Next Steps For Spain

Tyler Durden's picture

Via RanSquawk

Spanish Budget Announcement Crib Sheet – How/what/when/why?

With the ESM passing through the German high court, and the ECB formally announcing their OMT bond-buying programme, the next headache for European asset classes to digest comes from the will-they-won’t-they speculation regarding a Spanish sovereign bailout. With Spain’s withering finances, elevated borrowing costs and rapidly shrinking tax revenues, the need for governmental assistance is known by all. As such, this report has been compiled to run through each possible bailout scenario and the possible impact across the asset classes.


Thursday 27th September

  • Spain are expected to release their economic reforms as speculated over the past week. The release could pave the way for a Spanish bailout request.

Friday 28th September

  • Spanish banking audit results. Expectations currently stand for Spanish banks to require EUR 60bln, with a majority going to towards the recapitalization of Bankia.


  • Moody’s review on Spain’s Baa3 credit rating is due.

Sunday 21st October

  • Galicia regional elections, PM Rajoy’s region. Reports have suggested that Spain could hold on until after these regional elections before requesting sovereign aid.

Monday 12th November

  • Eurogroup meeting. Other analysts have suggested that PM Rajoy could delay a formal request until after this meeting.

Late November/Early December

  • Catalonia could bring forward their regional elections, according to the Catalan leader. Catalonia is one of the wealthier regions and is the largest contributor to Spanish GDP. One topic of discussion for these regional elections will likely be the increasingly popular notion of tax autonomy for the region, as civilians believe Catalonia suffers a net loss from the central government’s regional funding strategies.


1. Spain makes a formal request for aid this week from the Eurozone bailout mechanisms and conditions attached to the aid are not too harsh.

This would be the most risk-on possibility as Spain will be going a long way to receiving the cash it needs, however, it must be noted that this is likely to be the scenario that is already been priced into the global markets and as such, any upside move in the EUR or stocks may in fact be short lived. The Spanish IBEX is currently trading firmly above the 8,000 point mark, even though it is down 5% year-to-date, despite rallying by nearly 40% from it’s lows in July. Any relief rally will be beneficial to the Spanish banking sector and Spanish 10y yields could head towards the 5.5% mark to the downside, last seen in early April.

2. Spain makes a formal request for aid this week but the conditions attached are deemed very strict and possibly unattainable.

Anything other than scenario 1 is likely to be taken negatively by the markets with Spanish bonds in particular bearing the brunt and the 200DMA for the 10y yield could come into play at 5.931% and the 6% mark above. The EUR will also come under pressure but not perhaps as violently as some would expect given that the funds will still be available to Spain and agreements can always be changed as seen by the Spanish deficit target for 2012 which had already been revised higher twice this year.

3. Spain says the bailout request is delayed until after the regional elections or even further.

Similar to scenario 2 but any sell-off will be rather more aggressive in nature as this will be seen as Spain just kicking the can down the road. Again the Spanish bonds and EUR will be assets to watch with Bunds also seeing safe-haven flows. There are likely to be spill-over effects into other asset classes with oil markets moving lower in-line with other riskier asset classes. Spot Gold could be supported as it remains one the few safe places to park cash.

List of Spanish Banks to watch:

  • Banco Santander (SAN SM)
  • Bankia (BKIA SM)
  • Caixabank (CABK SM)
  • Banco Sabadell (SAB SM)
  • Bankinter (BKT SM)
  • Banco Popolar (POP SM)

Lenders with high exposure to Spain:

German lenders have a particularly large exposure to Spain at USD 139.9bln, of which USD 45.9bln is banking exposure. Specifically, Deutsche Bank (DBK GY) and Commerzbank (CBK GY), who have EUR 29.7bln and EUR 13.5bln in exposure respectively.

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Quintus's picture

Last year, everyone agreed that Spain was too big to bail.  Now a Spanish bailout is a 'Risk on' event.


fonzannoon's picture

It's a play. It's totally choreographed. We are being spoonfed this play one act at a time. Have you ever heard of a crisis that is allowed to take a month vacation? This is all a bunch of crap. Germany will do this, Germany will do that....One day you wake up and you are 80yrs old and still waiting and realize you don't give a shit anymore.

bank guy in Brussels's picture

Germany and Spain ... the core truth in the article above, in line with what ZeroHedge reported months ago ... Merkel and the German banks on the hook:

« ... German lenders have a particularly large exposure to Spain at USD 139.9bln, of which USD 45.9bln is banking exposure. Specifically, Deutsche Bank (DBK GY) and Commerzbank (CBK GY), who have EUR 29.7bln and EUR 13.5bln in exposure respectively. ... »

