Is Europe In Trouble Again: Hints Of Portuguese, Italian Bank Bailouts Suggest Not All Is Well

Tyler Durden's picture

In the aftermath of Germany refusal to allow Italy to breach Eurozone regulations, and provide its banks with up to €40 billion in new capital, Italy has unveiled a new track to handle its insolvent banks and as Reuters reports, the Italian government may have to inject capital directly into weaker banks to bolster their financial strength, a government source said on Thursday, adding it was waiting for the results of stress tests being conducted by European banking authorities. The results of the tests are expected to be published at the beginning of the third quarter.

The source told Reuters the government was also working on a plan to increase the firepower of bank bailout funds Atlante, which was set up in April to help lenders raise cash and sell bad loans, by 3-5 billion euros ($3.34-5.57 billion) by the summer. The source said the government was in talks with private pension funds to seek additional contributions for Atlante.

Other contributions were expected to come from the state lender Cassa Depositi e Prestiti and from a public company called Societa per la Gestione di Attivita.

And then, in a surprising follow up, the EU appears to have once again backtracked when Reuters headlines emerged suggesting that Europe would provide up to €150 billion for Italian banks"

  • LIQUIDITY SUPPORT FOR ITALIAN BANKS INCLUDES GOVERNMENT GUARANTEES OF UP TO EUR150 BILLION --EU OFFICIAL
  • BANK LIQUIDITY SUPPORT WAS REQUESTED BY ITALY FOR PRECAUTIONARY REASONS --COMMISSION SPOKESWOMAN

But...

  • LIQUIDITY SUPPORT APPLIES ONLY TO SOLVENT ITALIAN BANKS --COMMISSION SPOKESWOMAN

Which, technically is none of them, but practically any bank can - after the sufficient non-GAAP adjustments - pass for solvent.

So is another major bank bailout event on the horizon? It appears so. And Italy may not be alone. In comments that were little noticed yesterday, Germany's Schauble said that Portugal may see another bailout too, saying "It would have to apply for a new program, which it would get. But the terms would be severe and it is not in Portugal's interests."

As Reuters reported, German Finance Minister Wolfgang Schaeuble pressed Portugal on Wednesday to stick to its European fiscal targets and said that if it were to apply for a new aid program the terms would be harsh. Portugal's left-leaning government has set out to reverse its predecessor's austerity policies, aiming to grow its way out of trouble by boosting demand and set an example for other post-bailout euro zone countries.

"Portugal would be making a big mistake if it does not stick to its commitments," Schaeuble told a news conference in Berlin.

Pressed by journalists, Schaeuble stressed that Portugal would not need a new aid program if it sticks to EU rules. "They (the Portuguese) don't want it (a new package) and they don't need it if they stick to the European rules," he said. Portugal insists it will meet this year's budget deficit target of 2.2 percent, which is half last year's gap, and that no new measures will be necessary after solid budget execution in the first five months of the year.

The Portuguese finance ministry said Lisbon was not considering asking for any new bailouts and was working to meet its EU targets and to cut its budget deficit.

"Regarding the remarks made by Wolfgang Schaeuble, although he himself immediately corrected them, the finance ministry clarifies that no new aid program is being considered for Portugal," it said in a statement.

Still, was Schauble's Freudian slip earlier that "it would get a new program" if it only just asked for it a hint of things to come?

And then there is, of course, the world's most systemically risky bank, Deutsche Bank...

In retrospect, the UK may have exited Europe just in time.

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nibiru's picture

Draghi is late to the party with his attemtp to bail out his Italian friends. Schauble stalled him enough with his veto.

 

Now dear reader sit back, open a bottle and enjoy as slowly their perfectly designed Eurozone is collapsing on their faces.

Go home Europe you are drunk.

http://independenttrader.org/itn-may-june.html

Edward Quince's picture

there is no problem. steady hands have all under control.

OrangeJews's picture
OrangeJews (not verified) Antifaschistische Jun 30, 2016 10:45 AM

"LIQUIDITY SUPPORT APPLIES ONLY TO SOLVENT ITALIAN BANKS"

 

So... none of them?

magicdragon's picture

Um... if they were "solvent" then why would they need "liquidity support" in the first place?

