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Post by jeffolie on Mar 5, 2012 16:32:15 GMT -6
Comparing troubled Italy to the image that Spain is less troubled, the portion below concludes Spain will crash and burn before Italy ... I continue to view Spain as the bigger trouble that will be too big to refinance resulting in the biggest trouble for the euro... When ... late 2013 or 2014 =========================== " ... Sufficient Unto the Day So what does a country with deficits and growing debt do? It sells lower-current-cost short-term bonds to help its current deficit (more on that later), rather than take on longer-term debt. It can also buy back more expensive longer-term debt sold last year for much lower short-term rates today. But that means there is more roll-over risk in the very near future, as you have to borrow to replace those bonds when they mature; but why worry about that today? As my Dad was wont to say when he wanted to ignore the problems cropping up in his future, "Sufficient unto the day is the evil thereof." I saw a table created by those clever people at Bridgewater. They analyzed the nature of the capital of the banks of various European countries. Not much has changed in the last few years, except that foreign capital is still fleeing and that capital is being replaced (almost euro for euro) by ECB debt. Let us make no mistake, without ECB largesse, European banks would either have to sell equity at fire-sale prices or their governments would have to nationalize them. Otherwise they would be insolvent. And that would in all likelihood mean a credit crisis worse than 2008, as hard as that is to imagine. And while many applaud Mario Draghi's actions, as they feel he has averted a crisis with his initiation of the LTRO, there are others who are not pleased. This note from yesterday's Financial Times: "The head of Germany's Bundesbank has launched a powerful attack on Mario Draghi, president of the European Central Bank, in a sign of mounting concern in Europe's biggest economy at measures being taken to try to contain the eurozone financial crisis. "Jens Weidmann's warning of increasing risk stemming from some ECB policies highlights fears of potential costs for Germany from its role as the eurozone's biggest creditor nation and may spark fresh doubts about the eurozone's ability to deal with the long-running banking and sovereign debt crisis. "Mr Weidmann, who has an influential voice on the ECB's governing council, said the central bank risked endangering its reputation and called for a quick return to stricter rules on the collateral that the ECB accepts from banks in return for central bank funds. The criticism in a letter to Mr Draghi was revealed on Wednesday by Germany's Frankfurter Allgemeine Zeitung." Peter Sands, the head of Standard Chartered (a British commercial bank), warns that the new money runs the risk of "laying the seeds for the next crisis." He wonders what happens in three years' time when all that debt needs to be refinanced. That seems a reasonable question, as finding a spare €1 trillion will not be a lot easier in three years. Former ECB board member (and fellow Italian) Lorenzo Bini Smaghi added to Mr. Sand's concerns. He said that banks may become "addicted to easy financing," creating a disincentive for them to "stand on their own feet once the crisis is over." (the FT) The concern is that the ECB is now committed to more than just €1 trillion. As noted above, ECB financing, which amounts to almost 8% of peripheral countries' bank financing, has offset foreign (to the home country) debt that is leaving. Since that exodus is accelerating, the word fleeing may be more appropriate. And foreign investors (mostly banks, as I understand it) have another 14% of funding in peripheral banks. The concern is that the ECB may have to come up with even larger sums to offset the losses as foreign assets flee. (Foreign in the sense that they are not from in-country sources. As an example, Italian banks have about 6.5% of ECB funding and 12% of foreign – non-Italian – funding.)
There is really no way to know how much will be needed to forestall a further crisis. The ECB has so far signaled it is willing to step up, and the markets seem to see no reason it won't continue to do so. But therein lies the unintended consequence. In an effort to keep the eurozone from breaking up in the midst of a credit crisis, they may have made it easier for it to break up in the future. To understand why, let's revisit Greece a few years ago. Was it only three years ago that the market was willing to lend Greece all the money it wanted at rates not far above those of Germany? And then it seemed like, all of a sudden, in the blink of an eye, Greece could no longer sell debt at interest rates that allowed it to credibly have a hope of repaying the debt. And Europe had to step in and bail them out. But let's be certain of one thing. As I was writing back then, the ONLY reason that Germany, France, et al., were willing to continue to lend Greece money was that their banks had bought so much Greek debt that if they had to write it off all at once it would cost the various governments hundreds of billions. The financing package of €130 million that Greece will get? €100 billion goes right back to private bondholders, mostly banks and institutions (like insurance and pension funds). Just to create the fig leaf that there is no default. So Greek debt actually goes up, even though there is a haircut on current debt. (More on that below.) If the only banks that held Greek debt had been Greek banks, then Europe would simply have let Greece go under, with its banks. Maybe some token help, but nothing like the amounts that have been funded. Greece would have had no choice but to leave the eurozone and return to the drachma. I wrote at the time that we would know when German banks had essentially sold their Greek debt, written it down, or were otherwise able to handle a default, because Merkel would no longer be willing to fund Greece. That point was essentially reached a few months ago. Now Europe keeps demanding ever more austerity from Greece, and every time Greece agrees they move the line and ask for more. Greece is now going to have to demonstrate it is willing to cut spending and raise taxes, no matter what. Greece's economy will experience deflation this year as GDP falls 4.4%, the nation's fifth straight year of recession, according to the European Commission. Greece's economy contracted 6.8% last year and 3.5% in 2010. As recently as November, the commission forecast the Greek economy would contract just 2.8% this year. But just two weeks ago that estimate was blown away. Fourth-quarter data showed Greece had contracted by almost 7% in 2011. But they had just agreed to massive austerity cuts for the next ten years, totaling as much as their current annual GDP. In an economy where government spending is 40% of GDP. Such cuts will make it even more unlikely they can meet their targets. Europe will then demand even more cuts when the targets are not reached (or increases in taxes on what's left of the private sector). Everyone realizes the party is over, but no one wants to be the first to leave. It simply will not do for the eurozone to expel a member. The precedent is dangerous. So they make staying in the eurozone so onerous that leaving eventually becomes the best choice (more on that later). "We didn't tell force you to leave; it was your own choice." So what is happening now is that European banks are slowly shedding their foreign sovereign debt and buying the sovereign debt of their own countries. More Italian debt is coming home to Italy, Spanish debt to Spain, and so on. Given ECB funding, this process will go on for several years. And at some point, if Spain or Italy decided to partially default, then European banks will be able to absorb the losses. If one of the peripheral countries does not get its budget in order, then it too will have to face the music of austerity and rolling recessions, just as Greece is, in order to get funding from Europe. If, as an example, Europe decides to no longer fund Spanish debt (at the cost of German and other taxpayers) without draconian austerities, what then? Since Spanish debt will mostly be in the Spanish system (banks, insurance, pensions, etc.), if Spain decides to leave the eurozone it will be much easier on the larger European system.
I think the very fact of allowing (encouraging?) the various countries to bring the debt home to internal banks and institutions is in fact increasing the likelihood of exit from the eurozone, when a future crisis occurs . It's all well and good to talk solidarity, but continuing to fund the peripheral nations at the cost of other taxpayers, with the accompanying damage to the euro, will soon wear thin on voters in those other countries.
Far-fetched? Aren't Spain and Italy getting their act together? Kiron Sarkar makes the following points, with which I agree, so let's jump to him (courtesy of The Big Picture):
"Spain unilaterally set its 2012 budget deficit at 5.8% of GDP, much higher than the 4.4% previously agreed with the EU. The budget deficit came in at 8.5% last year, once again higher than the target of 6.0%. A ‘discussion' between Spain and the EU is inevitable, especially as (to date) the EU has insisted that Spain sticks [sic] its prior commitment. Quite an interesting development, particularly as it has come on the same day that 25 out of 27 EU countries (excluding the UK and the Czech Republic) signed up to the ‘fiscal compact' which, once approved by each country's national Parliament (Ireland will need a referendum), will introduce the German inspired ‘debt brake' into their constitutions – basically commits the 25 EU countries to reduce borrowings and, indeed, balance their budget deficits.
"Spanish unemployment rose by a massive +2.4% MoM in February, with youth (under 25) unemployment over 50%, yep that's 50%.
"The EU has a tough task. If it offers concessions to Spain, expect Portugal, Ireland, etc., etc. to submit their own ‘requests.' However, I just can't see how Spain can meet its prior commitment. Officially, GDP is forecast to be -1.0% to -1.7% this year, though in reality the actual outcome will be closer to (indeed may exceed) the more pessimistic forecasts.
"Whilst Spain is facing increasing pressures, Italy announced today that its 2011 budget deficit fell to -3.9% (-4.6% in 2010), better than the -4.0% forecast. 2011 GDP came is a marginally higher at +0.4%, (+0.3% expected). Whilst Italy entered into recession in the last Q of 2011 and its economy is expected to contract this year, Italy has pledged to balance its budget deficit by 2013.
