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Spanish Banks Borrow Record €126 Billion From ECB In June As Country's Funding Lock Out Enters Third Month
For all those celebrating that Spain and Greece can peddle a few billion in short-term Bills to the ECB and a few Chinese investors (did SAFE recover yet from the massive drubbing it suffered in its US stock holdings earlier this year when it was begging for more capital?) it may be prudent to consider that. as Bloomberg reports, Spanish banks borrowed a record 126.3 billion euros ($161 billion) from the European Central Bank in June. This represents a 48 percent increase from the €85.6
billion borrowed in May. Which is why we hope that anyone claiming liquidity conditions in Europe are anywhere even close to normal, will be brave enough to lend even one dollar to Spain's Cajas or appropriately tickered bank Santander (NYSE: STD), because nobody else has done so for over two months!
The southern European country’s banks haven’t sold any bonds publicly in the past two months amid investor concerns about the country’s ability to cut its deficit without hurting the economy. The yield on 10-year Spanish government debt relative to benchmark German bonds has more than tripled to 200 basis points since the start of the year. A basis point is 0.01 percentage point.
“The pressure for Spanish banks will keep rising as they can’t raise cash in the bond markets at reasonable prices,” said Thomas Nyegaard, a London-based analyst at F&C Investments, where he helps manage 4 billion euros of assets including Spanish bank debt. “The lenders can hardly provide any new lending under these conditions.”
The country’s lenders are increasing their dependence on the ECB as the European Union starts to examine banks’ resilience to losses after the debt crisis pummeled the bonds of Spain, Greece and Portugal. Europe’s deficit woes sparked concern about banks’ losses from sovereign debt holdings on top of the 438 billion euros already written down since the start of the global credit crisis in 2007.
Spain, saddled with the third-highest deficit in the euro region, pledged to provide as much as 99 billion euros through its Fund for Ordered Bank Restructuring, known as FROB, to help banks replenish capital. The fund has raised 9 billion euros from the government and sold 3 billion euros of bonds so far, according to Bank of America Corp. data.
The botton line: the bulk of Europe's periphery continues to be insolvent, have no access to capital markets, and would collapse into outright bankruptcy if the backstop of the euro printer were to be removed. And somehow the expectation is that bank "stress tests" are supposed to make any of this better?
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Do TPTB really need to keep this going for another day, week, year? Or is it the politicians who keep flogging this dead horse and TPTB have already jumped ship and could care less what happens now?
You know, I think an awful lot of people have reached the same mental state. Everyone seems to have clocked out for the summer and are just treading water during the meantime.
The batch of fiscal/monetary policies launched between 9/2008 & 3/2009 now seem to be operating strictly on auto-pilot, with no actual persons really giving a damn. In the entertainment biz, it's called "phoning it in".
During WWII, there was a brief interregnum between autumn 1939/winter 1940 called the "phoney war" before the Germans launched their spring offensive and overran western Europe.
What is going on right now cannot continue for very much longer. Come fall, when people begin to focus their energies on the political situation, I think the volatility meter is going to start ratcheting upward in dramatic fashion.
"The bottom line: the bulk of Europe's periphery continues to be insolvent, have no access to capital markets, and would collapse into outright bankruptcy if the backstop of the euro printer were to be removed. And somehow the expectation is that bank "stress tests" are supposed to make any of this better?"
As most of us here on ZH know, they aren't trying to make the evenings dinner fare "better", just a bit more palatable. Or should I say, more able to be swallowed without immediate gaging or upchucking.
After all, isn't that why the cover the turds with chocolate?
Or just provide enough for the MSM to spin it just so, which seems to be in a bit of frenzy at the moment to keep the news on the positive side.
OT: anyone see the UK consumer confidence numbers?
but, but..the stress tests said...
:>)
"but, but..the stress tests said..."
Whatever they wanted it to say.