Sandmann's picture

Commerzbank is nationalised and Deutsche Bank owns the CDU forgot Allianz SE the owner of PIMCO

Pretorian's picture

Getting harder to kill Europe if you have chf weakening. Expect more S&P attack on SNB. The wolchers are not still. 


zorba THE GREEK's picture

Any and all bail-outs for Spain and the other PIIGS are not really bail-outs because with

the imposed austerity measures, they add to the economic downward spiral of the countries

that are bailed out. The so-called bail-outs are just stalling tactics for solvent euro members,

giving them time to attempt to build a firewall around their economies. Unless the insolvent

nations are forgiven their debts, this is going to end very badly for everyone.

slaughterer's picture

The ECB crafted a variety of different plans for bailout.  I think they give Spain the less harsh one.  

j0nx's picture

So...let me get this straight. 25% unemployment, no opportunity, wrecked infrastructure and they want to give the banks $60B instead of using it for the people? Riiiight. That should go over REAL well. It amazes me that people all over the world have not stormed their own respective 'castles' and strung up their ruling classes by now. Me thinks the people are getting tired of the banksters and corrupt politicians' bullshit.

bank guy in Brussels's picture

You are right ... Southern European streets are blowing up over this, and the storm will only increase in size, till the storm becomes 'storming' the castles and bastilles ... I don't see how the 'Troika' will keep a lid on it

matrix2012's picture

just remember that ALL the ARMED guards in UNIFORM (national guard, police, soldiers) are on THEIR payrolls, and they may have possibly collected lots of Skynet Drones... and OF COURSE, plenty of hollow-point ammo.

Never underestimate the GODFATHERS for their willingness to sacrifice...

i quote here the Vlad Tepid's well summarized lines earlier:

"You also have to account for the fact that the wizards who put together the "imaginary construct" at Jekyll Island would rather bring the temple down on their heads (and yours) rather than give up the POWER that has been unknowingly loaned to them by people who have bought into the dollar myth.  Money is merely a means to power, and they will destroy it and you rather than give up a wit of power.  If it was you and me and Ron Paul, we could fix this mess in ANY minute.  These people don't want a fix.  They want to shoot anyone who threatens the rules or the construct between the eyes."


JackT's picture

I'm going to need a graph for this.

CaptainObvious's picture

You don't even need to draw the graph, you can just visualize it in your head.  It looks like this:  an x-axis and a y-axis, with a big red line going straight down.  Possibly with another piece of paper taped to the bottom so the line can go down even further.

nasdaq99's picture

seems they can't coalesce around a message.  the message the people of Spain need to confront is that BANKS ARE MORE IMPORTANT THAN PEOPLE.  THEY ARE BEING LAID OFF TO SAVE THE FREAKING BANKS.  why can't somebody get the message delivered to the people?  

Negro Primero's picture
Wednesday 26th September 7pm: back to the Congress!

Best Trend in Twitter: #Volvemos26s

overmedicatedundersexed's picture

the plight of western central banks, if all you got is a hammer you use it and use it until all is smashed, of course some benefit cough cough elite reptiles feed on the cheap assets.

Sandmann's picture

the German high court


It is not The High Court but the Constitutional Court.........a High Court is a Trial Court

youngman's picture

What is funny to me is Spain INCREASED their government spenidng by 10% last year........but...but..but..all that talk of austerity....I think there is some money to be made with all these bailouts...if you are the government employee writing the checks...

john milton's picture

rioting seems to be best antidote for QE and then rebuilding is good for GDP...hmm but you can not say it aloud coz

99ers might think they can actually affect 1% wealth... i want them back on street...but no human casualties pls..okey you can eat couple of rich if hungry

orangegeek's picture

Digging deeper and deeper.  And the value of the Euro should continue downward.


This should drive the US Dollar upward.

SKY85hawk's picture

Have these steps been completed?

1- Germany signed off on the ESM charter/treaty?

2- Germany & Austria & France contributed their share of initial ESM funding?

3- Italy, Greece & SPAIN contributed their share of initial ESM funding?

I am not feeling any belief in the talk of the new  SPAIN 'loans/bailout' .

Am I missing something?


Grand Supercycle's picture


Due to recent central bank intervention and short covering spikes, these daily charts are extremely overextended and significant correction expected very soon:


Ned Zeppelin's picture

I would rather be holding Spain's hand in this poker game.  Frankly, they have nothing to lose by simply saying nothing but "unconditional bailout," and repeatedly so until the ECB capitulates, which they will do.  But for that to happen, Spain's leaders would have to be not already corrupted by the financial regime capos.  If the banksters can't win the game according to the rules, they'll try to install a more compliant Spanish government.