"As I keep banging on, Italy is in far better shape than Spain, in spite of its higher headline debt to GDP. Spanish and Italian bond spreads continue to converge – I remain of the view that Italian bond yields will decline below equivalent Spanish bonds."advisorperspectives.com/commentaries/millenium_030312.php
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Post by jeffolie on Mar 6, 2012 15:57:13 GMT -6
Greece is little compared to the implosion coming in Spain ... sooner rather than later " ... Remember how it all started in Greece? Yes, Spain is following the same path. Having spent another 90 billion Euros more (that it doesn’t have) than projected in 2011, things will start heating up in Spain. With unemployment sky rocketing, the property bubble about to implode for the second time, Spain does not need a credibility problem. Espana, everything under the sun. More on the Spanish Economy and the (in)famous ghost towns of Spain below; ..." ============================= Spain-Europe’s pink elephant in the room about to implode03/06/2012 Finally reality is knocking on the door. The Teflon market, churning higher on no volume, is taking a pause. The no volume, low volatility market has attracted many new “smart” and confident longs. Even Bank of Israel is now engaged in trading Apple (according to ZH). The markets have shown signs of “strange” behavior lately. The “secret” GLD and SLV seller surprised many when hammering the metals last week. Yesterday’s mini flash crash in Apple, has suddenly reversed investor sentiment across the markets. Meanwhile, the credit markets have continued underperforming. People still talk about Greece (and about Alex Hope, the FX trader), but the elephant in the room, Spain, is still neglected given the size of the potential problems arising in Spain. Remember how it all started in Greece? Yes, Spain is following the same path. Having spent another 90 billion Euros more (that it doesn’t have) than projected in 2011, things will start heating up in Spain. With unemployment sky rocketing, the property bubble about to implode for the second time, Spain does not need a credibility problem. Espana, everything under the sun. More on the Spanish Economy and the (in)famous ghost towns of Spain below; From El Pais; Prime Minister Mariano Rajoy on Monday ruled out the idea of affording the country’s regions some leeway on their contribution to reducing the shortfall in the state’s finances. At the same time, Economy Minister Luis de Guindos on Monday estimated the government would have to find budget savings of 37.9 billion euros this year to meet the deficit figure of 5.8 percent of GDP. De Guindos insisted that the higher-than-agreed overshoot complied with the terms of the European stability pact. The regions, which were largely responsible for the blowout in the country’s finances last year, will have to contribute 15.6 billion euros to the total estimated by De Guindos. The country’s two biggest regions, Andalusia and Catalonia, on Sunday called on Rajoy for some slack in the target in order not to have to cut back on essential services such as health and education. (Full reading here). Remember those ghost towns? From Huff Post; Towering apartment blocks, complete with swimming pools and playgrounds, loom over empty streets, weed-filled lots and gaping excavation pits. The lone bank in this mega-development nicknamed “Manhattan” closed two years ago and most storefronts are bricked up. Apartments galore are for sale here and prices are plunging. More than 13,000 apartments were supposed to go up to create a mini-city for 30,000 people just 45 minutes outside of Madrid. But only 5,100 were built, many are uninhabited and regular Spaniards who bought them as investments are now competing to offload them for huge losses. Spain’s real estate crash and economic implosion have turned what was supposed to become a vibrant suburban paradise for young Spanish couples and their children into one of the most visible monuments of the country’s boom gone bust. Such modern-day ghost towns have become a familiar part of the Spanish landscape, abandoned shells left to slowly decay. (Full article here). Ghost town video here. (bottom of page) www.zerohedge.com/contributed/2012-10-06/spain-europe%E2%80%99s-pink-elephant-room-about-implode
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Post by jeffolie on Mar 9, 2012 10:13:24 GMT -6
A piece here starts to speak to the greater than acknowledged bad debts hidden in Spain's regional debt and more ... this piece is too little and the recognition is too late =========================================== March 8, 2012 Alarm sounds over Spain’s rising public debt In the years of economic crisis since the collapse of Lehman Brothers in 2008, Spanish leaders have always been able to boast to nervous investors that Spain’s public debt burden – however bad its annual budget deficits – is smaller than Germany’s and well below the European Union average. Economists, business executives and even government officials, however, have started to sound the alarm about the rapid and unsustainable growth of the country’s public debt. The original boast remains officially true, despite scepticism about “peripheral” European economies after the Greek bailouts. The latest statistics from September 2011 show total Spanish public sector debt standing at €706bn, as measured by the EU’s deficit-control rules – a manageable 66 per cent of the country’s €1.07trn gross domestic product. But the total debt is already much higher than the number calculated according to the EU’s definitions. Moreover, it is growing quickly with each successive annual deficit. This year will see a further €60bn added to the total, or 6 per cent of GDP, and it could be greatly swollen in future by contingent liabilities for everything from bank bailouts to guarantees for lossmaking toll road contracts managed by the private sector. Edward Hugh, a Barcelona-based economist who has studied the composition of Spanish public debt, concludes that by EU measures it has already reached about 70 per cent of GDP, to which must be added 7 percentage points for the unpaid bills of central, regional and municipal governments, 5 percentage points for the debts of public enterprises and a further 5 percentage points for public debt held by the state pension fund. Mariano Rajoy, the centre-right prime minister, is acutely aware of the problem – not least because his government has announced it will pay €35bn in overdue bills owed to waste collection companies, pharmaceutical groups and other suppliers by municipalities and regional governments. The unpaid bills and the other extras take Spain’s actual public debt total to about 87 per cent of GDP – close to the €877bn estimated by the Bank of Spain as the amount of total public sector liabilities (although the items included by the central bank and Mr Hugh are slightly different). Spain is not unique in having a total debt higher than the EU-defined number. But if the debt continues to rise, it will become ever harder to service in a recession that has probably already begun. “Once they get past 90 per cent they could have a problem at any moment,” says Mr Hugh. Even using the more narrowly defined EU numbers, it is hard to see how Spain can obey its own, EU-compliant fiscal stability law and cut its debt to 60 per cent of GDP by 2020. Spain’s burgeoning debt problem has its roots in the housing construction boom that came to an end shortly before the collapse of Lehman. Ephemeral tax revenues from the building bonanza encouraged high expenditure in municipalities and regional governments on public swimming pools, hospitals and more, including several airports that now lie empty. Among actions that have come back to haunt the authorities was a decision to suppress inflation by keeping electricity prices down in spite of costly renewable energy subsidies. That meant tolerating the build-up of what is now a €24bn “tariff deficit” underwritten, yet again, by the government. “If you go back a few years and understand what was happening in the good years, you’ll see that people were just trying to use the government’s guarantees and the government’s money – without breaking EU rules or inflation targets,” says one Spanish financier involved in the sale of distressed debt. The onset of the economic crisis soon made things worse, sinking several savings banks that had to be rescued and ultimately leading to the transfer of billions of euros of debt from the private sector to the public. “Spain’s total debt [public and private] rose from 337 per cent of GDP in 2008 to 363 per cent in mid-2011, due to rapidly growing government debt,” said the Debt and Deleveraging report published by the McKinsey Global Institute in January. Last year, the former Socialist government of José Luis Rodríguez Zapatero tried and failed to privatise the state lottery and the airports authority, which would have reduced public debt. Today, with another recession imminent, the new government is contemplating the opposite: a €3bn-€4bn nationalisation of the underused “radial” toll roads leading to and from Madrid. “It all adds up,” says Mr Hugh, adding that Spain risks raising its acknowledged public debt ratio to 100 per cent of GDP. “When you add all the debt up, we are already in the high 80 per cent range, and two more years of ‘normal’ deficit plus more funding for the financial sector should take it through the psychological barrier,” he says. www.ft.com/cms/s/0/2c02be0c-6870-11e1-b803-00144feabdc0.html#axzz1odWLfPAv
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Post by jeffolie on Mar 9, 2012 16:04:23 GMT -6
Since the onset of the euro crisis, it has made every spending cut and pledged every deficit target demanded by Berlin ... er, Brussels.
The problem is that, much like Greece in its day, Spain won’t be able to meet those targets. ========================================== WASHINGTON (MarketWatch) — Now that Greece has successfully navigated its default disguised as a voluntary debt restructuring and agreed to a pound of flesh for European Union aid, we can start worrying about Spain. Spain is not Greece. Whereas Greece has been hobbled by a history of corruption, widespread tax evasion and weak governments, Spain has been an exemplary EU citizen since Franco’s death and its transition to democracy enabled it to join the EU in 1986. It has more than four times as many people as Greece, and its economy is nearly five times as big. In fact, Spain is the fifth largest economy in the EU, after Germany, France, U.K., and Italy. Since the onset of the euro crisis, it has made every spending cut and pledged every deficit target demanded by Berlin ... er, Brussels.
The problem is that, much like Greece in its day, Spain won’t be able to meet those targets. Spanish Prime Minister Mariano Rajoy surprised EU officials last week when he unexpectedly announced that he felt compelled to unilaterally raise the target for Spain’s debt-to-gross domestic product ratio this year to 5.8% from the 4.4% his predecessor had agreed to with the European paymasters. Brussels has been busy monitoring the Greek debt restructuring and markets have been watching the European Central Bank’s money spigots open up again, but after a chance to catch their collective breath, everyone will soon be paying attention to Spain Will Brussels graciously “renegotiate” — voluntarily, it goes without saying — the Spanish targets? Or will the Germans insist that Spain pay a fine for exceeding its deficit targets? And if Spain is fined, will the Netherlands, which also announced it is exceeding its deficit limits, be fined as well? If Spain is fined, will Rajoy, who claimed the new target was a “sovereign decision,” resist and insist on his sovereignty again? Reuters Spain's Prime Minister Mariano Rajoy The Spanish situation is further complicated by the fact that the national government has devolved much of its budget and spending responsibilities to its regions — part of a Europe-wide trend to give greater autonomy to areas that lay claim to their own distinct history and culture. Still relatively young, these regional governments often are unwilling or unable to take the political heat for making drastic spending cuts, and are resisting the limits imposed on them by Madrid. So you have regional governments in Barcelona, Valencia, and so on fighting Madrid; Madrid in turn fighting the EU officials in Brussels; and those officials in turn fighting German Chancellor Angela Merkel and her finance minister, Wolfgang Schäuble. One might be forgiven for thinking this extended chain of command could break down here and there, and Rajoy’s unilateral announcement last week was a shot across the bow. This is less of a problem in Italy, where there has been much less devolution of national budgeting. Portugal and Ireland are much smaller and fairly centralized as well. So Spain is shaping up as an interesting test case for the euro crisis managers. The only EU country where the provinces enjoy a similar amount of fiscal responsibility is, ironically, Germany. It’s a safe bet that some of the German provinces would be showing equal resistance to fiscal austerity if that country had not benefited so handsomely for the past decade from the terms of trade imposed by the euro. This does not mean, however, that German officialdom, or the German public, will have much sympathy for Spain. No more than rich and prosperous Massachusetts, say, takes pity on the much poorer Mississippi. Fortunately, the U.S. federal system has long since institutionalized the fiscal and monetary transfers that smooth out the differences in productivity across the nation. Nonetheless, however deficient Merkel has been in taking the long view, she continues to show an ability to reach short-term patchwork agreements that enable the EU and the euro to shuffle along. It just remains to be seen what contortions in the EU treaties and international law that Merkel & Co. will devise to deal with Spain. Then it will probably be time to worry about Greece again. www.marketwatch.com/story/after-greece-eu-can-now-worry-about-spain-2012-03-09?dist=afterbell
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Post by jeffolie on Mar 21, 2012 9:30:52 GMT -6
