This page has been archived and commenting is disabled.
Greece Fallout: Italy & Spain Have Funded A Massive Backdoor Bailout Of French Banks
Submitted by Benn Steil and Dinah Walker via The Council on Foreign Relations,
In March 2010, two months before the announcement of the first Greek bailout, European banks had €134 billion worth of claims on Greece. French banks, as shown in the right-hand figure below, had by far the largest exposure: €52 billion – this was 1.6 times that of Germany, eleven times that of Italy, and sixty-two times that of Spain.
The €110 billion of loans provided to Greece by the IMF and Eurozone in May 2010 enabled Greece to avoid default on its obligations to these banks. In the absence of such loans, France would have been forced into a massive bailout of its banking system. Instead, French banks were able virtually to eliminate their exposure to Greece by selling bonds, allowing bonds to mature, and taking partial write-offs in 2012. The bailout effectively mutualized much of their exposure within the Eurozone.
The impact of this backdoor bailout of French banks is being felt now, with Greece on the precipice of an historic default. Whereas in March 2010 about 40% of total European lending to Greece was via French banks, today only 0.6% is. Governments have filled the breach, but not in proportion to their banks’ exposure in 2010. Rather, it is in proportion to their paid-up capital at the ECB – which in France’s case is only 20%.
In consequence, France has actually managed to reduce its total Greek exposure – sovereign and bank – by €8 billion, as seen in the main figure above. In contrast, Italy, which had virtually no exposure to Greece in 2010 now has a massive one: €39 billion. Total German exposure is up by a similar amount – €35 billion. Spain has also seen its exposure rocket from nearly nothing in 2009 to €25 billion today.
In short, France has managed to use the Greek bailout to offload €8 billion in junk debt onto its neighbors and burden them with tens of billions more in debt they could have avoided had Greece simply been allowed to default in 2010. The upshot is that Italy and Spain are much closer to financial crisis today than they should be.
»
- 45993 reads
- Printer-friendly version
- Send to friend
- advertisements -
Yeah? What would you have done with those bonds?
Wars were waged for much less.
The Bank Run will be a 2016 Olympic event.
I expect the Spanish, Italian and Portugeuse teams to be among the finalists since the Greeks have been disqualified for not having any banks with cash to run to ...
Italy and Spain.....the new Bad Banks.
Good rule of thumb, don’t invest in insolvent entities. Litmus test for insolvency is simply if an entity did not have access to loans or a printing press could they meet their near term obligations. If the answer is no, then don’t buy their debt.
How about a global debt revolt? Latin America's reaction to the Greek NO vote: http://www.telesurtv.net/english/news/Latin-American-Leaders-Congratulat...
Many in the US have not read Confessions of an Economic Hitman, but the leaders of these countries have. Regardless of their dysfunctional centrally planned socialisms, they will be encourged by Greece to stick it their lenders. How many losses can the banksters take? How many multiples of the actual issued principal of the bonds is their CDS exposure?
Read it here;
http://library.uniteddiversity.coop/Money_and_Economics/confessions_of_an_economic_hitman.pdf
Huh huh huh huh
He said Greek and backdoor in the same sentence
Huh huh hu huh
fits the zeitgeist profile of Pluto in Capricorn: all govt structures get the death-near death, change-or-die experience.
I would hope that the bankster downfall was long and drawn out..like pulling one fingernail at a time. So how many losses? We shall see. one finger nail at a time.
nice find Bastiat...thanks
"Throw those useless Italian and Spaniards out already!"
If the ship is going down anyway....
Put a plug in the leak... buy some insurance and then...
"Pull It!" ~ L. Silverstein
Buy some more leveraged interest rate protecction. Spread out that risk I tell you. I will buy yours if you buy mine and then we will sell to
Freddie X 2 and leverage that by 10 and sell to a fund.....but make sure we do not need to mark to any market that we don't rig.
Kinda like 5 hookers using and passing on the same condom. But the use gets more expensive as the customers go down the line.
That's probably true.
But if France did the right thing, who can blame them? If everyone did it then German/Greek spreads would have been perpetually through the roof and this would have ended way before now; prior to the debt being offloaded onto the respective publics.
