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A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.
I guess that makes me a traitor to the European Union...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun Jun 20th, 2010 at 08:29:48 AM EST
[ Parent ]
Daily Kos: The Black Swans of Europe

A new EU report warns that economic conditions in Portugal and Spain could "result in a high `snowball' effect on the government debt."
  French financial group AXA says "there is a fatal flaw in the system and no clear way out." They are predicting the Eurozone to break in half or completely disintegrate in the next 18 months.
  Over 13% of Europe's investors are betting on a Black Monday-style collapse in stock prices (think 1987).

 The latest source of these fears is a renewed liquidity crunch among Europe's banking sector, which is expected to write off another 195 billion euros in losses in the near future.

  The central bank is preventing a crisis by providing banks with unprecedented funding. In substituting long-term money with shorter-maturity ECB cash, policymakers are making it harder to wean banks off life support as well as the short-term financing that regulators blame for the credit crisis.
  Banks are still struggling to borrow even from one another and loans with a maturity of more than one month are "rare and expensive," making them depend more on ECB funding, Brice Vandamme, a London-based analyst at Deutsche Bank AG, wrote in a note to clients on June 9.

The source of all this distress is the banks of France and Germany, who lent enormous amounts of money to Greece, Portugal, and Spain.

 All told, Spain, Ireland, Portugal and Greece owe nearly $1.6 trillion to banks in the 16-country euro zone, either in the form of government debt or credit to companies and individuals in the four countries, the report said. Credit from French and German banks accounted for 61 percent of that total.

 These huge liabilities on the balance sheets of the strongest banks in Europe are the reason why the EU decided on a trillion dollar bailout of its southern members rather than the more logical restructuring of debt that is badly needed.
  Or to put it another way, the politicians in Brussels decided to kick the problem down the road by a year or two, hoping that the citizens of Greece, Portugal, and Spain would accept abject poverty without complaint, rather than have to face a catastrophic collapse in major European banks who made stupid loans.



"We can all be prosperous but we can't all be rich." Ian Welsh
by melo (melometa4(at)gmail.com) on Sun Jun 20th, 2010 at 08:53:26 AM EST
[ Parent ]
Less charitably, if Deutsche Bank keels over by itself, then it will be politically impossible to bail them out.

But if the blame can be pinned on a "Club Med" default, then it becomes politically palatable to bail out Deutsche Bank.

In fact, the loans made to Greece on condition of abject austerity are a bailout of Greece's foreign creditors, first and foremost, using IMF and EU money.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Sun Jun 20th, 2010 at 09:02:46 AM EST
[ Parent ]
Maybe that's why the Slovaks want no part of it. Doubt any Slovak banks will suffer...German and French ones, though...

The Hun is always either at your throat or at your feet. Winston Churchill
by redstar on Sun Jun 20th, 2010 at 09:23:40 AM EST
[ Parent ]
Don't know enough about the Slovak case, but, yeah, I agree with Mig.  The bailout had nothing to do with propping up Greece and everything to do with Merkel bailing out Frankfurt and blaming it entirely on the stupid Greeks.

Spain doesn't seem interested in lying down and taking it like Greece though.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jun 20th, 2010 at 09:37:10 AM EST
[ Parent ]
They probably know Sarko won't let that happen. French banks even more exposed than German ones down there. They just love real estate.

Oops!

The Hun is always either at your throat or at your feet. Winston Churchill

by redstar on Sun Jun 20th, 2010 at 09:49:07 AM EST
[ Parent ]
The whole thing is a bit surprising to me.  I'd heard for a few years that European banks were in a bad way, but I didn't know the extent of it.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jun 20th, 2010 at 10:08:47 AM EST
[ Parent ]
The bailout was Sarko's idea, and Merkel was brought along after all the others, so the politicians are more clueless than that.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Jun 20th, 2010 at 12:17:32 PM EST
[ Parent ]
A lot of the French and German banks' exposure to these countries is through direct ownership of banks there. I fail to see why these local banks would be in any worse position than the other local banks, which are not necessarily in a bad way because of public sector deficits (other than the fact they probably own quite a bit of government bonds, but that's still a fraction of their balance sheets, and in their case it makes sense to have your own government's bonds...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Jun 20th, 2010 at 11:39:09 AM EST
[ Parent ]
It's written in the media that just over half of Spanish debt owned by German banks is money lent to Spanish banks.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Jun 20th, 2010 at 12:22:13 PM EST
[ Parent ]
In the Germany-as-Machiavelli version, that doesn't really matter: What matters is that it can be spun as "shiftless PIGS creating a crisis - we have to save our stalwart German bankers from those irresponsible brown people."