In the UK, David Cameron has apparently stopped waiting for stress test and proposes 40% budget cuts... I mean.. 40%?? Just before it was 25% in real terms over 4 years, but 40%, you know, that is some serious shaving.
http://www.thisismoney.co.uk/news/article.html?in_article_id=507945&in_page_id=2#ixzz0tgLHaTUcUh, actually, where did the ECB get that money to lend to them? FX swaps compliments of the Chairman?
Exactly. Who gets the bill for this attempt? after it fails, of course. Spain is borrowing 126 Billion Euros A MONTH?
People, please-- DO NOT FEED THE BUREAUCRATS.
Gold swaps with the BIS ?
Hey, when you are throwing trillions of dollars out of a helicopter, a couple of billion are bound to land outside the target area.
Hahaha! Thats a good one! Thanks TA
Do you know anything about helicopters? Can I ask you a question?
How many helicopters would it take to dump a literal 126 Billion Euros out of helicopter/s in a month?
OMG. I just realized that Larry Summers looks just like Hilary Clinton with shorter hair!
ewwwww
Serious question: What will finally end the charade? If the ECB and Fed and every other CB can just print, extend and pretend.....what will end all the bullshit?
That's been my question for almost two years now. Nobody or nothing calls them on it. Not the market, politicians, people...no one. They will print as long as they can get away with keeping things constant. When things start going off the rail, all hell will break lose. Until then, they will do whatever they want.
I ask that question all the time too. I think it's the states and locals that will crack it up. They can't print and their budgets are a mess. Eventually, you'll get a muni default of size and then that entire market might just freeze up.
I also think the liquidity mess in Europe will slowly get worse, and there's not as much consensus at the ECB/Germany then is portrayed. Might be a run on the banks of some sort...
Probably has something to do w/ getting the SDR basket of currencies sorted out later this year. Then they'll be ready to boot the can upstairs and carry on.
On this day, Bastille Day, we should be mindful that old regimes die a long and painful death, passing through remarkably predictable stages. Focusing on the economic rather than the political aspect that the French Revolution represents, we may draw parallels from the long, slow death of the feudal system in France (and elsewhere) to the death of what seems painfully obvious to be our contemporary Ancien Regime.
The "private trans Atlantic financial club" that has dominated global finance since the end of world war 2 is mortally wounded. I'm referring to the tight knit group of banks who owe each other trillions from decades of private deals. Ironically, its undoing is the result of the greed of its own aristocratic bankers. Just like in 18th century France. They sucked out every dime they could find from their countries' treasuries to support a precarious pyramid of debt. If they could securitize those securities and sell them to one another for another round of pyramiding, they would. But they can't, being limited by the sovereign debt crisis that is a direct result of their excesses.
The old system is crumbling. But don't expect the farce to end abruptly. Those with the smallest claim to banking aristocracy and a license to print money for themselves will not relinquish without a fight. But as more and more bandaids, remedies, amputations and experimental treatments are needed to salvage the old system, it becomes academic that the system will fail.
I disagree, I believe that banks sponsor countries, not the other way around, for the purpose of sucking wealth out of a population. It doesn't matter if the country defaults in the end because the elite bankers have transferred that wealth into hard assets and moved on to greener pastures. Even more so today because all the banks are publicly traded it is not their wealth at risk, yet they can still cream off the top and when it eventually all collapses they simply move on.
Banks are vampires.
Vampires are culturally popular.
Stockholm syndrome?
We're not in disagreement. But when referring to the G7 nations, banks don't sponsor countries. This is especially true in the post WW2, post-Bretton Woods construct where the money tree grows in the halls of government and banks only stir it around. Way long ago it was banks that funded governments from the collected gold wealth of their investors. Not so when the Fed can print money at will and acts as rainmaker for its favored private banks.
But we agree about bankers using their positions to siphon wealth for themselves. What I'm also pointing out is that they could do it by simply agreeing to keep it all in the family and make deal after deal with each other.
The only way out is a way out. In my opinion, Spain (and Greece, and Portugal) will have to leave the eurozone. Sooner or later.
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