Spain Risks Default Now More Than Ever Mar 21, 2012 Spain has never been so close to default and Greece, Ireland and Portugal may need further bailouts, Citigroup Inc. chief economist Willem Buiter said. “Spain is the key country about which I’m most worried,” Buiter, a former Bank of England policy maker, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “It’s really moved to the wrong side of the spectrum and is now at greater risk of sovereign restructuring than ever before.” Willem Buiter, chief economist at Citigroup Inc. Two years of debt-driven stresses in European markets have eased as Greece avoided a disorderly default, the building blocks of a new euro economic management system fell into place and the European Central Bank pumped over 1 trillion euros ($1.3 trillion) into the banking system. “The European Central Bank has drowned the markets and the banks in liquidity,” Buiter said. “There’s a general feeling of near euphoria at the moment which leads those drowning in liquidity to believe that all troubles are over.” Spain sold 5.04 billion euros of 12-month and 18-month bills at the lowest rates in almost two years yesterday even as the nation’s overall debt last year surged to the highest in over two decades. Euro-area finance chiefs agreed on March 12 that Spain won’t achieve its budget goal for the second year in 2012 as the country’s second recession since 2009 hampers deficit-cutting efforts. Greece, Portugal, Ireland Buiter said Greece may need another bailout before the end of the year and no later than next year. “The Greek sovereign is by no means on a sustainable path so they will have to restructure again,” he said. Portugal and Ireland aren’t out of the woods either, Buiter said. Portugal is at a “very high” risk of a restructuring, which may occur next year, and Ireland certainly needs “additional official sector support,” he said. “The efforts for recapitalization in the case of banks and deleveraging for governments tend to slacken off” when they are no longer confronted with extreme difficulties in funding themselves, Buiter said www.bloomberg.com/news/2012-03-21/spain-risks-default-now-more-than-ever-buiter-says-tom-keene.html
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Post by jeffolie on Mar 28, 2012 13:44:18 GMT -6
Spainish troubles: an obvious failure to comply The Conservatives kicked out the Socialist ... the inherited mess will doom the Eurozone IMHO No way can the conservatives impose more austerity nor budget a fake, pretend budget ... Germany, France et al hate the 'lazy Spainards' whose criminal and fraudulent books contain impossible to pay completed projects that loses tons of money such as sports arenas & hospitals for local teams where the locals have 23+% unemployment so they not afford to pay higher ticket prices and can not pay for their hospital bills. Pretend and Extend now has failed ... Spains audited revenues failed. I do not expect the real failure to be dealt with as a real failure. Rather, I expect that because Spain is too big to fail with so much debt it chokes Germany that more pretend & extend with be applied to Spain again just as happened to Greece until the market place rates on Greek debt reach 600%. So, to will the rates on Spain rise but no one can accept even 10% on Spains' debt as possible to believe that the total scheme headed by Germany will fail. Until Spain again is over 7% the market can pretend & extend. Today's just 5% is not sufficient to make Germany choke. ======================================= Spain Tries To Buy Time Spanish Prime Minister Mariano Rajoy unveils his 2012 budget later this week, observers say he may buy some time in financial markets, but still faces what could be the most difficult year yet for the country’s embattled economy. How long any relief will last is another matter. Friday’s budget announcement comes a day after a planned national labor strike. It also falls on the same day as a meeting of euro-zone finance ministers, which is expected to decide on a plan to bolster the euro zone’s firewall. And then there’s some not-so-welcome pre-budget noise. The ruling Popular Party failed to win a majority at Sunday’s regional election in Andalusia, which some labeled a setback to efforts to rein in the country’s deficit. Meanwhile, a bearish note from Citigroup Chief Economist William Buiter on Wednesday said Spain’s risk of some sort of debt restructuring is now more likely than since the crisis began. Click to Play China's rocky economy spooking marketsWSJ MarketBeat reporter Steven Russolillo previews the day on Wall Street, including fears of an economic slowdown in China. Photo: STR/AFP/Getty Images Observers in and outside of Spain say Rajoy must strike the right balance with the budget to convince speculators that Madrid can get its fiscal house in order, ensuring it can continue to access credit markets. If done well, he could buy enough time until market participants start worrying about Spain’s even bigger deficit hurdle for 2013. “The discussion now is, ‘Is the government really good for a huge fiscal tightening?’” said Roberto L. Ruiz- Scholtes, head of strategy at UBS Spain. “Market worries are that Spain is going to fall into an economic depression like Greece or Portugal, which makes achieving targets impossible due to falling activity.” The Bank of Spain said Tuesday that first-quarter data indicates a continued contraction in the economy and signals it is now in recession. The government expects the economy to contract 1.7% this year, which could be exacerbated by austerity measures. Ruiz-Scholtes said the best thing the government can do is deploy a multiyear fiscal consolidation plan, reinstating 2013 and 2014 targets. “This would reassure investors that there is full commitment and the probable slippage in 2012 would not impede achieving the final targets. “If the 2012 budget was not credible enough, markets would immediately assume that the deficit will surpass 6.0%-6.5% this year and 4.5%-5.0% next year,” pressuring bonds and the sovereign risk premium, he said. Spain’s budget was in surplus until the financial crisis hit in 2008. The bursting of a property bubble has crippled the economy. Housing prices continue to fall while unemployment has topped 20%. Mounting pressure Renewed pressure on Spain has been building since Rajoy earlier this month announced the government wouldn’t hit its 2012 deficit target of 4.4% of gross domestic product. He angered Brussels by setting the goal at 5.8%. Under pressure from the European Union, Spain later reset the target to 5.3%. The yield on Spain’s 10-year government bond /quotes/zigman/4869131/delayed ES:10YR_ESP -0.05% has pushed back above 5%, but remains well off the high near 6.7% seen last November. The IBEX 35 index /quotes/zigman/2759620 XX:IBEX -1.96% is underperforming other European stock markets, down 5.3% year to date. Madrid continues to insist it will hit its goal of cutting the deficit to 3% of GDP in 2013. “Markets are probably discounting that the 2013 target deficit won’t be reached, albeit by an acceptable amount,” Ruiz-Scholtes said. Rajoy is expected to announce up to 40 billion euros ($50.7 billion) worth of spending cuts and tax hikes on Friday, though details are slim. The government announced spending cuts of around €15 billion right after coming into office. Spain’s regions bear the brunt of the blame for the country’s weak fiscal position, and Moody’s Investors Service is among those who think they will miss 2012 deficit targets. The regions control one-third of public spending in Spain. In an effort to show it means business, the government recently announced a draft law that would make it illegal for local administrations to overspend or miss targets. While Andalusia has always been a Socialist stronghold, its election result showed a clear distaste for the government’s austerity plans, and labor market reforms that in part make it easier to fire workers. Thursday’s national strike, which could severely limit public services and travel, could pose another source of concern for investors this week. “Spain has gone from market confidence, by showing willingness to impose austerity and enact reforms, to investors standing back and saying, “Can you really do this?” said Gayle Allard, an economist at IE Business School in Madrid. “In this sense, the general strike day will be an important day for the markets. Maybe they’re a little nervous about that.” Allard said it’s hard to say how much support there will be on Thursday, as those who have jobs are worried about holding on to them. She said unions represent about 40% of the working population, a number that could decline. The nation’s 23% jobless rate, she said, “is going to rise before this is over. We’ll be above 25%, maybe more with labor reforms.” She said Spain’s biggest problem is investors’ lack of faith in the population’s willingness to withstand austerity. “They don’t see the Spanish people in that way, they don’t understand how a country can put up with it,” she said. “Having watched Spain through previous crisis, they are a pretty surprising country. They get behind things, hard things,” Allard said. “I don’t think this is ever going to look like Greece and that’s something the markets don’t understand.” Stakes are high Antonio Garcia Pascual, chief Southern European economist at Barclays, said in a note on Tuesday that Rajoy’s decision to hold off on the budget announcement until after the Andalusia election has been viewed in a negative light. “At a time when both markets and EU peers would have appreciated prompt corrective action on the back of a large fiscal slippage in 2011, the government decided to postpone the budget release to aid its chances to govern Andalusia,” Pascual said. In the end, the lack of a majority at the election won’t likely matter much to austerity, but the government’s credibility is on the line, he said. /quotes/zigman/4869131/delayed 10YR_ESP 5.30, -0.0025, -0.05% 7654ON12FM “Now it is crunchtime for the Spanish government, the countdown to convince the markets that Spain is fully committed to execute a fiscal plan consistent with the very ambitious fiscal deficit targets has effectively started,” Pascual said. “Some say rigorous budget deficit cuts are absolutely essential, in the long run that’s true, but I have a lot of sympathy for the Spanish position,” said Martin Jansen, head of international equities for ING Investment Management U.S. “Even though they committed to the fiscal compact, to cut the deficit too quickly risks a much sharper recession and makes debt reduction more difficult.” He and others say the market’s response to Spain will also rely on what kind of data is seen out of the stronger European economies, the U.S. and China. Signs of a slowdown elsewhere will only increase market worries over Spain. A comprehensive long-term solution to the Spanish bank restructuring story is also needed by the market to move forward, and also key for Spanish banking stocks, said Jansen. “A robust game plan in terms of how to resolve that could take that cloud of uncertainty out of the markets.” CaixaBank SA /quotes/zigman/482755 ES:CABK -3.19% announced a merger earlier this week with smaller rival Banca Civica for €977 million in an all-share deal at a sizable discount. Lenders in Spain, many saddled by bad debts from the housing collapse, continue to try to find ways to meet capital requirements that were raised by Rajoy’s government earlier this year. And if predictions by Citibank’s Buiter come to fruition, Rajoy’s best budget efforts won’t prevent the international intervention that the country has been desperately trying to keep at bay. Buiter says practically the entire economy is overleveraged and predicts even further house prices falls, with bank losses to mount, leaving the government ill-equipped to adequately recapitalize their banking system. “Spain looks likely to enter some sort of a troika program this year, as a condition for further ECB support for the Spanish sovereign and/or banks,” said the former Bank of England policy maker. “The initial conditions of the public finances look worse than expected and official growth forecasts appear too optimistic.” www.marketwatch.com/story/rajoys-budget-seeks-to-buy-time-for-spain-2012-03-28?pagenumber=2
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Post by jeffolie on Mar 29, 2012 10:24:57 GMT -6
SPAIN IS THE NEW GREECE: And This Time It's Big Enough To Matter... Mar. 29, 2012 '... the sheer scale of Spanish youth unemployment. As in Greece, young people have been seen as responsible for escalating peaceful political protests to violent riots. Spain's unemployment data suggest that protests there could eventually be much larger—nearly half of young people are already unemployed and they face a tough future and a shrinking social safety net amid economic contraction and austerity measures. www.businessinsider.com/photos-todays-general-strike-in-spain-looks-a-lot-like-greece-2012-3
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Post by jeffolie on Apr 3, 2012 8:50:00 GMT -6
Spain Record Home Price Drop Seen With Bank Pressure Apr 2, 2012 Spanish home prices are poised to fall the most on record this year, leaving one in four homeowners owing more than their properties are worth, as the government forces banks to sell real-estate holdings. Home prices will decline 12 percent to 14 percent, according to research and advisory company R.R. de Acuna & Asociados, after Economy Minister Luis de Guindos in February gave lenders two years to make 50 billion euros ($67 billion) of additional provisions and capital charges for losses linked to real estate. That’s the most since the National Statistics Institute started tracking values in 2007. Standard & Poor’s forecasts borrowers with negative equity may rise to 25 percent this year from 8 percent in 2010, based on an analysis of 800,000 mortgages. Spain Record Home Price Drop Seen With Bank Pressure April 2 (Bloomberg) -- Carmen Munoz, an analyst at Fitch Ratings, talks about the outlook for Spain's banks. She speaks from Madrid with Manus Cranny on Bloomberg Television's "Last Word." (Source: Bloomberg) “There will be more serious price drops this year because of the government decree,” said Fernando Rodriguez de Acuna Martinez, a partner at the Madrid-based firm. “Banks are now prepared to incur big losses on real estate to shift all they can.” Spain’s Prime Minister Mariano Rajoy and his People’s Party are betting the overhaul will help bolster confidence in the country’s banks without undermining a drive to tackle its budget deficit that’s threatening to reignite Europe’s debt crisis. The move is likely to force banks to sell assets cheaply, accelerating a four-year decline in residential property prices that are already 30 percent below the peak. Government Decree The government’s Feb. 2 decree on real-estate provisions is already leading to reduced sales prices. In the week after the plan was announced, more than 10,000 homeowners who use Idealista.com, Spain’s largest property website, lowered their asking prices. That’s 30 percent more than the weekly average during the previous month. Banco Santander SA (SAN), Spain’s largest lender, and CaixaBank SA (CABK), the fourth-largest, are offering homes at discounts of as much as 50 percent on their Altamira and Servihabitat property websites. Bankia SA (BKIA), the No. 3 bank, went even further on March 15 by announcing that the company aimed to sell 9,000 properties this year at discounts of as much as 60 percent. Spain’s IBEX 35 benchmark index, which fell as much as 1.8 percent in intraday