Spain and Italy ban short-selling to calm volatile markets as debt crisis spawns global sell-off

Too little, too late, but God love 'em for tryin', right?  CNN, via The Extinction Protocol:

July 23, 2012 – ROME – Securities regulators in Spain and Italy both instituted short-selling bans Monday as financial markets tumbled. The move is designed to limit the downward pressure on markets by preventing investors from betting against shares of certain companies. The ban in Italy applies only to short positions in shares of banks and insurance companies, according to the Commissione Nazionale per le Società e le Borse, or CONSOB. Spain’s Comisión Nacional del Mercado de Valores (CNMV) banned short positions in shares of all companies under its purview. Both bans are temporary. In a statement, CNMV said European shares have been hit with “extreme volatility” that might cause the “disorderly functioning” of financial markets.(Artfully worded, no?) Regulators in Italy and Spain, as well as France and Belgium, imposed a temporary short-selling ban in August 2011, at the height of the last major flare-up in the eurozone debt crisis. Back in 2008, the Securities and Exchange Commission banned short selling for 799 companies in the wake of Lehman Brothers’ collapse. The move was aimed at restoring confidence and stemming a steep stock sell-off. The bans could limit the selling in the short-term, but longer-term, investors want concrete evidence that the global economy is turning around. Investors are currently concerned that Spain might be forced to seek a bailout similar to those taken by other troubled euro area economies, although Madrid reiterated Monday that it will not need additional aid.

At this stage of the endgame, today's actions are pointless.  Pointless.

No One Expects the Spanish Revolution?

From The Daily Kos.  Forget about Greece or Portugal or Ireland:  It looks like Spain's gonna blow first.

You wouldn't know it from the sub-rosa treatment being given to it in America, but Spain is currently experiencing something like the Arab Spring. As one Spanish author put it:

Madrid isn't Tahrir, but the "virus" is the same: an abundance of youth without hope, doomed to a declining market modernized by cutting social rights and jobs, with the only prospect long-term trash contracts. There are thousands of stories of men and women who can't find a position, who suffer. No one speaks of them. The party line prevails, that of the others, of bureaucratese, of press conferences without questions, of the untouchables.

From the coverage that Spain does receive in American media, you would think that the government is one of the more deeply indebted in the EU.  However, this is simply false. Eurostat data (see below) shows that Spain has a moderately high current government deficit, but has an actual sovereign debt substantially lower than France, Germany, or the UK.

Spain doesn't have a government debt problem.  It does have an enormous private debt problem. Household debt is part of the problem, but is far overshadowed by business debt.  The reason that the Spanish government faces such a premium when financing debt is that the banks doing the lending expect the government to be called upon to assume this private debt in the near future.

Now that we know the truth about where the debt lies, we need to ask who holds it.  Yes, there is a great deal of domestic exposure here: Spanish banks holding Spanish debt.  But, when you look about the Merkel-Sarkozy axis of austerity, the pattern of Spanish debt holdings becomes all the more suspect.

French and German banks are heavily exposed to Spanish private debt.  The Spanish government is being called upon to assuming this debt, and implement austerity measures to pay the bill, as a means for Merkel and Sarkozy to protect their nation's haute finance. It's the banksters stupid!

But it's the Spanish public paying the bill.
..
Unemployment is a peculiar Spanish bane. The country regularly has a rate higher than the rest of the continent. The overall rate stands at more than 20%. The collapse of the real estate market and declines in tourism help explain this in part.  More serious is the fact that much of the country has a business class intent on competing on low labor costs, even though this is out of step with the reality of modern Spain. As bad as this has been for country as a whole, the burden on young workers has been hardest.  Youth unemployment in the country lies at nearly 50%

Angry, unemployed youth are the fuel that lit the Arab Spring. And, Spain has them in spades. That shit is going sideways now doesn't seem like it should be a surprise.

Spain's descent into chaos will be presented as astonishingly fast, but the contributing elements have been percolating for some time now.  The first European domino is rocking..

For Europe’s Future, Spain Is All That Matters

Another great analysis from Gonzalo Lira. Excerpts:

If I had to bet on which country will bring about the end of the Euro—and perhaps even the end of the European Union—I’d have to say it’s Spain.

Right now, no one is talking about Spain—Spanish spreads are as quiet as a guilty man in a police line-up—everyone’s too concerned over Ireland, and the upcoming Portuguese Situation.

But Spain is the key—Spain is what you should be paying attention to, if you want to find out what will happen to the European Monetary Union (EMU), and the European Union (EU) itself.
And:
According to IMF numbers for 2009, the gross domestic product of Greece was $331 billion, Ireland was $221 billion, and Portugal was $233 billion—

—but Spain’s GDP in 2009 was $1.468 trillion. Roughly twice Greece, Ireland and Portugal combined. In other words, close to half of Germany’s GDP.
And:
Therefore, to bail out Spain, and plug up its fiscal balance sheet hole over the next three years would cost €450 billion—minimum. That’s about $600 billion.

Look at that number again—look at it closely, and take your time:

€450 billion.(600 billion US)

That’s twice the size of Ireland’s total GDP for 2009.

In order to figure out how much each party would have to shoulder of this €450 billion price tag, Bruce Krasting, in some private e-mail exchanges, thought that the percentages that the EU, the ECB and the IMF were shouldering for the Greek and Irish bailouts could serve as a template.

Fair enough: If we go by Greek and Irish percentages, then roughly a third of that €450 billion price tag to bail out Spain would be shouldered by the IMF—and as everyone knows, the U.S. puts up 20% of IMF money.

So the U.S. would be on the line for €30 billion—$40 billion—to save Spain.

Then Bruce delivered his verdict: “The U.S. is going to say ‘Yes’ to that and ‘No’ to California? No way. Not going to happen with this new Congress."
And:
Therefore, the IMF’s participation in a Spanish bail-out will be severely reduced, if not marginal. Therefore, bailing out Spain will be a strictly European affair.

Does Europe have €450 billion to bail out Spain? That is, does Germany have €450 billion to bail out Spain?

No it does not. It does not have the money for such a bailout—and even if it did, it does not have the political will to push through such a bailout.

Period.
And Finally:
Best case?

Though they remain in the European Union, the weaker economies exit the EMU and go back to local currencies, which they quickly depreciate, while their Euro-denominated sovereign debts are restructured and paid off over time. The Euro becomes the currency of France, Germany, Holland, Finland and Austria.

Worst case?

I can imagine a number of worst cases, all of them different, except for one thing in common: They’ll all be bad.