Why would they do that? The plan is to create a bubble, get mad returns on it and when it bursts, pass the bill on to the tax payer in the form of a bail out. Repeat the same plan. Gotta love banksterz...
That would be a hoot to watch: an Italian-Franco War.
Nothin' would happen until the topics turned to bread or whose women have the hairier armpits.
So France stuck Spain and Utaly with the Old Maid?
LMAO...Children's games with real consequences.
Damn...What ever happened to childhood memories of playing cards?
Don't get stuck with the Old Maid. First one out generally wins...or something like that.
The Italians would lose the war since their generals would probably order zito instead of shells.
There always seems to be a majical trust for what is said in the TV Box and by our Fearless Leaders.
Spainish and Italian Banks must have picked these up at Steep Discount to make a big profit.
Kind of like when they say Bailout, but it is a high interest Loan not a gift or a get out of some debt free card. Except in the 2012 Greek Corporate Bailouts and Restructuring which actually did contain Debt Write-Offs as we are told. But again our people may not realize that the private debt was socialized to place the risk on the Public.
Bankers make mistakes, they are cocky, they do these things to get rich... Why don't we hear about Claw Back of Bonuses, Salaries or at least Bonuses and Forced Resignations. Because it is a Game that everyone in leadership is in on.
It is a game.
Will Spanish & Italian Stakeholders seek to punish their Bankers??
We had to burn Greece to save France.
/shocked face
Let the Americans and lehman Default in the first place ;p instead of saving them and then throwing the hot potatoe!
How do you short Spain or Italy? GREK is the Greece etf that gets hammered every day.
The present volatility due to Greece and China is sure to trigger a flight to quality among investors; mainly German and US bonds. The Euro is liable to further lose value relative to the dollar for the same reason.
Germany needs to realize France will never love them. Always being put in the friend-zone. Russia is there just waiting for Germany to realize
I have noticed throughout the last half decade the Italians once they got Berlu off stage have been very, very quiet.
Having lived in Italy and a little time in Greece both countries share remarkably similiar Med issues - black economy, hardwired DNA of avoiding taxes whenever and wherever possible, weak to non existant public insitutions (to be fair this is Western world wide issue nowadays) - and a towering debt there is no way in hell they will ever be able to pay - even if they were inclined to which they are not.
Greece is just the Southern Med canary - the whole shithouse is coming house once Greece says 'fuck it - no mass and no money for ECB'. That will light the fuse.
It Figures!!
Looks like the Old Boy Network!!
is this just a........ French tickler?
Zerohedge is one site they don't actually blame the Greeks! you don't see it too often nowadays lol!
Why should we blame Greece? Who give money to people if people already can't pay back...
The battle between the lazy and stupid and the smart and manipulative....and we are supposed to take sides???
who to blame for the US housing bubble? The bankers who loaned money to unemployed/underemployed people-or the people who took the loans?
while I have no sympathy for deadbeats who don't pay their debts, there can be little doubt that this was deliberately perpetrated by those seeking collective dominance. Creative destruction on a global scale. Lord help us with what they are creating.
Exactly, its an issue of moral hazard being applied to only one member of a deal. In this case greeks got the shaft with Dr. Schauble pointing his finger at them while he forgot to do so in the case of his banker friends. Greece took a 25-30% hit on its GDP (rightly so) but the major German and French banks got bailed out without losing a cent. If I where a banker Id be looking for a repeat of such a good investment. Wouldn't you?
YEPPPER!
Now get to work Lazy Greek (tm) before we indent you even more!
I wanna see the indentation in their budgets once the lazy greeks crash out of the Eurolalaland.
Just because the French are socialists, doesn't make them stupid.
Don't forget they created slime like the "Fab Tourre" who sold GS shit to fellow French.
The French just took advantage, very simple.
True dat. It's genetic.
Sounds like a circle jerk or a game of hot patoto among the Countries. Now it will get much more interesting as they each go after the jugular vein of other members.
Just one of the bennies of being in the Nuke Club. Shit in a brown paper bag, lay it on your lesser neighbors porch, light it on fire, ring the bell and run like a nun.
Sacrebleu!
Greece seemed so lonely in their despair and chaos - so it's good to see that others will soon be joining them. Misery all around!!!!!
Industrail strength musical chairs.
We hate it, when our friends become successful.