In the Germany-as-Clueless version, it doesn't necessarily matter either, because the markets have the predictive power of a bipolar crack monkey and the attention span of a ferret on speed, and our politicians are so thoroughly indoctrinated that they could have most of their higher brain functions replaced by Bloomberg feeds and nobody would notice the difference.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 20th, 2010 at 04:21:59 PM EST
[ Parent ]
JakeS:
so thoroughly indoctrinated that they could have most of their higher brain functions replaced by Bloomberg feeds and nobody would notice the difference.

ROFLMAO

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sun Jun 20th, 2010 at 04:44:36 PM EST
[ Parent ]
As Mig suggested:

Migeru:

I am on the record suggesting to replace governments with roomfulls of monkeys at Bloomberg terminals.
by Bernard on Mon Jun 21st, 2010 at 07:09:16 AM EST
[ Parent ]
No, in Slovakia, this was an election campaign theme, and it was a populist "why should poor Slovakians pay for the irresponsibility of rich Greeks" argument (Slovakia having a much lower per capita GDP; and the Slovakian elite and media having swallowed the irresponsible-Greek-public-spending narrative like all others).

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Jun 20th, 2010 at 12:20:36 PM EST
[ Parent ]
European Bank Exposures--From PIGS to FUG Banks Business Insider

Portuguese Exposure

Orange: Public Sector.  Green: Banking Sector.  Yellow: Non-bank private sector.  White: Other Exposures.

Irish exposure


Orange: Public Sector.  Green: Banking Sector.  Yellow: Non-bank private sector.  White: Other Exposures

Greek exposure.

Orange: Public Sector.  Green: Banking Sector.  Yellow: Non-bank private sector.  White: Other Exposures

Spanish Exposure


Orange: Public Sector.  Green: Banking Sector.  Yellow: Non-bank private sector.  White: Other Exposures.

French Banking Exposure

French banks have $106 billion in exposure to the public sectors of Greece, Ireland, Portugal, and Spain.

French banks have sovereign debt exposure of $48 billion to Spain, $31 billion to Greece, and $21 billion to Portugal.

French banks have $493 billion in exposure to the private sectors of Greece, Ireland, Portugal, and Spain.

French banks have $248 billion in exposure to the private sector of Spain alone.

UK Banking Exposure

The UK's banks have $23 billion in exposure to the public debt of Greece, Ireland, Portugal, and Spain.

UK banks have $230 billion in exposure to Ireland's private sector.

Banks in the UK also have $140 billion in exposure to Spain's private sector.

German Banking Exposure

German banks have $68 billion in exposure to the public sectors of Greece, Ireland, Portugal, and Spain.

German banks have sovereign debt exposure of $33 billion to Spain, $23 billion to Greece, and $10 billion to Portugal.

German banks have $465 billion in exposure to the private sectors of Greece, Ireland, Portugal, and Spain.

German banks have exposure of $202 billion to the private sector of Spain alone.

German banks have $177 billion in exposure to Ireland's overall private sector, and $126 billion to the non-bank private sector.

Source of all data: Bank for International Settlement.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 20th, 2010 at 01:37:19 PM EST
[ Parent ]
As I have commented elsewhere
The Bank of International Settlements published a 68-page report in which half a page is occupied by these statistics. The exposure to other OECD countries is nowhere to be found. Germany has larger aggregate debt than Spain and higher public debt-to-gdp ratio - who's exposed to that? BIS isn't telling.


By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun Jun 20th, 2010 at 06:44:28 PM EST
[ Parent ]
Graphu, Sensi! Graphu!

