Zerohedge - "Portugal 1 week away from bailout"

Cassandra Syndrome

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Well he was spot on about Ireland. Now ZH reckons Portugal will be dialling that infamous Washington number within 1 weeks time. They are facing another credit downgrading and their bond yield has surged past 7%.

Next after that €5 Trillion indebted Spain.

Of course, he will need not only help, but a bailout, in one week when his bonds are trading a 10%+. In the meantime, let the comedy continue.
Portuguese PM Response To Downgrade: "We Dot Not Need Any Help" | zero hedge
 


asset test

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Well in fairness, Ireland ( Government telling porkies) said we didn't need help either.

What happens when Spain needs IMF help too after Portugal, which looks like a certainty? I think I can guess, but for my sanity I need it set out in black and white.
 

Alexis Colby

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@CS
i read somewhere that 50% of spanish debt is held in spain
as opposed to ireland having 90% + being external
does this make a difference?
better or worse for the spanish people?
 

Tea Party Patriot

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Well he was spot on about Ireland. Now ZH reckons Portugal will be dialling that infamous Washington number within 1 weeks time. They are facing another credit downgrading and their bond yield has surged past 7%.

Next after that €5 Trillion indebted Spain.



Portuguese PM Response To Downgrade: "We Dot Not Need Any Help" | zero hedge
After the battering the Portugese banks took today it might not even last a week. They are probably negotiating secretly already like Cowen and Lenihan were.
 

bokonon

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And Spain has already denied it needs a bailout...
A disturbing pattern is emerging in the galloping euro zone debt crisis. A struggling country denies it needs a bailout. Investors don’t believe it and drive up sovereign bond yields, making the bailout inevitable.

The no-bailout-yes-bailout reversal happened in Greece earlier this year. Two weeks ago, Ireland’s hapless politicians forcibly denied a bailout was needed, then accepted one on Sunday. On Friday, it was Spain’s turn to deny.

Spanish Prime Minister Jose Luis Rodriguez Zapatero told Barcelona broadcaster RAC1 that he is “absolutely” ruling out the need for a rescue package from the European Union and the International Monetary Fund...

Spain denies need for bailout as debt fears spread - The Globe and Mail
 

Cassandra Syndrome

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@CS
i read somewhere that 50% of spanish debt is held in spain
as opposed to ireland having 90% + being external
does this make a difference?
better or worse for the spanish people?
That is a good point, external debt in Spain is around €2.5 Trillion. Personally I think it will be worse for Spain because their households have savings of 200% of their income, so that will of course be used as collateral in any deal with the IMF for the €2.5 Trillion. Our external debt may be huge for the size of our country but its still about a trillion less than Spain's.

Its pointless speculating. Its mathematically impossible for the IMF to bailout Spain without printing more money and thats when the SHTF goes exponential into Zimbabwe levels.
 

asset test

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Euro "lite" for the Piigs so.

Bail us out, cast us adrift and give us a few scraps (pigs love scraps).

We bailouters should adopt a common currency, devalue, start up again, and give the bird to Germany and France.

OK, OK, I am hallucinating now, but really, that's what they hinted at. A core EU and a peripheral one.

They have engineered this, the muckers!!
 

Echolalia

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That is a good point, external debt in Spain is around €2.5 Trillion. Personally I think it will be worse for Spain because their households have savings of 200% of their income, so that will of course be used as collateral in any deal with the IMF for the €2.5 Trillion. Our external debt may be huge for the size of our country but its still about a trillion less than Spain's.

Its pointless speculating. Its mathematically impossible for the IMF to bailout Spain without printing more money and thats when the SHTF goes exponential into Zimbabwe levels.
I'm a little confused here, as I didn't think that the IMF could print money, only borrow it from donor Governments. If this is a typo and you meant the ECB , surely the Germans would rather leave the Euro than run the risk of hyperinflation?
 

Tea Party Patriot

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Euro "lite" for the Piigs so.

Bail us out, cast us adrift and give us a few scraps (pigs love scraps).

We bailouters should adopt a common currency, devalue, start up again, and give the bird to Germany and France.

OK, OK, I am hallucinating now, but really, that's what they hinted at. A core EU and a peripheral one.

They have engineered this, the muckers!!
The problem is if Spain goes, then Italy goes, and if Italy goes France goes because its itallian exposure is so high.
 

Clanrickard

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That is a good point, external debt in Spain is around €2.5 Trillion. Personally I think it will be worse for Spain because their households have savings of 200% of their income, so that will of course be used as collateral in any deal with the IMF for the €2.5 Trillion. Our external debt may be huge for the size of our country but its still about a trillion less than Spain's.

Its pointless speculating. Its mathematically impossible for the IMF to bailout Spain without printing more money and thats when the SHTF goes exponential into Zimbabwe levels.
Spain's debt to GDP is only 60% and their main banks are in good nick so they theoretically are in a better condition. Their problem seems to be no prospect of growth with unemployment at 20%.
 

asset test

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The problem is if Spain goes, then Italy goes, and if Italy goes France goes because its itallian exposure is so high.
But Germany will never go? Even though it has taken major risks with us, and no doubt others. Why is that?

No doubt I sound totally clueless, but I dare say I am not alone in all this either.
 

seabhcan

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If Spain is pushed into a bailout, the ECB will have to print the money. I doubt it would cause hyperinflation as the money would go to gradual repayment of debt. Not paying that debt would cause hyper-deflation.

And the Germans cannot leave the euro - returning to the D-Mark would amount to debt-forgiveness for eurodenominated debt, upon which the german banks depend. They would also instantly lose the market for their exports because the rest of europe would be unable to get d-marks to pay for those goods. Leaving the Euro = debt forgiveness + economic collapse.
 