Please check the numbers. This is a zero-sum game and France and Germany's gains should equal the losses of the others.
They have often called it a zero-sum game. But in this end game the biggest players get to decide who wins and who loses. For example why have they not officially declared a default on Greek bonds, when everyone knows they've been in default for years (they will only declare default when the right parties are positioned favourably).
That's not the first problem. It's the final problem; that the winners of the derivatives contest will not be resolved, but decided.
Is there some megaphone or drill or radiotherapy beam that can start getting facts like this into the head of the great German voter, trapped in his dreamworld where he's the long-suffering benefactor and victim of those terrible Greeks and the south of Europe generally?
They are too busy packing for their August holiday season.
OUTSTANDING PIECE....EUROPE = 1 BIG INSIDER SHITHOLE
It all is.
This policy was called Merkozy cosying. Here is the timeline IMO :
First they, Sarko and Mutti and Brown, fought on Eurobonding in 2009; Sarko wanted Europe to go joint and several given the French bank exposure in PIIGS (remember the analysis that Reggie M made on Paribas). He wanted the banks reigned in ("Le laissez faire c'est fini" was his motto in 2009).
But Mutti said Nein to eurobonding, she wanted the principle of subsidiarity to apply; aka every country was responsible for its own fiscal policy, something which argued against Eurobonding. Brown said NIET to tax haven clean outs in Caymans, the other issue addressed in 2009 at G20 meeting in UK. City did not want Euro style central controls on fiscal issues and discipline.
SO Sarko lost out on both accounts. But he then did a deal with Mutti to strengthen core banks of EZ by having the PIIGS' Banks pick up more of their own debt as of 2010 when things started hotting up via HF speculation of US banks in EU. Subsidiarity went full blown; to each his own, with ECB backdooring "sterilising the junk govt bonds".
It was this move of first transferring govt bonds via back door ECB plays on to national banks-- the national junk bonds emissions which were exploding to counter Lehman fall out and subsequent HF presures on peripheral bond rates. Public ledgers were exploding to protect the private banks in face of economic stagnation.
And...then in G20 Cannes meeting in November 2011, after having eliminated Q-daffy that summer, the Sarko/Cameron/Obama team imposed "sterilised QE" on Mutti and had Draghi to replace Trichet, considered too austere and Bundesbank minded. He had panicked twice by having Euro interest raise hikes in 2009/2010 against the mantra of QE/ZIRP of FED. Other decisions at Cannes were to pull the plug on Berlu (they had the Italian bonds spike via HF speculation) and they got rid of Papandreu in Greece, as well.
So Cannes 2011 was when the Squid blueprint was put into motion in EU zone. French banks exposure had been slimmed down as concession to Sarko for accepting no Eurobonding and no removal of UK tax havens (along with Luxembourg).
Voilà the time line.
DSK at IMF was kicked in the nuts by Geithner, his main paymaster, when he advocated hair cuts in Ireland as first step to allow ECB funding. IMF then played ball on Greece where French banks had more skin exposed...DSK did not stick his neck out there having been kicked on Ireland.
Never buy a used car from a salesman named Peirre.
Yeah, it's usually a bad sign when they misspell their own name.
Thier, I'll just leave it like that.
Mrs. Lagarde was the french finance minister at the same time Mr. Strauss-khan was the head of the IMF: both french. No wander why she got France out of the Greek debt: they new that Greece would be soon in trouble, as it did. So that might show how they screwd the other EU partners.
Never trust an Orange Lizard
There are always consequences; this is the Law of Cause and Effect...
http://verbewarp.blogspot.com.au/2011/02/economic-heresy.html
in which poor assumption and self-interests play a major role.
Ho diddly hum
Merkel to Greek pensioners:
"DROP DEAD!"
The data shows socialist countries are simply running a con game - the more they "provide", the more taxes go up and.....the more debt accrual accelerates.
A socialist is just a capitalist that never pays back any of his loans.
http://www.teapartytribune.com/2015/06/11/socialism-increases-debts-as-t...
Hey what are good neighbors for. Good neighbors help when and where they can. Good neighbors are trustworthy. That gets rid of the IMF and the ECB. Now add France to the list. I think we are going to have an European family feud before this is over...
All bailouts are for the banks. The stated goal is just noise.