trading today, closed up 0.4 percent. Shares of Santander rose 0.2 percent to 5.78 euros, erasing an earlier 3 percent drop. Banco Bilbao Vizcaya Argentaria SA (BBVA), the country’s second-largest lender, rose 0.1 percent. Spanish banks account for five of the top six worst- performing stocks on the 48-member Euro Stoxx 600 Banks Index (SX7P) this year. ‘Can’t Compete’ Theresa Legarra, a 33-year-old sales manager from Madrid, said she can’t compete with the banks when it comes to selling real estate. She and her ex-husband bought an 85 square-meter (915 square-foot), two-bedroom home in Pozuelo de Alarcon, one of Madrid’s most affluent suburbs, in 2006 for 385,000 euros. To pay for the property, they took out a mortgage with Caja Madrid for 85 percent of the purchase price. Caja Madrid is one of the seven Spanish savings banks that merged to form Bankia in 2010. Six months ago, the apartment was put on the market for 350,000 euros, about 20,000 euros more than the outstanding mortgage on the property. “The telephone hasn’t rung once,” Legarra said during an interview in Madrid. “Three separate real-estate agents say I need cut the price to 300,000 euros to have a hope of selling.” About 20 percent of Spanish mortgage borrowers owe more on their loan than their property is worth, up from about 8 percent in October 2010, according to a study by Andrew South, the London-based head of European structured finance research at S&P. ‘Negative Equity’ “If house prices were to continue to decline at their current rate this year, the number of borrowers in negative equity by the end of 2012 could be closer to 25 percent,” he said in an e-mail. The S&P study was based on an analysis of 800,000 Spanish mortgages, two thirds of which were granted between 2006 and 2008, and includes loans predating 2000. In January, residential mortgages fell 41 percent from a year earlier, the 21st straight decline, according to the National Statistics Institute. Asking prices have fallen by an average of almost 30 percent from their high in April 2007, according to a March 1 report by Fotocasa.es, a real-estate website, and the IESE business School. Spanish home prices fell 11.2 percent in the fourth quarter from a year earlier, the most on record, the National Statistics Institute in Madrid said on March 15. By their measure prices are down about 22 percent from the market’s peak in the third quarter of 2007. Home prices in Ireland (IHPINARP) and the U.S. (SPCSUSA) have fallen 49 percent and 34 percent respectively from their highs. ‘Delayed Declines’ “We suspect house prices have fallen by more than 30 percent since the peak, but accept that some of the downward price adjustment may have been delayed by banks hoarding large portfolios of repossessed properties,” Raj Badiani, an economist at IHS Global Insight Inc. in London, said in a March 15 note. Financial institutions have foreclosed on 328,720 homes since 2007, according to Plataforma de los Afectados por la Hipoteca, a group known as PAH that campaigns against evictions. That number may balloon to as many as 600,000 in the years ahead as unemployment increases, Taurus Iberica Asset Management estimates. The Madrid-based company manages 35,000 foreclosed properties for 25 lenders. Banks have also acquired properties from developers to cancel debt and may have as many as 900,000 finished, unfinished and foreclosed homes on their books, according to Borja Mateo, author of “The Truth About the Spanish Real Estate Market” Aversion to Risk In Spain, which has euro region’s fourth-largest budget deficit, bond yields have surged and banking stocks have plunged as investors shun risk. According to Fernando Encinar, co- founder of Idealista.com, the biggest problem is that investors distrust the valuation of real-estate assets held by banks and the government has offered a solution by pushing them to sell assets at market price. Spanish 10-year borrowing costs have jumped 44 basis points to 5.33 percent since March 2, when Rajoy raised the country’s budget deficit target for this year defying his European Union Allies. He’s struggled to cut the funding gap since he was elected in December and his government faced its first general strike on March 29. Mario Monti, Rayoy’s Italian counterpart, said on March 24 that Spain could reignite the European debt crisis if the country’s fails to control its finances. Its gross domestic product fell 0.3 percent in the fourth quarter, as the country suffers its second recession since 2009. Reduce the Deficit Budget Minister Cristobal Montoro presented the 2012 budget on March 30. The government aims to reduce the deficit to 5.3 percent of gross domestic product from 8.5 percent last year even as the economy contracts. Investor confidence in the 182 billion euros of bonds tied to Spanish residential-mortgage backed securities trails securities from Italy, the Netherlands and U.K., including that’s country’s version of subprime home loans. The extra yield investors demand to hold Spanish RMBS above benchmarks has held at 500 basis points since the end of February, 155 basis points higher than a year ago, according to JPMorgan Chase & Co. data. A basis point is 0.01 percentage point. Spanish banks’ average net borrowings from the European Central Bank surged in February to a record 152.4 billion euros from 76 billion euros in October as the central bank stepped up its emergency lending to avert a credit crunch, according to data published by the Bank of Spain. ‘Bring Transparency’ The extra yield investors demand to hold bonds from Spanish financial companies is 483 basis points, almost twice the 242 basis points average for the U.S. and 257 basis points globally, according to Bank of America Merrill Lynch index data. “This will bring transparency,” Encinar said by phone. Spanish banks will be able to absorb the losses better than individual homeowners, he said. Rajoy’s efforts to shrink the banking industry will be helped by CaixaBank SA’s plan, announced on March 27, to buy Banca Civica SA, a group of former savings banks, for 977 million euros. That will be the industry’s biggest transaction since three of Banco Pastor SA’s largest shareholders accepted a 1.35 billion-euro bid from Banco Popular Espanol SA. (POP) The word “mortgage” originates from Law French and literally means “death contract,” or a pledge that ends when either the obligation is fulfilled or the property is taken through foreclosure. For Legarra, who can’t sell her home to start a new life in another property or move back to her birthplace in Pamplona, the word’s meaning is significant. “It definitely feels like a hefty sentence for me.” www.bloomberg.com/news/2012-04-01/mortgage-column.html
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Post by jeffolie on Apr 10, 2012 7:23:51 GMT -6
Over 20% of All Real Estate Loans in Spain are Delinquent; Construction Firm Delinquencies Ended 2011 at 17.65%; Late Payment on All Loans Ended 2011 at 7.61% Some rather shocking delinquency numbers (to mainstream media readers but not readers of Mish, Acting Man, Zero Hedge, Max Keiser, the Slog etc.) have surfaced in Spain. Courtesy of Google Translate please consider The default property is multiplied by ten since 2008. Upfront Notes: 1.The following translation is somewhat choppy, and I present it as is. 2. Recall that decimal points "." in Euroland are the equivalent of commas "," in the US. Thus "62.366 million" should read as 62,366 million or 62.366 billion euros. 3. Many of the following just released numbers are as of the end of 2011. Rest assured numbers as of the end of the first quarter of 2012 are much worse. With those notes out of the way, please consider the following translation. Since the crisis began in 2008, the Spanish financial sector accounts have been seriously damaged by late payment of real estate companies, which rose from 1.98% in the first quarter of this year to 20.9% it closed 2011. According to recent data published by the Bank of Spain of 298.267 million euros to the Spanish financial institutions were granted at the end of last year to real estate companies were delinquent 62.366 million, a figure that grew by 4.789 million in one quarter. In fact, between July and September 2011, the delinquent real estate companies stood at 18.97%, as there were 57.577 million euros a portfolio outstanding of 303,506,000. As for the interannual evolution, real estate delinquencies rose seven basis points from 13.98% recorded in the last quarter of 2010 to 20.9% one year later, for a real estate loan portfolio totaled 315.782 million then , which fell in that period 17.605 million. The Bank of Spain data also reflect strong growth in the delinquency of construction firms, and ended the year with 17.65% of outstanding claims, well above the 12.12% they had in December 2010. Compared to the previous quarter, the difference was just over one and a half points, as it stood at 16.09%. The real estate and construction activity has gone from being the main driver of the Spanish economy its biggest drag in just four years, as has happened with the accounts of banks, which carry a much lower overall arrears of these depressed sectors . In particular, late payment of credit extended by banks, savings banks, cooperatives and credit institutions closed 2011 at 7.61%, its highest level of the previous 17 years, particularly since November 1994 when it stood at 8%. This rise in defaults is a result of increased bad debts, which in December 2011 reached the EUR 135 838 000 134 227 000 compared to November, according to Bank of Spain. Of that amount, the questionable real estate and construction touched the 80,000 million euros, standing at 79.759 million, which means that 58.7% of defaults across the Spanish financial sector came from this sector. But the situation was much worse a year ago, as the unpaid real estate accounted for 73% of total bank dubious, almost three quarters of the portfolio outstanding. Meanwhile, the total credit portfolio of banks, savings banks, cooperatives and credit institutions fell to 1.782 billion euros in December, from 1.785 billion that were awarded in November. Most mainstream media is woefully late in reporting this kind of news even though it is generally available with a bit less of a lag in Spain. More importantly, some of us have predicted this catastrophe far in advance. Thus, what is shocking to many Johnny-come-lately analysts is simply a realization of what had to happen. A few of us insisted from the get-go that Greece, Spain, and Portugal would all blow sky high, and that process is clearly underway now. The party is not over yet because those countries, and perhaps even Italy are destined to leave the Eurozone (or extract equivalent punishment out of Germany, Austria, the Netherlands and France). Mathematically this must happen, so it will. Delays and bailouts will increase the costs globaleconomicanalysis.blogspot.com/2012/04/over-20-of-all-real-estate-loans-in.html
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Post by jeffolie on Apr 10, 2012 14:56:03 GMT -6
... in my Big Picture thread, I expect a decline on the S&P 500 Index to 800 and/or below ... how low? I am guessing that as low as 400 is possible ... what I continue to expect is a relationship with gold to the DJIA of 1 to 1 which long term over 200 years does signal important long term lows to switch into stocks ... for now I feel safe in metals. Shorter term if Spain does not get support by governments & Central Banks, etc driving now their rates, then the market will not reach or extend this up move into the May to June period ... I expect support for Spain again and that the recent fears would then represent a sort of pullback before the last move up to whatever happens in the May to June period ... in Elliot wave type of charts this would be a wave 4 type of pullback with wave 5 into the May to June period... however, I do not like Elliot wave beyond accepting that there almost always are volatile pullbacks which old chartists would have commented upon as forming a shoulder in a 'heads-n-shoulders' formation. The hottest financial theme is my long length series of posts and threads in which I view Spain as doomed, such as this just released minutes ago Bloomberg piece: ================================================================== Europe Spain Is on the Bleeding Edge of a New European Crisis April 10, 2012 Euro Facing a Decline from Spain Concerns Things are unraveling in Europe at a startling pace. The country in the greatest danger is Spain, which could become the fourth member of the euro zone to require a bailout, following Greece, Ireland, and Portugal. Spain’s 709 billion euros of sovereign debt is roughly twice the debt of those three nations combined, according to data compiled by Bloomberg, so a rescue of Spain would be a heavy burden for the rest of Europe. Investors got overconfident in Spain after the European Central Bank announced last December that it would funnel cheap, three-year loans to European banks, which they could (and did) use to invest in the debt of their own nations. The ECB lent more than 1 trillion euros. Spanish government 10-year yields, which were over 7 percent last November, plummeted to below 5 percent this January and February. They have raced back upward, to just below 6 percent in recent weeks. Spain’s yields started jumping in early March, after Prime Minister Mariano Rajoy announced that the government budget deficit would miss the 4.4 percent of gross domestic product target that the previous administration had agreed to with the European Union. The problem is that the easy money from the ECB didn’t do anything to fix Spain’s fundamental problem—overindebtedness and an uncompetitive economy that, because of the common currency, can’t use depreciation as an escape hatch. Bloomberg News reports today that Rajoy “is targeting basic public services for the first time since his election in December in a bid to convince investors he can bring order to the nation’s finances.” But Mark Grant, a managing director at Southwest Securities in Fort Lauderdale, Fla., says that the education and health benefits that Rajoy wants to cut “do not totally come under the purview of the Spanish federal government.” Writes Grant in a note to his customers today: “Even if the Federal government could get the cuts accomplished, it will take them months and perhaps months and months so that the headlines of what Spain is going to do has all of the substance of the milky froth atop some cup of coffee in Valencia that resembles a cappuccino.” So not only does Spain have financial problems—it has Americans dissing its coffee. www.businessweek.com/articles/20 ... ean-crisis Read more: unlawflcombatnt.proboards.com/in ... z1rfnvaAej
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Post by jeffolie on Apr 12, 2012 9:47:31 GMT -6
