ABN Amro Complains About Interbank Liquidity Crunch, As CEO Says End Of Euro Would Make 1930s Seem Like "A Trifle"

Tyler Durden's picture

As we have been writing for a while now, it is not in the arcania of shadow banking that one needs to look to find increasing signs of the collapse in interbank lending. No: something as simple as Libor, especially its USD variant, which is so crucial to USD-crunched European banks, is more than sufficient to determine that not just Greece, or the PIIGS, but now the entire Eurozone is becoming completely dependent on the dollar generosity of the ECB, and the various other regional central banks. This by implication means that the Fed will once again be forced to step in, "in size" and bail out the world, only this time it is far more debatable if the world believes that even the Fed alone is sufficient to prevent a rising global insolvency tsunami. And confirming how bad it is, we now have none other than ABN AMRO's CEO on the tape, complaining loudly about liquidity: this is and always has been a move of total desperation as the last thing a bank wants to do is give any indication of funding weakness. Furthermore, since ABN Amro is not a USD LIBOR reporting bank, we can safely say that the dollar liquidity crunch has spread far and wide from the 18 BBA member banks, where it is hardly any easier to procure the former reserve currency.

As a reminder this is what USD funding costs look like: as Dennis Gartman would say: it starts in the lower left and proceeds to the upper right.

From Bloomberg:

Banks are seeking to retain their liquidity, making interbank lending more difficult, as funding from money and capital markets becomes harder to obtain, ABN Amro Group NV Chief Executive Officer Gerrit Zalm said.


Interbank borrowing for more than six months is also becoming problematic because banks are reluctant to lend to competitors with “big positions in weaker countries’ debt, for instance,” he said today on Dutch television program “Buitenhof.” ABN Amro is “well-capitalized,” he said.


Zalm was Dutch finance minister from 1994 to 2002, during which time he helped oversee the implementation of the euro currency and the associated “stability pact” aimed at ensuring member states adhered to specific budgetary criteria. Germany and France both exceeded those criteria during his later term as finance minister from 2003 to 2006.


He said today the euro region needs an independent authority to ensure budget discipline among national governments. Only when budgetary discipline has been achieved should the region as a whole consider issuing bonds, he said.

And an additional bonus is the realization that the end of the Euro, which now everyone is openly talking about, would destroy the Dutch economy:

A demise of the euro would have “catastrophic” consequences for the Dutch economy, which sends about three- fourths of its exports to other euro-zone states, and “would cause a recession that would make the 1930s a trifle by comparison,” Zalm said.

He said. Not us.

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speconomist's picture

Is the Fed Bailing out or bailing in?

arizona11912's picture

WHY A EURO BOND WILL BE EVENTUALLY BE ANNOUNCED Europe (Euro zone) has no choice but to form a more closely knit monetary union Say Germany says to EU pissed off and says: "We are going back to the Mark". The short term effects is the Mark will increase in strength against Euro, USD, Pound, Yen, and all the other shit fiat currencies out there. Since all countries on Earth (at least in the long term) have to a balanced "balance of trade" except the USA (thanks to the Petrodollar system). If Germany's exports become too costly what will BMW, Volkswagon, Merc etc do? Naturally they will just expand their already established factories in Euro denominated countries. Already 2/3 of BMWs are made in Austria.

This hypothetical situation I've briefly discussed in what the Swiss are feeling right now. Moreover by Germany exiting the EURO zone they would naturally be responsible for their portion of the current Euro zone debt. The ECB would make damn sure that don't get away from not discharging their fiat debt. So not only going they'll have their currency high, debt incurred by EU, plus falling bond rates which would not attract other central bankers cheese since they couldn't mop of up all the excess liquidity in sufficient form in the long term since they wouldn't be a large denominated currency such as the "big 3". For an example of that taking place see Switzerland. The long term affects is Germany would be forced to engage in printing money til hitting the bottom to compete against the "big 3." For that example see Chile, Switzerland, India, China and now Russia has recently got in the game of debasement.

Now for another example say Portugal and Greece says get me out of the Euro zone.... Will they do it on their own terms? No, because they would be forced to pay back the fiat from the ECB denominated debt plus filing from bankruptcy is too much of a risk for their spineless politicians. Also their bond rates would shoot to the moon. Initially it would attract Chinese investors which are already increasing their holding of Greek and Portuguese debt (because the backstop is France and Germany and they see the writing on the wall for the USD) but will falter since neither country has a functioning economy which would run a negative trade balance. This would erode the standard of living for Portugal and Greece.

