Post Tagged with: "Spain"
On Spain and Europe’s existential crisis
It encourages me to see Portugal fade from the headlines instead of becoming the next Greece. But it discourages me to see Spain take Portugal’s place as the next Greece. All the while, the root problem has been the same: the common currency without ECB support for sovereign debt has meant that European governments lack the fiscal space afforded by sovereign currencies to run countercyclical fiscal that partially offsets the private sector deleveraging. Are European leaders ever going to solve this fundamental flaw in the euro’s design
Spain is the New Greece
Spain has become the new Greece. Actually, in many respects Spain is now worse than Greece. The Spanish unemployment rate is already so high and unlike Athens, Madrid has made no headway in reducing its public debt levels (whereas the Greeks are close to running a primary fiscal surplus at which point they could leave and turn the problem back on to Brussels). Moreover, Spain has a huge private debt burden that is twice that of Greece
[Premium] Why the Spanish bailout may be to recap the banks instead of sovereign
Ever since Willem Buiter mentioned the probability of a Spanish bailout some time in 2012, speculation has been rife about a Spanish bailout. In this column I argue that Spain is still too big to bail and that any bailout for Spain must therefore be of Spanish banks and not the Spanish sovereign. I believe this will happen and I will keep you abreast of the developments. If it does happen, it will have very big implications not just for Spain but for sovereign debt, European equities and the global economy
Full Text: S&P downgrades Spain two notches
“We believe that the Kingdom of Spain’s budget trajectory will likely deteriorate against a background of economic contraction in contrast with our previous projections. At the same time, we see an increasing likelihood that Spain’s government will need to provide further fiscal support to the banking sector.”
The ECB is on Mars
Collapsing credit demand ultimately leads to a loss of banking capital, which is the exact opposite of what the LTRO program was set up to achieve. Interestingly, as the charts below show, banks seem to think that there will be a slowing of the fall in credit demand in the next quarter across all markets. Given European fiscal policy is setting up Europe up for perpetual recession, I have no idea why the banks think this will occur
Judging by Ireland, Spanish banks to take a lot more credit writedowns
Ireland dealt fairly quickly with its property market bubble by effectively and forcefully nationalizing and recapitalizing its banking sector. They clearly still have a serious problem on their hands, but the nation has been aggressive in addressing the issue of distressed real estate loans. In contrast, Spain’s banking system is nowhere close to fully recognizing the full extent of the problem. Not facing the problem however is not going to make it go away
German decoupling is an illusion
The concept of German decoupling from the Eurozone recession may have been wishful thinking. The latest German Manufacturing Purchasing Managers’ Index (PMI) has converged with that of the Eurozone as a whole. Manufacturing PMI is a closely watched index and tends to be a leading indicator for the GDP. In response, Spain’s 5yr sovereign CDS hit a new record high of 511bp (previous high was 510 on 4/16). The Eurozone is headed for a double dip
(Premium] There will be more defaults in the eurozone
In last week’s weekly newsletter, I explained why Spain was in big trouble. Today I want to present the full context euro zone-wide and why there will be more sovereign defaults to come in the euro zone. This will be a very comprehensive must read post for anyone interested in the euro zone
[Premium] Daily Commentary: On Auction Results from Spain
Today’s big news was the bond auction in Spain. Spain’s auction went off without a hitch but at a cost. Spain sold 2.5 bln euros ($3.3 billion USD). The Spanish Treasury sold a 1.1 bln euro bond maturing 31 Oct 2014 (average yield: 3.463%, bid-to-cover: 3.3 vs 2.0 at previous auction in October). The Treasury
[Premium] Daily commentary: On burst housing bubbles in Spain, the Netherlands and Denmark
Most of the focus these days is on Spain and the periphery – and for good reason. Spain’s bond yields are putting it into a potential debt death spiral from which the only escapes are a bailout or default. Moreover, the whole of the periphery are reporting terrible GDP numbers, with Italy predicting a deficit
[Premium] Peak oil explains the Repsol YPF expropriation in Argentina
I think this should be obvious to everyone by now, but peak oil is a clear factor in the Argentina/Spain oil crisis. Here’s what happened
[Premium] Daily commentary: On Spain’s death spiral and the nationalism of depression
Spain is involved in two stories today that point to the difficulties that surround sovereign governments that are overindebted in foreign currency. There are a ton of Spanish-language links for that reason