"We only toss life preservers to people who aren't drowning."

HowdyDoody's picture

#StillNoBrExit

A number of prominent high level UK politicians who were in favour of BrExit and potentially helpful to actually start the process to leave have shown their true colors and gone over to the BrRemain side.

 

 

buzzsaw99's picture

eu = fourth reich

i hardly think an italian gubbermint guarantee is worth much.

Squid Viscous's picture

as long as they roast some jews again, i'm down ...

SpanishGoop's picture

Is Europe in trouble again, is that really a question ?

If you mean the European Union and not Europe go back to the Lissabon treaty and skip the "again".

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Jun 30, 2016 9:53 AM

The European banks can shore up their capital by buying US Equities.  Any capital shortfalls they have will be filled within a few months as they capture capital gains.

Dark Daze's picture
Dark Daze (not verified) TradingIsLifeBrah Jun 30, 2016 9:58 AM

Buy US Equities  HAHAHAHAHAHAHAHAHAHAHA. 

 

You're kidding, right?

Paul Morphy's picture

Like the Central Bank of Switzeland did? It's bought amongst others Apple's shares.

Those equity purchases and any equity gains therein - couldn't offset CBSI losses.

Baronneke's picture

Ofcourse Italian (and other countrys as well)  banks will be bailed out.  Schauble knows darn well that his own DoucheBank is about to collapse so he'll gonna need all the money in the world.  Same old story over and over and over and over again.  

Dark Daze's picture
Dark Daze (not verified) Baronneke Jun 30, 2016 9:57 AM

We're talking a minimum loss of 55 Trillion if DB goes under, plus a minimum of 450 Trillion for the 'other' banks that it will take with it.

I doubt that they can come up with that kind of money, because if they did, the Germans would revolt. 55 Trillion is 12 times German GDP. Even if they didn't revolt, the knock on effect of printing that many euros would be collapse first, then hyperinflation the likes of which we have never witnessed before.

They are better just to default, close it down, and hope that they don't get invaded.

 

Paul Morphy's picture

Deutsche Bank goes, it will make Lehmanns look like a ha'penny place collapse.

€55 Trillion.

If the news reports are accurate, the only counterparties to losses in the Italian banks and Portugese banks are the ordinary taxpayers.

 

The taxpayer and ordinary citizen is going to be left with the job of trying to clean up this entire farking mess.

 

Dark Daze's picture
Dark Daze (not verified) Jun 30, 2016 9:53 AM

Schaeuble - That fucker reminds me of Peter Seller's German character in Dr. Strangelove.

I'm quite sure he will still be ranting and raving when they send him over the cliff.

wachtamrhein's picture

https://www.youtube.com/watch?v=ww7WlSPi9gc

 

... always fun to watch and hear him saying that...

ParkAveFlasher's picture

Wow, low interest rates mean no profit for banks?  Would never have figured that out!

Squid Viscous's picture

Schaeuble has about as much credibility left as Eddie "Wolfgang" Munster...

Kagemusho's picture

That 'money' has to come out of EU members state taxes, or Euro hyperinflation will raise its ugly head, open its mouth and bite their legs.

Here's where the rubber meets the road as far as other EU countries remaining; does the Czech Republic or Romania want to bail-out Italy and Portugal? Do the Poles? 

oncemore's picture

You are too eraly with your comment.

We do not know yet, if they will print a fiat money, or it will hit the budgets of particular countries.

For example Slovakia has an anual budget of 1.8*10^10€. and they allocated (under the preassure from Germany) from budget in the last 3 years 8*10^9 to Greece. basically 45% of budget for 3 years. A full disaster for the people of Slovakia.

If they print fresh money, then nobody cares. If Schaeuble will press the country to handout a cash (no promisses, no promis notes, no "credits") or collateral, then it will be a big joke. We shall see a revolution, or as Maria Zacharova stated: Whoexit? Everybody.

oncemore's picture

First of all they need calipers. This shLt stinks in the whole Europe.

Bemused Observer's picture

Schauble should focus on his own German bank issues, never mind the Portugese.

The nerve of him, complaining about the Portugese and their worn-out underwear after his own Douchebank totally shit their drawers!

Yeah Schauble, we ALL smell it, and no one is looking at Portugal.