Again this is thanks to Keynesian thinking "long term it doesn't matter, we're all dead" so no one would be willing to sacrifice now and clean house then establish themselves as a viable economy. So the concise conclusion is if the PIIGS back out all the debt that's not written off rides on the backs of France and Germany which will cause bonds to rise (at least hypothetically) and the qualitative reason is the politicians want a unified Europe and they don't give a damn how it has to get there as long as it gets there. The latter half of the sentence is probably the most influential of why there will be a unified Euro bond in the near future.

sushi's picture

But the "I don't give a damn" eurocrats will spend the next 3 years debating how to move forward while Europe and the remains of the global economy collapse in rubble around them. And do not forget der pitchforken volks who will emerge in large numbers to de-elect those very same "I don't give a damn" eurocrats.

arizona11912's picture

Hi Sushi,

The ECB knew from day one that that a unified Euro bond within the monetary union would be unveiled. It was just a matter of when they were going to reveal it. I've been waiting for these guys to say this for two years now. Give it a little time. It gets easier and easier for me to see how these guys work.

sushi's picture

Hello Arizona:

In that respect the Euro ruling elite are no different from the US elite: they are willing to disregard democratic process in order to achieve their aims. In doing so they invite a strong negative reaction and once that negativism is given voice no one will be able to put it back in the bottle.

If the eurocrats seek to achieve their ends by a rewrite of the Lisbon Treaty it will take longer than forever. The world will burn before they achieve an outcome. 

If the eurocrats had dealt with Greece in a realistic fashion a year or so ago (having Greece exit the euro-zone) then today alternatives would be possible. But they sought to achieve the impossible, their publics are turning against them and collapse beckons.

arizona11912's picture

Hi Sushi,

The ECB knew from day one that that a unified Euro bond within the monetary union would be unveiled. It was just a matter of when they were going to reveal it. I've been waiting for these guys to say this for two years now. Give it a little time. It gets easier and easier for me to see how these guys work.

Which is worse - bankers or terrorists's picture

My theory is this: Germany LETS Greece go, in a Lehman-like way, just to create enough fear and distortion in the markets to get the EuroBond passed.

It's the only way Merkel gets re-elected. 

arizona11912's picture

I don't think the bankers will allow Greece to slip out of the matrix that easy. Maybe they'll sweep the Euro-bond issue until after the elections then implement the Euro-bond.

Which is worse - bankers or terrorists's picture

My theory is this: Germany LETS Greece go, in a Lehman-like way, just to create enough fear and distortion in the markets to get the EuroBond passed.

It's the only way Merkel gets re-elected. 

Filanderer's picture

Surprising that Sushi talks about US Elite and Europe Elite separately , there is only one real elite ruling both sides of the Atlantic.

john39's picture

imagine my shock... calls for more centralized government control following an engineered collapse.  couldn't see that one coming.

Ahmeexnal's picture

This is bullish for the Gulden.

tasmandevil's picture

and for brigitte bardot by dutch masterpainter

Ahmeexnal's picture

Schroeder is a scumbag.

He's the one that passed a gag law in which any mention of his wig in the media was a crime.

Then he passed another gag law so no one could criticize him for handing out billions to GAZPROM.

BTW, right after leaving office, he got a phat job at GAZPROM.



sushi's picture

Schroeder argues that the euro states should willingly give up their sovereignty. He just needs to take his argument one step further and he has a winner:

             Sell Europe to the Chinese.


LeBalance's picture

What is the consensus for the opening in Au?

Sudden Debt's picture

It's not important anymore how much our PM's go up, it's more important to see how much the rest is going down.

Never the less, this week we'll be making a killer!!! :)


LeBalance's picture

the proper phrasing would be: "making a killing."

We gauge the "rest going down" by the inverse valuation of them in Gold.

Thus the view of Gold as surrogate to "death of the dollar."

cossack55's picture

SD may have had it right after all.  If the Euro goes kaput, I believe many former stable folks may turn to killing.

Durchbruch's picture

Yep, if the euro goes kaput the economic crisis will be a never-seen-before scene. We would go back to the state of the economy we had before discovering America. Think of 40 % of China export vanishing and of the chinese factories having to face lire and pesetas weaker than their renmimbi. Then go to the USA export data and delete the export-to-europe row (already kinda of a triangulation from shangai to europe). 