Alexis Colby

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spain seems to be all over the place
too big yet too small
which for the IMF/ECB/Germans means too many unkowns
i cant see 'avoid risk-no creative' Merkel getting involved
 

Cassandra Syndrome

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I'm a little confused here, as I didn't think that the IMF could print money, only borrow it from donor Governments. If this is a typo and you meant the ECB , surely the Germans would rather leave the Euro than run the risk of hyperinflation?
In 2008, faced with a shortfall in revenue, the International Monetary Fund's executive board agreed to sell part of the IMF's gold reserves. On April 27, 2008, IMF Managing Director Dominique Strauss-Kahn welcomed the board's decision of April 7, 2008 to propose a new framework for the fund, designed to close a projected $400 million budget deficit over the next few years. The budget proposal includes sharp spending cuts of $100 million until 2011 that will include up to 380 staff dismissals.[13]

At the 2009 G-20 London summit, it was decided that the IMF would require additional financial resources to meet prospective needs of its member countries during the ongoing global financial crisis. As part of that decision, the G-20 leaders pledged to increase the IMF's supplemental cash tenfold to $500 billion, and to allocate to member countries another $250 billion via Special Drawing Rights.[14][15]
International Monetary Fund - Wikipedia, the free encyclopedia

When Special Drawing Rights were created in 1969 one SDR was defined as having a value of 0.888671 grams of gold, the value of one US dollar at that time.[1] After the breakdown of the Bretton Woods system in the early 1970s, the SDR was redefined in terms of a basket of currencies.[9][12] Today, this basket is composed of Japanese Yen, US Dollars, British Pounds and Euros, and the proportion each of these four currencies contribute to the nominal value of a SDR is reevaluated every five years.[1]

For the period of 2006-2010, one SDR is the sum of 0.6320 US Dollars, 0.4100 euro, 18.4 Japanese yen and 0.0903 pound sterling.

Due to varying exchange rates, the relative value of each currency varies continuously and thus the value of the SDR fluctuates. The IMF fixes daily the value of one SDR in terms of US dollars based on the exchange rates of the constituent currencies.[1] The latest US dollar valuation of the SDR is always available from the International Monetary Fund web site.[1]

^ When the Euro was introduced in 1999, it simply replaced the Deutsche Mark and French franc at the fixed conversion rate. The IMF officially quoted the amounts of converted Marks and Francs separately.[14]

With effect from January 1, 2011, the IMF has determined that the four currencies that meet the selection criterion for inclusion in the SDR valuation basket will be assigned the following weights based on their roles in international trade and finance [2]:

U.S. dollar 41.9 percent (compared with 44 percent at the 2005 review)
Euro 37.4 percent (compared with 34 percent at the 2005 review)
Pound sterling 11.3 percent (compared with 11 percent at the 2005 review)
Japanese yen 9.4 percent (compared with 11 percent at the 2005 review)
[edit] Allocation
Special Drawing Rights are allocated to nations by the IMF. A nation's IMF quota, the maximum amount of financial resources that it is obligated to contribute to the fund, determines its allotment of SDRs.[1]

Allocations are not made on a regular basis and have only occurred on a handful of occasions. One reason is that the IMF has considered the possibility of a reserve shortage remote as there has been a continued demand for, and sufficient supply of, US Dollars.[10]

The first allocation, 1970–72, was made due to the possibility of an insufficient amount of US Dollars, as the US was reluctant to run the deficit necessary to supply future demand.[7] While this situation was soon reversed,[9] suspicion of the Dollar during the late 1970s lead to the 1979-81 allocation.[10] The financial crisis of 2007–2010 precipitated the latest issuance of SDRs
Liberty 33 and its printing presses are just around the corner from the IMF HQ, if need be.
 

Clanrickard

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If Spain is pushed into a bailout, the ECB will have to print the money. I doubt it would cause hyperinflation as the money would go to gradual repayment of debt. Not paying that debt would cause hyper-deflation.

And the Germans cannot leave the euro - returning to the D-Mark would amount to debt-forgiveness for eurodenominated debt, upon which the german banks depend. They would also instantly lose the market for their exports because the rest of europe would be unable to get d-marks to pay for those goods. Leaving the Euro = debt forgiveness + economic collapse.
Yep I agree that is what they will do.
 

Cassandra Syndrome

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Spain's debt to GDP is only 60% and their main banks are in good nick so they theoretically are in a better condition. Their problem seems to be no prospect of growth with unemployment at 20%.
Thats sovereign debt only. Total debt including company and household is nearly 500% of GNP. That's the problem.
 

muffin

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spain seems to be all over the place
too big yet too small
which for the IMF/ECB/Germans means too many unkowns
i cant see 'avoid risk-no creative' Merkel getting involved
The problems were with Iceland and Ireland was total depedence on banking and property.

Not sure why with Portugal. Am guessing its because they do depend on tourism which is like zero now. Not sure why with spain and Italy.

Greece definitely has ridiculous retirement age, they retire at 50 which is mad. And they depend on tourism 100%.
 

Clanrickard

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Thats sovereign debt only. Total debt including company and household is nearly 500% of GNP. That's the problem.
Yeah but that doesn't really matter to bond dealers. Bonds are sold to the government on the basis of their ability to pay. It is very worrying to Zapatero and his mates but of no real concern I would think on the bond market. I would think they are a lot more worried about where Spanish growth is going to come from as they had an even bigger bubble than us.
 

Squire Allworthy

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Because of the Irish 'deal' Portugal has been hung out to dry.

Spain with 20% unemployment cannot possible tighten its belt. It needs growth. All the PIIGS need growth and with governments, individuals and businesses all reducing debt you get a downward spiral.

If Spain goes they will be taking positions against Germany!!
 


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