral exit, few of the large listed eurozone banks would be left standing,” the Credit Suisse report said. The banking sector could need capital injections of as much as €470bn if the three scenarios considered by the Credit Suisse analysts – a Greek exit, an exit of the periphery countries and a situation where banks retrench domestically – happen at once.
And:(My emphasis)
The Credit Suisse analysts insist they are not expecting the euro area to break up – or for Greece to leave – but they believe it is likely there will be a dramatic reduction in cross-border business – leading to less loans for businesses and individuals. The International Monetary Fund has estimated that some €2tn of credit could be lost through a euro zone break up and the Credit Suisse analysts point out they have only analysed the impact on banks they research.
Remember the good old days of say, January, when any mention of Greek, Spanish, or Italian bailouts, defaults, or anyone at all leaving the European Union was so far fetched it wasn't even discussed? Wow, six months later, and here we are.. So what does that say about the real magnitude and urgency of Credit Suisse's analysis? Is this close to an accurate assessment, or a vastly under-estimated threat?
Posts