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 20th, 2010 at 08:11:10 PM EST
[ Parent ]
Barroso, Zapatero and others need to bring pressure to bear on BIS to release comparable information treating France, the UK and Germany as possible defaulters and showing who is exposed to their debt.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 20th, 2010 at 11:24:12 PM EST
[ Parent ]
Barroso!?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Mon Jun 21st, 2010 at 02:24:25 AM EST
[ Parent ]
Barroso is a high ranking EU politician from Portugal. Portugal is Spain's chief foreign debtor. Both Spain and Portugal are amongst the much maligned PIGS and both have nominally socialist governments....Didn't seem outrageous.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jun 21st, 2010 at 10:47:39 AM EST
[ Parent ]
Barroso is a member of the EPP (also known as the Enemy). He's also widely considered to be an incompetent idiot, which is why he was rewarded with a second term at the Commission. See here.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Mon Jun 21st, 2010 at 10:56:25 AM EST
[ Parent ]
"Less charitably, if Deutsche Bank keels over by itself, then it will be politically impossible to bail them out."

Rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, rights issue, RIGHTS ISSUE!!!!!!!111 GAAAAAAAAAAAH!!!!!!!!!1111111

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Jun 20th, 2010 at 04:03:55 PM EST
[ Parent ]
Rights issues presume that the offering company is actually solvent.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 20th, 2010 at 04:24:11 PM EST
[ Parent ]
No they don't. The new capital might very well be used to plug the holes in the balance sheet of an insolvent company.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Jun 20th, 2010 at 04:29:30 PM EST
[ Parent ]
And the new capital would love to do that for what precise reason, again?

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 20th, 2010 at 05:09:59 PM EST
[ Parent ]
Because the new capital, which might or might not be supplied by the old shareholders, will get shares at very preferntial terms, ie any old shareholder who doesn't take part in the rights issue will more or less be wiped out.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Jun 20th, 2010 at 05:30:15 PM EST
[ Parent ]
You forget the point is to protect management. You know, like this...

EurActiv: Merkel embroiled in row over banker's birthday party (27 August 2009)

A month ahead of national elections, German Chancellor Angela Merkel stands accused by the opposition and the media of having spent public money celebrating the birthday of a banker friend.

Deutsche Bank Chief Executive Josef Ackermann revealed in a TV talk show that Merkel had asked him to invite 30 friends to celebrate his 60th birthday at the chancellery a month ago.

...

Merkel was prompt to react, and in another television appearance explained that part of her job as chancellor was to bring together public personalities. She insisted that the event "was not a birthday party," but a dinner of schnitzel and cold asparagus for people prominent in business, culture, science and education, including Mr. Ackermann.

A month before August 2009? Then there must have been more than one birthday bash for Ackermann at Merkel's expense...

Deutsche Welle: Deutsche Bank boss throws party, Merkel foots the bill (27.08.2009)

Reports say German taxpayers covered expenses of lavish birthday dinner for Deutsche Bank chief Josef Ackermann. The meal was held in Chancellor Angela Merkel's office.

...

In April 2008, Deutsche Bank chief Josef Ackermann invited about 30 guests from home and abroad to the German chancellor's office where he hosted a belated dinner to celebrate his 60th birthday in February.

Mysteriously, back in 2008 Spiegel was reporting less than positive relation between Merkel and her favourite banker: Deutsche Bank CEO Under Fire (10/29/2008)
German Chancellor Angela Merkel had invited an illustrious group of guests to the Chancellery to honor a man from the business world whom she especially admires: Josef Ackermann, the CEO of Deutsche Bank.

...

At the time, in February of this year, the chancellor's relationship with her favorite banker was still in good shape. The dinner in Berlin was Merkel's way of thanking Ackermann for having invited her to his 60th birthday celebration, which she was unable to attend due to scheduling conflicts.

Wait, there was another birthday dinner in February 2008?
Today Ackermann is the bogeyman in Berlin, across all political party lines. The reason for his fall from grace can be summed up in a single sentence: "I would be ashamed if we were to accept government money in this crisis."
Unless your bank was brought down by the PIGS through no fault of your own, right, Josef?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun Jun 20th, 2010 at 07:29:19 PM EST
[ Parent ]

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