" ... not a small country that can be pushed around for year after year. " ... How and when all this will end is anybody’s guess but I have suspected for a long time that Spain is the lynchpin of the system. The intellectual atmosphere has changed entirely. Politics must surely follow. SPAIN IS DOOMED in my opinion and the EU biggest problem ... only now does the author Ambrose Evans-Pritchard come to realize that ... I started a Spain is doomed picture thread 2 years ago. This current and more recent thread contains lots of documentation of Spain's and the big issue for the EU's DOOM in its current membership configuiration. ============================================ Spanish epiphany as depression deepens? - Ambrose Evans-Pritchard Spain’s industrial output is sliding at an accelerating rate, as is entirely predictable if you enforce draconian fiscal tightening on an economy in deep recession with no offsetting monetary stimulus or exchange rate devaluation. The latest data show that output fell 5.1% (y/y) in February, after 4.3% in January and 3.5% in December. Durable goods fell 14.8pc, the sixth successive monthly fall. Capital goods output fell 10.6pc, according to Raj Badiani from IHS Global Insight. This is politically untenable. Unemployment is already 23.6pc on the Eurostat measure. David Owen from Jefferies Fixed Income expects this to reach 27.5pc by the end of the year (which is roughly 32pc using the old measure from the 1990s, based on a Bank of Spain study). Prof Jesus Fernandez-Villaverde says the German-imposed drive to cut the budget deficit from 8.5pc to 3pc over two years in a slump is a "recipe for disaster". It will not fly in a country where the two main trade unions are "living in the 19th century" and where there is no national consensus on the nature of the problem at hand. There will be a revolt. Indeed, the interior minister today introduced new measures to prevent plots using "urban guerrila" warfare methods to incite protests that pose a grave threat to public order. Is this the start of coercion? I hope not. Spanish democracy is worth more than a mere currency. The professor told me that Germans were "crazy" to try to impose such self-defeating austerity. The EU dictates should be resisted. Premier Mariano Rajoy should take a leaf from David Cameron's book and risk a full-fledged showdown, instead of quibbling over details in mini-spats that achieve little. "What is the EU going to do? Send in the army?" In a joint oped piece with other Spanish economists in El Mundo he said EU-IMF rescues for the eurozone are pointless because they don’t go to the root of the crisis. They do not restore lost competitiveness through devaluation. They argue that Spain’s is sliding towards a full-blown crisis and an EU bail-out on the current policy settings. This must be avoided at all costs because the terms of these packages are shaped and enforced by the EU creditor states with their own interests at stake, not by a neutral IMF acting as an honest broker. Having followed the Spanish press closely over the last five years or so, I am surprised by the sudden change of tone – as if the country has gone through an intellectual epiphany. Articles calling for Spain to withdraw from EMU – or at least exploring the idea – are no longer rare. They are appearing every day. Here is one today by Federico Quevedo in El Confidencial: "The only alternative for Rajoy: take Spain out of the euro". Loosely translated, he says "the only way out for Rajoy is to force Brussels and above all Berlin to make the ECB act as it should act – as a lender of last resort for economies with problems such as ours – by threatening to leave the euro, and even if the threat becomes reality it would surely be the least of our problems and might even be the solution". What is striking is the response on the comment threads of such pieces. My impression over the last month is that a large bloc of informed Spanish opinion has reached the conclusion that EMU is dysfunctional, and increasingly destructive for Spain. Many posters seem extremely well-informed, using terminology such as "debt-traps", "internal devaluations", and "relative unit labour costs". Many point the finger directly at Germany, correctly stating that Berlin seems to think it can lock in a current account surplus with Club Med in perpetuity. Clearly, such as an arrangement is mathematically impossible within a currency union – unless Germany is willing to offset the surplus with flows of money for ever, either through fiscal transfers or loans or investment. These flows have been cut off. Opinion is divided, of course. The pro-euro camp is still a majority. But the smothering conformity of past years has been obliterated. The Spanish reading public now has a very good grasp of the fundamental realities of EMU. This will have consequences. Spain is not on the fringes of the Balkans, terrified of being cast into Ottoman banishment. It is not a small country that can be pushed around for year after year. How and when all this will end is anybody’s guess but I have suspected for a long time that Spain is the lynchpin of the system. The intellectual atmosphere has changed entirely. Politics must surely follow. blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100016130/spanish-epiphany-as-depression-deepens/
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Post by jeffolie on Apr 13, 2012 16:25:23 GMT -6
Spanish Minister Calls on ECB to Buy Bonds as Crisis AcceleratesApr 13, 2012 "... ECB officials are nevertheless struggling to present a united front over what to do next as investors dump Spanish bonds amid renewed concern about bad assets at the country’s banks. While Executive Board member Benoit Coeure signaled on April 11 the bank may start buying Spanish bonds, his Dutch colleague Klaas Knot said yesterday that the ECB is “very far” from reactivating a policy that failed to stop a selloff in Spanish bonds in November. “I hope we never have to use it again,” he said in Amsterdam. Spanish yields surged above 6 percent in August, prompting the ECB to start buying bonds, and reached 6.78 percent in November before ECB President Mario Draghi said the bank would offer financial institutions unlimited three-year loans. www.bloomberg.com/news/2012-04-13/spanish-minister-calls-on-ecb-to-do-more-as-crisis-accelerates.html
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Post by jeffolie on Apr 13, 2012 18:15:01 GMT -6
April 13, 2012 Investors brace for more pain in Spain (MarketWatch)—Spain will remain a top concern for investors after a week that saw European markets battered by mounting worries over the country’s banking sector and fiscal outlook. “As most money managers around the world now appreciate, Spain is the elephant in the room for the major asset classes,” said strategists at FxPro in a note. Spain was firmly back in the spotlight on Friday, after news of a sharp rise in borrowing by the region’s banks from the European Central Bank triggered losses across European stocks, but especially for the IBEX 35 index -3.58% , which fell more than 3% to a three-year low. The yield on the 10-year government bond in Spain +0.0004% , which had appeared to get some relief in the latter half of the week, resumed a climb upward, rising 15 basis points to around 5.93%. Yields rise as bond prices fall. The cost of insuring Spanish government debt against default using credit-default swaps, or CDS, rose to an all-time high. The five-year Spanish CDS spread widened to 505 basis points from 476 basis points on Thursday, according to data provider Markit. That means it would now cost $505,000 annually to insure $10 million of Spanish government debt against default for five years. Data released by the Bank of Spain showed gross borrowing from the central bank hit 316.3 billion euros ($416.7 billion) in March, up from €169.86 billion in February. Economists said the data indicated Spanish banks were among the biggest users of the February long-term refinancing operation, which pumped more than €500 billion into the financial system via cheap, three-year loans. “For this week they are trailing, paying for all their sins, and the Spanish banking system is for me the biggest tail-risk presently in the euro debt crisis,” said Steen Jakobsen, chief economist at Saxo Bank, in emailed comments. “[Banco] Santander one of the most shorted stocks, and loss taking on real estate needs to start as banks are now selling out at huge discounts…risk off.” Shares of the country’s biggest bank by assets and market capitalization -4.48% -2.99% fell 3.4% on Friday, for a weekly loss of nearly 10%. “Although some Spanish banks took advantage of the ECB’s generous provision of liquidity (via the LTRO), this has merely papered over the cratering being experienced on the asset side of their balance sheets,” added strategists at FXPro. “The Bank of Spain has already proposed that banks in Spain increase their provisions by €50 billion. Given the rapidity of the decline in property prices, this will likely need to be raised significantly,” they said. The banking sector in Europe took a jab on Thursday from Portugal. Its biggest bank, Banco Espirito Santo SA triggered sharp losses for the PSI 20 index -0.75% and the banking sector after announcing a heavily-discounted rights issue. Nervous chatter The latest news to come out of Spain at the end of the week was that the government of Prime Minister Mariano Rajoy received parliamentary approval for a budget stability law that forces the country to balance its budget by 2020. The bill is aimed at shoring up the governments efforts to get its various regions in line--a thorn in the side of markets and investors, as those regions played a large part in driving up the budget deficit last year. Analysts at Exane BNP Paribas said in a note that Spanish stocks are hardly cheap, and given a restructuring of debt is a likely outcome, it’s far too early to even get tempted. “This could end up eventually being a positive catalyst for Spanish equities but the history of European coordination on such matters suggests that this will not happen until the situation becomes palpably much more urgent,” said the analysts. Barbara Kollmeyer is an editor for MarketWatch in Madrid. www.marketwatch.com/story/investors-brace-for-more-pain-in-spain-2012-04-13
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Post by jeffolie on Apr 29, 2012 9:36:21 GMT -6
Spain's misery coming to America: conservatives to bring added misery to average Americans ... upper 20% of incomes/wealth will gain, lower 80% of incomes/wealth will pay and lose Spain's hugely elected conservative new rulers impose "screwflation" with higher taxes for less health & education services confirming my jeffolie 2012 prediction of Jan 1st 2012: "... jeffolie predicts… EUROPEAN CRISIS: the financial crisis will increase ‘austerity’ as retirement ages extend, services are privatized from higher paying government salaries to lower paying private jobs, benefits reduced. Bailouts of European banks will shift low valued debt from the banks to the IMF, FED, ECB, China via ‘swaps’, bond sales, loans, etc. Average European families will have their version of screwflation because their incomes will decline and expenses increase from governments privatizing.American voters will do the same in Nov 2012 impose "screwflation" with higher taxes for less health & education services: jeffolie predicts... Throw the bastards out of office gained ground against Establishment politicians in 2010, 2011 and will gain ground in 2012 . jeffolie predicts...This repeats my old assertions made prior to Obama winning the 2008 primaries that Obama and the Democrats will lose enough power to fail after the 2010 elections to get anything done, continued political and economic gridlock. jeffolie predicts… SCREWFLATION: everything the ‘average American family’ buys goes up in price and everything they own goes down in value. Taxes, fees, charges, special assessment districts from State, Local, etc governments will rise while services from them will decrease. Energy expenses for homes, cars, electricity will rise compounded by additional taxes and fees. Food prices will rise. Health care/insurance expenses will rise; College Tuition will rise; Mortgage/house payments will rise because interest rates will rise seasonally; Rents will rise. The ‘average American family’ wealth will decline. The ‘average American family’ wealth will decline for those still owning their homes because house prices will continue to decline. Food Stamp use will make new records. I prefer screwflation over stagflation because of the regressive impact on middle and lower class families' standard of living and that they have no investments that rise with inflation or money printing and in fact usually have their wealth tied up in declining or negative home equity while the upper 20% of earners usually have investments that will rise in 2012 outside of their home equity. ============================= Tens of thousands protest health, education cuts across Spain MADRID (AP) – Tens of thousands of people across Spain protested Sunday against education and health care spending cuts as the country slid into its second recession in three years. Thousands protest against education and health care spending cuts in Madrid on Sunday. Unemployment is at a eurozone high of 24.4%, more than half of Spaniards under 25 years old are jobless, and Prime Minister Mariano Rajoy's conservative government has introduced stinging austerity measures in its first five months in office. Speaking at a party rally, Rajoy, who on Friday announced a new set of tax hikes to come into effect next year, said he had "no alternative." He added, "Spain needs deep structural change, not makeup." Protesters in northeastern Barcelona, northern Bilbao, eastern Valencia and many other regional capitals carried banners urging Rajoy to not "mess around with health and education." Cayo Lara, lawmaker of the United Left party, said at a large gathering in Madrid that many protesters believed the government was intent on using the financial crisis as an excuse to sell off essential public services to the private sector. Ruth Colomo, a 39-year-old teacher, said the country's public education system and national health service had been built up over decades with Spaniards' tax contributions. "They are ours and I think we have the right to fight for them," she said. Mechanic Evaristo Villar, 62, said he hoped Rajoy would listen to the protesters' concerns. "The government will hear us. I don't know, though, if it will pay any attention." Rajoy said that, given the bad state the national economy was in when the previous Socialist government handed it over to him at the November general election, "the least they could do now is to shut up." www.usatoday.com/news/world/stor ... 