Zerohedge - "Portugal 1 week away from bailout"

CookieMonster

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Wait... wasn't Ireland's forcefeeding of billions of euro of debt supposed to save Spain and Portugal from this?

Does this mean a debt crisis can't be solved with more debt?

WHO KNEW!
 


Nobber Man

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For ************************'s sake, are we only a few months away so from: German bond yields have been creeping above the psychological 7% mark... German bank shares are down dramatically... Chancellor Merkel has denied that Germany needs a bailout... Berlin official admits 'contacts' with IMF / ECB... Bailout of €50 gazillion announced for Germany... Ireland contibutes 50 cent to the fund...

I mean, it's absurd. The so-called 'markets' have to stop - or be stopped - somewhere. Will it keep going until, finally, the Chinese bail out the Germans and then we all become coolies?
 

Alexis Colby

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Where does the 'run' on euro gov bonds end?
today italy and belguim yields went higher
is the end of the euro the ultimate aim?
how would that affect QE2 in the states?
 

gombeensville

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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%.
I was wondering about Spain's banks and their apparent rude health! I was under the impression that they had a ridiculous property bubble just like us, which collapsed, therefore destroying the banking sector when all the developer's loans when pear-shaped. Now, if Spain's banks weren't lending for the property developers in Spain, since they're obviously in such good nick, who's were? Or was Seanie and the boys at work here too?
 

Tea Party Patriot

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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.
Yes you are correct in your point. But watch what happens when the interest rates go too high for overstretched Spanish banks to borrow money for refinancing on the bond markets. Irish banking crisis all over again only on a larger scale!

If you notice today it is the inability of Portugese banks to borrow that is finally forcing them towards a bailout.
 

Cassandra Syndrome

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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.
But half of that debt ($2.5 Trillion) was external from other countries mainly UK, France and Germany and US. The banks owe all that money and they may look good on paper but the property market has collapsed like ours.
 

slx

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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%.
Spain's "main banks" are almost totally unexposed to property debt. The problem is that Spain's housing bubble was largely financed by the 45 smaller banks known as Cajas (Caxias). This is why I think the Spanish banking debt is somewhat hidden because these small banks are below the radar.

The Cajas represent something like 50% of the entire Spanish banking market.

The likes of Santander, BBVA, BankInter etc etc are relatively safe.

It's quite an alien market compared to Ireland as it's just so fragmented. Ireland's setup is more like a handful of relatively large institutions (compared to the size of the economy).

There's also something really odd about some of the local banks in Spain. I know of examples like a small local bank which has 45 branches in a city about the size of Cork!

Something ain't right, that's for sure!
 
Last edited:

Sariel

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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?
They can't, the IMF get their funding from the member states and the SDR is not a currency because the IMF have no taxing power.
 

Sariel

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Wait... wasn't Ireland's forcefeeding of billions of euro of debt supposed to save Spain and Portugal from this?

Does this mean a debt crisis can't be solved with more debt?

WHO KNEW!
No, it depends on who is issuing the debt. All monetarily sovereign countries can solve a private debt crisis with public debt because they are monopoly issuers and as a monopolist they are price setters. This does not mean that they should, just that they could.
 

locke

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Where does the 'run' on euro gov bonds end?
today italy and belguim yields went higher
is the end of the euro the ultimate aim?
how would that affect QE2 in the states?
The aim is to turn a profit.

If it destroys the Euro, the speculators won't really care.

It's like when sterling was forced out of the ERM. That wasn't the aim; it's just that there was money to be made from the British Government's resistance.
 

deirdrem

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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%.
I've heard this said so often that I almost believe it.
However, I still ask the question:
How can Spain's banks be in good shape when they funded a housing bust every bit as severe as Ireland's?
Several banks also went on a buying spree, take overs, mergers, the works - where did the capital come for all of that, and who holds the debt?
I think Spain's banks are actually pretty scary.
 

slx

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I've heard this said so often that I almost believe it.
However, I still ask the question:
How can Spain's banks be in good shape when they funded a housing bust every bit as severe as Ireland's?
Several banks also went on a buying spree, take overs, mergers, the works - where did the capital come for all of that, and who holds the debt?
I think Spain's banks are actually pretty scary.
I'd say the story will just be like Ireland X 10 or so.
None of it adds up. Their banking model's different, i.e. lots and lots and LOTS of tiny banks. Hence, the problem isn't being recognized *yet*
 

Scipio

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Also, five of the seven banks which failed the E.U.'s farcical "stress tests" back in July were, you guessed it, Spanish.
 

dent

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Spain's "main banks" are almost totally unexposed to property debt. The problem is that Spain's housing bubble was largely financed by the 45 smaller banks known as Cajas (Caxias). This is why I think the Spanish banking debt is somewhat hidden because these small banks are below the radar.

The Cajas represent something like 50% of the entire Spanish banking market.

The likes of Santander, BBVA, BankInter etc etc are relatively safe.

It's quite an alien market compared to Ireland as it's just so fragmented. Ireland's setup is more like a handful of relatively large institutions (compared to the size of the economy).

There's also something really odd about some of the local banks in Spain. I know of examples like a small local bank which has 45 branches in a city about the size of Cork!

Something ain't right, that's for sure!
I would be 100% shocked if BankInter were safe. If ever there was a bank in league with developers, it was Bankinter.
 

slx

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I would be 100% shocked if BankInter were safe. If ever there was a bank in league with developers, it was Bankinter.
I said "relatively" safe :D

Relatively compared to say, Anglo!
 

dent

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I said "relatively" safe :D

Relatively compared to say, Anglo!
It was Anglo i had in mind when thinking about Bankinter !
 

cul de sac

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If Portugal goes tits up then the EU and ECB will have to think big. Then we might get a better deal. Buiter calling us insolvent only hastens Portugal's demise. He reckons the bailout fund needs to be doubled. There's every reason for the opposition to pin the government on the deal in the Dáil as it will be out of date within weeks.
 

NYCKY

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Couple of points here in response to some of the other comments. The IMF can't print money, that would be up to the ECB. If Spain needs a bailout, it will probably have to print money.

Remember the Germans wanted inflation targets baked into the Lisbon treaty (the have a phobia about inflation since their bout of hyperinflation after WW11). They would never willingly accede to turning on the printing presses but may have no choice if Spain comes knocking. Of course, just because a low inflation level is in the rules, it doesn't mean that rule can't be broken. Just lookg at the debt levels of most of the Eurozone countries, (besides the obvious Irish and Greeks) many of them are well beyond the 3% limit.
 


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