54624058/1 =============================== Make your predictions for 2012. Here are mine: jeffolie predicts...Throw the bastards out of office gained ground against Establishment politicians in 2010, 2011 and will gain ground in 2012 . jeffolie predicts...This repeats my old assertions made prior to Obama winning the 2008 primaries that Obama and the Democrats will lose enough power to fail after the 2010 elections to get anything done, continued political and economic gridlock. jeffolie predicts...2010 food crisis that I made in 2008 will continues in 2012 for selective commodities such as grains with special attention to the seasonal trends for midyear tops from continuing weather issues. jeffolie predicts...stock market gains to mid year which is the traditional seasonal high hence the long standing cliche of 'sell in May and go away' with Ben of the Fed providing stimulus. jeffolie predicts...housing prices will continue going down because trends to rent continue. jeffolie predicts…SCREWFLATION: everything the ‘average American family’ buys goes up in price and everything they own goes down in value. Taxes, fees, charges, special assessment districts from State, Local, etc governments will rise while services from them will decrease. Energy expenses for homes, cars, electricity will rise compounded by additional taxes and fees. Food prices will rise. Health care/insurance expenses will rise; College Tuition will rise; Mortgage/house payments will rise because interest rates will rise seasonally; Rents will rise. The ‘average American family’ wealth will decline. The ‘average American family’ wealth will decline for those still owning their homes because house prices will continue to decline. Food Stamp use will make new records. I prefer screwflation over stagflation because of the regressive impact on middle and lower class families' standard of living and that they have no investments that rise with inflation or money printing and in fact usually have their wealth tied up in declining or negative home equity while the upper 20% of earners usually have investments that will rise in 2012 outside of their home equity. jeffolie predicts… EUROPEAN CRISIS: the financial crisis will increase ‘austerity’ as retirement ages extend, services are privatized from higher paying government salaries to lower paying private jobs, benefits reduced. Bailouts of European banks will shift low valued debt from the banks to the IMF, FED, ECB, China via ‘swaps’, bond sales, loans, etc. Average European families will have their version of screwflation because their incomes will decline and expenses increase from governments privatizing.jeffolie predicts…US STATES, CITIES, LOCAL AGENCIES CRISIS: major layoffs by the end of 2012, bills will not be paid, some bonds will default. jeffolie predicts…INTEREST RATES: higher through summer. Read more: unlawflcombatnt.proboards.com/index.cgi?board=general&action=display&thread=10102#ixzz1tRcwkUUW
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Post by jeffolie on May 12, 2012 19:11:27 GMT -6
At least 100000 Spaniards angered by grim economic prospects and the political handling of the international financial crisis have turned out for street demonstrations in the country's cities, marking the one-year anniversary of a movement that ...20,000 people demonstrated in Barcelona. Marches were also held in Bilbao, Malaga and Seville. Sympathisers held protests in other European cities...and unemployment stands at almost 25 per cent - the highest among the 17 countries using the euro. One in two Spaniards under the age of 25 are out of work. www.smh.com.au/world/100000-march-in-spain-over-austerity-20120513-1ykd8.html
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Post by jeffolie on May 19, 2012 10:49:31 GMT -6
Spain is doomed ... timing is the issue: 50% this Fall...2013 most likely " ... Spain says it may have to again revise its 2011 budget deficit upward ... to 8.9% of GDP, nearly three times the recommended maximum for nations using the euro.... " =================== (MarketWatch) -- Spain says it may have to again revise its 2011 budget deficit upward, the Associated Press reported late Friday. Spending by four regional governments within Spain -- Madrid, Valencia, Andalusia and Castilla-Leon -- exceeded forecasts, driving up the national deficit for a second time. AP said the government now projects a possible deficit that is equal to 8.9% of GDP, nearly three times the recommended maximum for nations using the euro. The government said it still expects to hit a 5.3% budget deficit this year. www.marketwatch.com/story/spain-may-again-revise-2011-deficit-upward-ap-2012-05-18
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Post by jeffolie on May 28, 2012 9:16:05 GMT -6
6.47% deadly high Spain rates: QE 3, ECB bailout to buy Spainish bonds soon? . Spain rates deadly high 6.47% banks, regions failing I consider 7% a point of no return, the market will decide not me. Spain remains TOO BIG TOO FAIL and the ECB in the past has bailed out Spain by buying down their interest rates to as low as to below 5% using the method of buying Spain's bonds. Time is required to build a consensus to buy Spains' bonds with a new bailout ... by the end of June many elections in America, Europe, other countries will change the voting. The FED mets in June resulting in an important opportunity for a announcement, but the FED does not like to be rushed and historically has waited to drop hints until its traditional meeting in Jackson Hole in the late Fall. ====================== Spain Borrowing Costs Hit New High May 28, 2012 "... Spain's 10-year government bond yield rose 0.18 percentage point to 6.47% Monday, a new 2012 high, after Spain announced a €19 billion ($23.78 billion) bailout for ailing lender Bankia SA, BKIA.MC -13.06% a dramatic escalation of its efforts to overhaul a banking sector that is grappling with the collapse of a decadelong housing boom. Borrowing costs at these levels are considered unsustainable over the long term.... offered the regions credit lines to help them pay off their debts and is preparing an instrument that would guarantee regional debt issues. online.wsj.com/article/SB10001424052702303807404577432033067170786.html
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Post by jeffolie on May 31, 2012 10:52:03 GMT -6
$82.0 billion sent abroad most likely some used to drive down US Treasuries yields as the US 10 YR Note demand resulted in 1.52% yield during May 31st trading." ... the credit ratings of eight regions were cut. ... Bank of Spain data showed a net 66.2 billion euros ($82.0 billion) was sent abroad last month, the most since records began in 1990. ...Fitch Ratings downgraded eight regions on Thursday, warning that a failure from the government to adopt new measures would result in further ratings cuts." ============================== Money flies out of Spain, regions pressured May 30 2012 Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut. Spain is the next country in the firing line of the euro zone's debt crisis, with spendthrift regions and shaky banks threatening to blow a hole in state finances and pushing funding costs towards levels that signal the need for a bailout. The European Commission gave new help on Wednesday, offering direct aid from a euro zone rescue fund to recapitalize Spanish banks and more time for Madrid to reduce its budget deficit. That helped lower the risk premium investors demand to hold Spanish 10-year debt rather than the German benchmark on Thursday, but it remained close to the euro-era record, at 520 basis points. Bank of Spain data showed a net 66.2 billion euros ($82.0 billion) was sent abroad last month, the most since records began in 1990. The figure compares to a 5.4 billion net entry of funds during the same month one year ago. Spaniards are worried about the health of their banks, hit by their exposure to a 2008 property crash, and have been sending money to deposit accounts in stronger economies of northern Europe. The capital flight data predates the nationalization of Spain's fourth biggest lender Bankia (BKIA.MC) in May when it became clear the bank could not handle losses from bad real estate investments, compounded by a recession. Spain's centre-right government has contracted independent auditors to assess the health of its financial system in an effort to restore faith in its banks. www.reuters.com/article/2012/05/31/us-spain-economy-idUSBRE84U08N20120531
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Post by jeffolie on Jun 14, 2012 12:59:38 GMT -6
Spain approach a media labelled 7% Tipping Point... 6.91% www.marketwatch.com/investing/bond/10YR_ESP?countrycode=ES&link=MW_story_quotemy jeffolie view ... Spain would have to have its rates at 7% for a long period ... many months before contagion fears become significant to me ... most likely central banks will find a way to buy down these rates this year ... 50% implossion chance this fall ===================== Spain and Italy, under increasing fire in Europe's debt crisis, promised new measures to repair their public finances as their soaring borrowing costs raised new alarm ahead of a cliffhanger Greek election. But German Chancellor Angela Merkel rebuffed pressure from EU partners and the United States for Europe's most powerful economy to underwrite debt or guarantee bank deposits in the single currency area. Spain's 10-year bond yield hit a euro lifetime high above 7 percent on Thursday - a danger level above which Greece, Ireland and Portugal were driven to seek international rescues - despite last weekend's euro zone agreement to lend Madrid up to 100 billion euros ($125 billion) to recapitalize ailing banks. "It is not a situation that can be maintained over time... and I am convinced that we will continue to take more measures in the coming days and weeks to help bring it down," Spanish Economy Minister Luis de Guindos told reporters in the corridors of parliament. In Rome, Parliamentary Affairs Minister Piero Giarda, in charge of a public spending review, said Italy will seek to cut 5 billion euros in state administration spending this year instead of a previously announced 4.2 billion euros. The money saved would help fund areas hit by two earthquakes last month. Moody's Investor Service slashed Spain's sovereign credit rating by three notches to Baa3, just one level above junk, late on Wednesday, citing the government's "very limited" access to international debt markets and the weakness of the economy. The downgrade added to a sense of emergency in financial markets ahead of an election in debt-plagued Greece on Sunday that could deliver a mandate to an anti-bailout party. Addressing parliament in Berlin, Merkel rejected "miracle solutions" such as issuing joint euro bonds or creating a Europe-wide deposit guarantee scheme, backed by new French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy. Such proposals were "counterproductive" and would violate the German constitution, she said. Instead, she called for gradual steps towards the "Herculean task" of building a European political union. "It is our task today to make up for what was not done (when the euro was created in 1999) and to end the vicious circle of ever new debt, of not sticking to the rules," Merkel said. She warned against overstraining the resources of Europe's biggest economy, saying: "Germany is putting this strength and this power to use for the wellbeing of people, not just in Germany but also to help European unity and the global economy. But we also know Germany's strength is not infinite." Italy, rapidly coming into the firing line, saw its three-year borrowing costs shoot up to 5.3 percent at auction on Thursday, the highest since December, despite Germany's strong expression of support for Monti's reforms when he visited Berlin on Wednesday. Surging Spanish and Italian bond yields reflect investors' concern that the 17-nation currency bloc has failed to arrest its 2-1/2-year-old debt crisis and faces potential turmoil after a general election that could put Greece on an unprecedented exit route from the euro area. GREEKS WARNED Hollande said in an interview with Greek television that he wanted Athens to stay in the single currency and it was up to Greek voters to decide what they wished. "But I have to warn them, because I am a friend of Greece, that if the impression is given that Greece wants to distance itself from its commitments and abandon all prospect of recovery, there will be countries in the euro zone which will prefer to finish with the presence of Greece in the euro zone." He did not name the countries but German, Dutch and Austrian officials have spoken openly of a possible Greek exit. In the last opinion polls published before a blackout 10 days ago, the leftist SYRIZA party, which rejects the terms of Greece's EU/IMF bailout, was running neck-and-neck with the conservative New Democracy party, raising the possibility of a radical anti-austerity coalition or another deadlock. However, battered Greek bank stocks rallied by 20 percent on market talk of secret opinion polls showing a government favorable to the bailout agreement was likely to emerge from the election. "The market sees that a pro-European government which will push ahead with reforms will be formed on Sunday," said Panagiotis Kladis, an analyst at NBG Securities. Greeks, who have endured four years of recession and now have 22.6 percent unemployment, have been pulling money out of the banks and stocking up on food ahead of the election, fearing worse turmoil after the vote. Greece's debt woes have helped push neighboring Cyprus to the brink of seeing a financial rescue, with officials looking to Europe, Russia and China for the best possible bailout terms. After weeks of wrangling Germany's centre-right governing parties and the centre-left opposition agreed on Thursday on a deal for parliament to ratify a treaty creating a permanent euro zone rescue fund in the last week in June, a coalition source said. German Social Democratic opposition leaders, whose votes Merkel needed for the required two-thirds majority, had held off until after they met Hollande in Paris on Wednesday, emerging to say they agreed broadly on the need for measures to revive growth in Europe and tax financial transactions. SPD chairman Sigmar Gabriel said Hollande understood that euro zone bonds could only come about after much deeper European economic and fiscal union had been created. "We, however, at this point deem the introduction of a debt redemption (fund)... as the appropriate instrument and our French partners showed a lot of interest in this model," he told reporters in Paris. The German government's council of economic advisers has proposed a scheme for euro zone members' debts above 60 percent of GDP to be pooled and paid down over 20 years by issuing joint bonds. Merkel has rejected that idea too. U.S. PRESSES Merkel acknowledged that the euro zone crisis, and Germany's role, would be at the centre of attention at next week's summit of the G20 major world economies in Los Cabos, Mexico. The leaders gather on Monday, a day after the Greek election. U.S. President Barack Obama, whose re-election prospects in November could be dented by the euro crisis, telephoned European Council President Herman Van Rompuy on Wednesday to inquire how Europe planned to cope with the outcome of the Greek vote. "There is a lot of concern in America about the outcome of the Greek elections and how Europe will deal with the results," a European official familiar with the talks told Reuters. U.S. Treasury Secretary Timothy Geithner said the world would be looking to Germany and other EU countries to provide clarity on plans for a euro zone banking union, a financial firewall and how Europe can revive economic growth. But he said it would be unfair to see Germany as the sole source of the problem in the euro zone. "Germany is saying make monetary union work. We are prepared to be behind this broader endeavor, you need to be in support of reforms," Geithner told the Council on Foreign Relations in Washington, adding that other countries needed to move toward Germany's position. news.yahoo.com/monti-urges-political-backing-euro-crisis-074942987--sector.html
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Post by jeffolie on Jul 11, 2012 10:32:29 GMT -6
Albert Einstein: ' Insanity is doing the same thing, over and over again, but expecting different results.' "... fourth round of austerity measures Rajoy’s ruling conservatives have introduced since sweeping to power in elections in November..." ================================== More economic pain in Spain as government unveils new cuts July 11, 2012 Declaring Spain’s deep recession a new “reality,” Prime Minister Mariano Rajoy announced nearly $80 billion worth of spending cuts and sales tax hikes Wednesday to try to pull his government out of the red. The new austerity measures come a day after Rajoy won European Union approval for an up to $125-billion bailout for Spanish banks, weighed down by bad real-estate loans from the country's housing bubble. EU finance ministers also agreed to give Spain an extra year, until 2014, to meet its deficit-cutting targets. Madrid’s budget shortfall last year was 8.9% of gross domestic product, nearly three times what EU rules allow. “We have to get out of this hole, and we have to do it as soon as possible. There is no room for fantasies," Rajoy told the Spanish parliament. "This is the reality. There is no other.” This is the fourth round of austerity measures Rajoy’s ruling conservatives have introduced since sweeping to power in elections in November. At least one of his tax hikes amounts to a broken campaign promise. The value-added tax, essentially a sales tax, on items such as clothes, cars and tobacco will rise from 18% to 21%. Rajoy’s Popular Party had vowed not to raise the rate to avoid dampening already-weak consumer spending. “The circumstances have changed, and I have to adapt myself to them,” Rajoy said in a speech that won applause from his fellow conservatives but boos from the opposition. Public employees will lose some vacation days and their holiday bonuses, which amount to about 7% of their annual pay, and 30% of local town councilors will lose their jobs. State industries will be privatized or closed. Public funding for unions and political parties will be cut by 20%. A tax credit for new home buyers, introduced just seven months ago, was scrapped. "These measures are not pleasant, but they are necessary. Our public spending exceeds our income by tens of billions of euros," Rajoy said, adding: "We are living in a crucial moment which will determine our future and that of our families, that of our youth, of our welfare state." Outside on the streets of Madrid, police fired rubber bullets at coal miners protesting a 63% cut to government subsidies, which they fear will kill their industry. Thousands of miners, on strike since May, occupied Madrid's main plaza overnight. Hundreds had marched about 250 miles from mines across northern Spain to reach the capital. Others locked themselves underground in their mines, with provisions, to protest government cuts. Spain has Europe’s highest unemployment rate, with one in four workers idle, yet unemployment benefits are also to be reduced. Rajoy said that a type of job-seekers’ loan that kicks in once regular unemployment benefits are exhausted would be cut for recipients who have been on it for more than seven months. latimesblogs.latimes.com/world_now/2012/07/more-economic-pain-in-spain-as-government-unveils-new-austerity-cuts.html
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Post by jeffolie on Dec 28, 2012 18:20:49 GMT -6
December 27, 2012 1:39 PM Social Trap in Spain: Mortgage Nightmare; Why Spain (or Germany) is Guaranteed to Leave Euro Looking for a synopsis of the problems facing Spain? A summary of bullet points I gathered from the Spiegel article Evictions Become Focus of Spanish Crisis shows just how hopeless the situation is. •There were a record number of evictions in 2012, foreclosures are expected to increase in 2013. •Some 400,000 eviction proceedings have been opened in Spain since 2007, with roughly half of the families involved having already lost residential properties due to foreclosures. That means Spain is only half-way through the crisis. •There are now 1.7 million Spanish households in which not a single family member still earns a salary. •4 million people have lost their jobs since 2007 •27 percent of the population lives below poverty level •Evictions now affects pensioners, who have used their own homes as collateral to take out loans for their sons and daughters •A joint study by UNICEF, Oxfam and Doctors Without Borders concluded that the country will need over 20 years to regain the standard of living it attained in the prosperous, pre-crisis years. •In the Catalonia region, unemployment is 26 percent •Youth unemployment is over 50% Social Trap Spanish Prime Minister Mariano Rajoy has issued a moratorium on foreclosures for "extreme hardship" cases. The definition of "extreme hardship" is "families with two children and an annual income of less than €19,000, more than half of which has to be used for mortgage payments." Single parents with children under the age of three also qualify. Notice that the hardship rule still requires over half of income to go to mortgage payments. Meanwhile interest accrues indefinitely. There is no way for these families to ever pay back debts accumulated at or near the height of the bubble. If there are evictions people are thrown out on the street. If there are no evictions, then there is no way for banks to sell the properties to someone who is able to afford mortgage payments. Euro Trap In mid-December, Spain received nearly €40 billion ($53 billion) from the European Stability Mechanism (ESM) to restructure its ailing banks. Yet every day Spanish banks acquire more properties not marked-to-market. Moreover, moratoriums delay the process as interest accrues. The longer Spain tries to stay on the euro, the deeper Spain goes into debt to the rest of the EU. This is what happened to Greece, and the result was the rise of "Golden Dawn" a neo-Nazi group. Constitutional Crisis There are no sign of Nazism in Spain. However, Pro-Referendum Parties Won 87 of 135 Seats in Catalonia and a constitutional crisis is brewing as Catalans wish to secede from the rest of Spain. Every day, bad debts mount at Spanish banks. Catch 22 of Sorts On December 19, I reported Loan Default Rate Hits 11.23% in Spain, a New Record; Construction Defaults Hit 26.4%; Credit Plunges 5% Can anyone tell me how Spain can possibly exit their trap that does not involve Germany pouring vastly more money into Spain? The only way I can come up with is default with Spain leaving the Euro. Sooner Spain Leaves the Euro the Better for Everyone Note that the ECB, IMF, and the rest of Europe (including Spain), threw money at Greece, turning a relatively small problem into a much bigger one. As Greece has shown, the sooner a country leaves the Euro, the better off everyone will be. So when does Spain, or Germany come to its senses? Either one will do. In the meantime, politicians will kick the can for as long as they can, making the situation messier and messier along the way. Pick Your Poison The bottom line is Germany will pony up (and by pony up I mean "give" not lend) massive amounts of money to Spain, or Spain will have no choice but hard default. 1.Ultimately, a charismatic politician in Spain will blame Germany, blame the euro, and pledge to default. That politician will be elected. 2.Alternatively, a charismatic politician in Germany will get tired of making handouts to the club-med states and promise to put Germany back on the Deutschmark. That politician will be elected. This is a clear case of pick your poison, and Germany will take a hit one way or another. Timing is the only uncertainty Mike "Mish" Shedlock Read more at globaleconomicanalysis.blogspot.com/2012/12/social-trap-in-spain-mortgage-nightmare.html#VEVG6A6RXS7hDT1e.99
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Post by jeffolie on Dec 29, 2012 14:26:56 GMT -6
Meanwhile, The Spanish Lies Are Being Exposed As our futures bleed this morning on the hangover from yesterday's rumor dujour on the "fiscal cliff" buried below the fold and therefore invisible to Americanus Stupidus is the news that both Bankia and Valencia, along with a handful of other Spanish banking names, are collapsing. Bankia was formed from a merger of provincial savings banks, drawing in over a quarter of a million small investors with extremely aggressive marketing. Unfortunately it appears that they were also hiding losses and it was recently revealed that the firm had negative equity (that is, its assets are worth less than its deposits.) Last May, if you recall, the firm was "nationalized" but the patina of normalcy was maintained for a while, with some fools continuing to believe they would somehow maintain their investment. That now looks to be a farce as the recapitalization of the bank will effectively destroy the value of the firm's stock and leave investors with what amounts to nothing. This leads one to wonder if the original listing on the Madrid exchange was basically a sham operation; it's not exactly as if the firm made all these loans in the 18 months since it was listed in July of 2011! But heh, remember that we're all being told that the global economy will be ok, we've just got to get through this fiscal cliff problem and then Europe and the United States will return to strong growth! market-ticker.org/akcs-www?post=215387
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Post by jeffolie on Dec 29, 2012 19:30:26 GMT -6
Dec 29, 2012 Bolivia expropriates Spanish energy subsidiaries LA PAZ, Bolivia (AP) -- President Evo Morales nationalized the Bolivian electricity distribution subsidiaries of the Spanish energy company Iberdrola in a public ceremony Saturday. Morales issued a decree allowing the takeover of shares in Empresa de Electricidad de La Paz (Electropaz) and Empresa de Luz y Fuerza de Oruro (Elfeo), which supply energy in this Andean nation. Soldiers guarded the installations of the electricity distribution companies, marked with signs reading: "Nationalized." In the ceremony at Bolivia's government palace, Morales also announced the expropriation of an investment management company and a service provider belonging to the Spanish energy giant. Morales said he had "been forced to take this step" to ensure that electric service rates remain "equitable" in the regions of La Paz and Oruro. The Spanish government said in a statement that it regretted Bolivia's decision to nationalize companies that included "Spanish, Argentine and American companies among its shareholders." Spain said it hoped "the process of assessing the value of the nationalized company is done with high standards of objectivity that would establish the just compensation to which shareholders are entitled." Telephone calls and emails seeking comment from Iberdrola in Spain were not immediately answered. The decree read by Morales calls for Iberdrola to receive indemnification after an independent firm is hired within 180 days to determine the value of the nationalized shares. Morales in May also nationalized Transportadora de Electricidad belonging to Spanish company Red Electrica, which controlled 74 percent of energy transmission in Bolivia. In his first year in office in 2006, the Bolivian president nationalized the oil industry through a renegotiation of contracts with a dozen oil companies, including Repsol, Petrobras, BG and Total. In 2009 Morales transferred to state control the country's largest telephone operator, which had been controlled by Italy's ETI, and in 2010 he did the same with the four largest power generators, which had belonged to French-owned Suez, Rurelec of Britain and Bolivian shareholders. hosted.ap.org/dynamic/stories/L/LT_BOLIVIA_SPAIN_EXPROPRIATIONS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-12-29-16-45-15
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Post by jeffolie on Jan 16, 2013 17:17:54 GMT -6
The US is headed in the same direction .... the FED buying our debt ================ 'Retiring' The Debt: Spain Drains Pension Fund To Prop Up Bonds Last week, Spain's Treasury raised $5.82 billion euros at auction in the country's first debt sale of the year; this was well above even the upper end of the target range. The consensus, which of course is somewhat justifiable, is that the successful auction indicates demand for Spanish debt isn't going to dry up anytime in the very near future. The problem for Spain in 2013, however, is that two major sources of demand for the country's debt are likely to be largely unavailable in the coming year. In a rather disconcerting piece published on January 3, the Wall Street Journal disclosed that Spain has now spent over 90% of its Social Security Reserve Fund buying its own debt. Just to reiterate: Spain has spent pretty much the entirety of its pension fund on its own bonds.
There are three obvious problems here.
First, this means that the fate of pensions in Spain is now hopelessly intertwined with the fate of Spanish government bonds, a fact that doesn't inspire much confidence, given the market for periphery sovereign debt in 2012.
The second issue involves the contention made by the Spanish government that the practice of betting the pension fund on Spanish government bonds is sustainable as long as Spain retains market access. It is inconceivable that anyone in a position of authority could miss the obvious contradiction here. Were it not for the purchases made from the Social Security Reserve Fund, Spain might have lost market access last year. So to say that this practice is sustainable as long as Spain retains market access is basically a tautology. That is, if Spain depends on the pension fund for market access, then the pension fund cannot depend on that same market access - that is circular reasoning at its worst.
Third, if 90% of the Social Security Reserve Fund has already been invested in Spanish government bonds, there can't be much left to invest. It is conceivable then, that demand for Spanish bonds will suffer in 2013 given that the pension fund's hands are now tied.
This problem could be complicated by the fact that Spain's banks already own some two-thirds of all Spanish government debt outstanding, meaning they aren't likely to step up to the plate either. In other words, foreign demand needs to rebound, a speculative proposition at best.
Link - seekingalpha.com/article/1110051-retiring-the-debt-spain-drains-pension-fund-to-prop-up-bonds?source=email_macro_view&ifp=0
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This reeks of Japanese Deja vu!
In both cases, the vast majority of National Debt is held within their own country, which means that when that source runs out, which it will, THEN that will be the end of them, NO ONE ELSE WILL TOUCH THEM, as they have nothing left to back their Debt! These countries will roll over & die! In reality, they will self implode! There seems no end to Politicians believing in "can kicking" and that, apparently, IF it doesn't happen on their watch, THEN everything is ok???
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Post by jeffolie on Jan 19, 2013 15:52:12 GMT -6
Spanish property prices to fall by a further 50% January 14, 2013 SPANISH house prices could drop by a further 50% and may not recover for the next 15 years, according to experts. The Costa del Sol is among the worst affected areas in the country, with the total fall in values predicted to be as much as 75% in some areas. There are 800,000 used homes on the Spanish property market, with another 300,000 having been foreclosed by the banks and a further 150,000 in foreclosure proceedings. What’s more, developers have 700,000 completed units not on the market and another 250,000 still under construction. “The market is broken,” said Fernando Rodriguez de Acuna, vice-president of Spanish economic consultancy RR de Acuna & Asociados. “In places like Castellon, near Valencia, where over-development was mad, banks are not financing anything and there is a high probability these properties will never be sold. They will have to be knocked down. “Banks are offering huge discounts and nobody is calling. Marbella has already fallen by 50% and prices are going down and down.” www.theolivepress.es/spain-news/2013/01/14/spanish-property-prices-to-fall-by-a-further-50/
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Post by jeffolie on Jan 31, 2013 18:22:37 GMT -6
The Secret Kickbacks In Spain Fall Mainly Into The Pockets Of The Ruling Party 01/31/2013 It appears the Spanish, not to be outdone by the Italians - with their growing BMPS debacle, have found their own epic political SNAFU. For decades, El Pais reports, the ruling Popular Party (PP) leaders were paid regular sums of money aside from their official salaries, via donations from companies (especially construction firms). Prime Minister Mariano Rajoy is at the top of the secret files list (kept by former PP Treasurer Barcenas) having started to receive these extra 'kickbacks' in 1997. Of course, the establishment is not responding to any questions on the matter - until exhaustive internal and external audits are undertaken - but this appears to be payback by the former PP Treasurer who was 'busted' earlier in the year (by Rajoy) for keeping millions of Euros in a Swiss bank account. If this wasn't so uncomfortably believable in a Europe that has proved itself capable of gross negligence and untruths, it would make for a great mafia-based movie transcript - unfortunately, it is all too real. Meanwhile, Spanish youth unemployment approaches 60%... Via El Pais, The ruling Popular Party’s internal accounting between 1990 and 2008, to which EL PAÍS has had access, shows that the conservative grouping’s leading members were paid regular sums of money aside from their official salaries. The files, kept by former PP treasurers Álvaro Lapuerta and Luis Bárcenas, comprise a series of incoming items in the form of donations from companies, especially construction firms, and outgoing expenses, which include the payments to party leaders. Among those who received payments on the side, according to the accounts kept by Bárcenas, is Prime Minister Mariano Rajoy. The PP president first appears listed in 1997, with sums of money next to his name that consistently add up to 25,200 euros a year, divided either in quarterly or six-monthly payments, and continuing up to 2008. The party’s current secretary general, Dolores de Cospedal, also figures in the papers, with two entries of 7,500 euros next to her name in the second half of 2008, immediately after she had been ratified in her post by the PP convention in June of that year. De Cospedal has publicly denied knowledge that these payments were made by Bárcenas to party officials. Mariano Rajoy, who was asked by this newspaper to comment on this story, declined to do so via a spokesperson. The prime minister said that he will not make any comment until he has seen the results of internal and external audits, ordered by him into the party’s finances in the light of the revelation earlier this year that Bárcenas had kept millions of euros in a Swiss bank account. The secret ledgers also include regular payments of similar quantities to those noted down next to Rajoy’s name for previous PP secretary generals (Ángel Acebes, Javier Arenas and Francisco Álvarez-Cascos), leading figures Rodrigo Rato and Jaime Mayor Oreja, and the party’s deputy leaders. The accounts, which also include other kinds of expenses, such as training courses, show final balance figures for each year. The books corresponding to the years 1993 to 1996 inclusive were not included in the documents seen by EL PAÍS. The periodical payments began in 1997, a year after Aznar had led the PP into government The periodical payments to leading party members are first registered in 1997, a year after then-party leader José María Aznar had led the PP into government for the first time in its history. Among the notes for the first months in the 1990 ledger and during two months in 1997, payments to “J. M.” are present. All of the outgoing payments recorded in 1990 are listed next to the same initials. Among the donors listed as having given money to the party are businessmen implicated in the Gürtel kickbacks-for-contracts scandal, which has seen several PP officials resign from their posts in regional and municipal administrations. One of those noted as having made donations is Pablo Crespo, the number-two man in Francisco Correa’s PP-linked corruption network, who has since become a target of the ongoing judicial probe into Gürtel. Alfonso García Pozuelo, the owner of the building company Constructora Hispánica, and Valencian assembly speaker Juan Cotino, are also shown to have given money to the party treasurers. Like Crespo, both were later accused of wrongdoing in the Gürtel case. According to Bárcenas’ bookkeeping, every year part of the total quantity of donations received was set aside and paid into a bank account at Banco de Vitoria (absorbed by Banesto in 2003). The fact that only part of the money received ended up being transferred to this bank account under the heading “donations” could imply that the Popular Party was engaged in illegal financing in as far as it was not declaring all of its income. www.zerohedge.com/news/2013-01-31/secret-kickbacks-spain-fall-mainly-pockets-ruling-party
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Post by jeffolie on Feb 1, 2013 11:48:39 GMT -6
January 28th 2013 Spanish secessionism makes first move: Catalonia is “a sovereign political and legal entity”Catalonia regional parliament has approved a declaration proclaiming the Catalan people a “sovereign political and legal entity”. The motion also calls for a referendum to be held to allow Catalans their say on independence. Rajoy says it will fight on constitutional grounds any attempt to hold a referendum on secession from Spain The motion was passed by 85 votes to 41. The ruling Convergencia I Union coalition was backed by its parliamentary partner Esquerra Republicana (ERC), and the communist green coalition ICV. The Partido Popular, most of the Catalan socialists (PSC) Party, and Ciutadans, a non-separatist platform, voted against. The growing separatist movement in wealthy Catalonia - which has its own language - presents a major challenge for Prime Minister Mariano Rajoy as he fights to maintain Spanish unity and steer the country out of a deep economic and fiscal crisis. Rajoy’s government says it will fight on constitutional grounds any attempt to hold a referendum on secession from Spain. It is widely believed that if Catalonia holds a referendum, the Basque Country would follow, potentially breaking up Spain. The declaration backs the right to self determination and states that “all existing legal means will be utilized to effect democratic strengthening and the exercise of the right to decide in dialogue and negotiation with the Spanish state, the European institutions and the international community.” The exact nature of the text had caused divisions in the Socialist ranks and among the upper echelons of the CiU coalition. ERC leader Oriol Junqueras opened the debate on what he called a “historic day.” “Sovereignty implies, literally, that there is nothing that ranks higher than the democratic will of the people,” Junqueras said. In response to the Socialists’ proposal for shared sovereignty with Spain, Junqueras noted: “The right to decide cannot be shared with another legal entity. The right to decide is a matter of one, not two or three.” en.mercopress.com/2013/01/28/spanish-secessionism-makes-first-move-catalonia-is-a-sovereign-political-and-legal-entity
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Post by jeffolie on Feb 8, 2013 10:56:25 GMT -6
POLITICAL EVENT TRIGGER my jeffolie view: a broad stock market topping process depends on continued FED policy and market upward tape trending ... the big risk to disturb these 2 remains a POLITICAL EVENT to trigger an EU reorganization along North EU vs South EU countries alignments ... the below video identifies Spain which for 2 years my jeffolie view has been to be the exact same title of this thread " ... Spain EU's big risk .... " ==================================== " ... Why Spain Is the Biggest Risk Europe Faces ... " video Spain's political funding and corruption scandals might lead to elections which afterwards could create doubt commitment to make reforms causing the ECB to question continued funding of Spain.www.bloomberg.com/video/why-spain-is-the-biggest-risk-europe-faces-hgoXQXDpTmiNsVchh~X1DQ.html
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Post by jeffolie on Feb 14, 2013 18:06:06 GMT -6
Who will provide the money and POLITIC MATTERS ideology to drive the large population of jobless Spainish young adults into revolt? " ... Greece (61.7% to be exact) would beg to differ with that view of the world (as their economy grinds to a halt) - and with Spain reaching new highs at 55.6% (as well as the Euro-zone over 24%), all the bureaucratic lip-service in the world won't stop the revolt my jeffolie view: Spain's breaking point will not happen until most likely in 2014 ... Mish has guessed 2013, I disagree because Merkel needs an intact EU to win in September 2013's German national elections. ================================ Greek Youth Unemployment Tops 60% 02/14/2013 www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/02/20130214_Greece.jpgOptimism it seems is all that matters (or is all that is allowed) as we are battered by dismal data left, right, and center. Of course, a reflection on the markets tells any 'smart' person that it all must get better - or why would stocks or sovereigns, or EURUSD be where it is? However, the 6 out of 10 15-24 year olds in Greece (61.7% to be exact) would beg to differ with that view of the world (as their economy grinds to a halt) - and with Spain reaching new highs at 55.6% (as well as the Euro-zone over 24%), all the bureaucratic lip-service in the world won't stop the revolt that is coming we fear. www.zerohedge.com/news/2013-02-14/greek-youth-unemployment-tops-60
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Post by jeffolie on Apr 30, 2013 12:03:54 GMT -6
I posted that Spain is doomed often last year ... in the below post, I predict Spain next year Italy's bigger debt load gets a lot of financial media attention, not Spain so much ... Spain should get more ========================================== I warned many years ago that Spain was the EU's big risk Violent Revolution could come as soon as late in this year or more likely in 2014 ... POLITICS MATTERS ================================= April 30, 2013 12:21 PM 33 Months of Falling Retail Sales in Spain; Austerity the Wrong Way Guru's blog in Spanish highlights the dramatic retail spending situation in Spain. Here is a Mish-modified translation. Last month I discussed the retail drama in Spain. March data is more of the same. Sales have fallen 33 consecutive months coupled with 56 months of job destruction. This month overall sales fell by 10.9%. Accounting for seasonal effects, sales are down 8.9%. The Corporate sales fell 14.1% (10.9% accounting for seasonal effects). Small business spending is down 12.7% (9.2% seasonally adjusted). Spain is in a national emergency with no consumer spending, no credit, and no job creation, coupled with strongly rising unemployment. Austerity the Wrong Way This is what happens when you implement austerity the wrong way, by raising taxes instead of cutting needless bureaucrats. Mike "Mish" Shedlock Read more at globaleconomicanalysis.blogspot.com/2013/04/33-months-of-falling-retail-sales-in.html#M64OEJ6FDvGY5520.99
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