Bicycle Repairman's picture

Wonder what the US will do with all their troops stationed in Europe?

Which is worse - bankers or terrorists's picture

Start shooting people who do not pay their debts. 

golfrattt's picture

Not much fuse left on that timebomb....

This is where the guy in the movie throws it as far as he can before it explodes. The problem is that he can't throw it far enough...

DeadFred's picture

Those nuclear hand grenades can be a bitch.

WoodMizer's picture

Or, the protaganist starts cutting wires in the hope of stalling the timer, but reality is not Hollywood.  The more the Keynesian bomb squad buries the bomb in debt the higher the chances it will go thermo-nuclear.

mikmid's picture

It appears the euro crash is near, which will cause problems in the US. I just wonder how big and how fast things will deteriorate.

rubearish10's picture

No need to worry, China will have its soft landing and we'll all be ok once USD printing re-commences.

Spitzer's picture

It looks to me like the ECB is refusing to re capitalize  banks in Europe. That is not a currency issue for the Euro, it is a systemic issue for the Fed.

flyr1710's picture

this chart should scare the hell out of everyone


Everyone is putting their money in the Fed...


look out below

Irish66's picture

making 2009 look good. thanks

New_Meat's picture

I'm a total newbie on these "High Finance" subjects.  Thanks and a greenie for the link. - Ned

Sudden Debt's picture

Looks like ABN AMRO is running out of Dutch boys to plug the leaks in their dikes :)



tasmandevil's picture

running outta dikes ya mean? lookit them waves coming from the east

New_Meat's picture

them dykes don't have the plugging capabilities of the Dutch boyz.

dearth vader's picture

Come on, ABN Amro is 100% government owned and Dutch dikes are fine, come hell or high water.

Here is what Zalm said: Kicking Greece out of eurozone not a solution

From VolksKrant [People's Daily] via Google Translate

VolksKrant UPDATE That said former VVD minister of finance and chairman of the board of ABN Amro Gerrit Zalm in Buitenhof Sunday. He thus responded to a ruling VVD celebrity Frits Bolkestein.

Bolkestein said in Nieuwsuur [News Hour] Saturday that the EU should continue to support Greece, but only on condition that Greece gets out of the eurozone. Zalm pointed out in Buitenhof that Italy will be the next quickly. "And then Ireland, then Portugal and eventually you just stay with the Netherlands and Germany."

Drastic measures
He pointed out that Greece has taken "drastic measures to reduce salaries. The first priority he believes is the reorganization of the IRS. "There is still a huge gold mine. There is a huge black economy. "

Expanding the emergency fund for Greece, he said, not yet needed. "But politicians say they are willing to fund."

Zalm also said to be against an additional tax on the banking sector. Imports of European government bonds (Eurobonds) he finds not a good idea.

"The bank tax will be passed on to customers as the dealer does with the excise on petrol. Banks will be stricter in issuing credit and charge higher costs for it. Also, the savings rate decline, "said Zalm.

The European Commission is considering for some time after the issuance of Eurobonds, which Member States are today the euro guarantee each others debts. "The Netherlands must not join it if no conditions are created so as to know that it is satisfied."

Budgetary discipline
According to Zalm, the northern states of the eurozone, who have their budgets into balance, should bring the fiscal discipline back to the southern members. Zalm advocates of such a European regulator that is independent of politics. "Politicians are always wheeling and dealing again, it weakens the whole thing."

Zalm said that the inter-bank loans begins to stagnate, mainly because of the ongoing debt crisis in Europe. "Up to a period of six months, it still works, loans with longer maturities are scarce."

Another reason, according to Zalm's new demands on the financial sector, known as Basel III. Banks shall under those rules include greater reserves.

"We may well keep up our own pants," said Salmon of ABN Amro. "We are adequately capitalized and will not return to the Minister for additional capital."

Pure Evil's picture

So what they're saying is that no matter how deep the hole, now is not the time to stop digging?

A couple hundred years from now they'll be giving existential classes on how Europes central banks and politicians turned a black hole into a super massive black hole.

Yes, I'd like to place a call to the scientists a the CERN laboratory. I think if you turn the equipment on when the shit finally hits the fan over there you might actually have a chance at finding the Higgs Boson, The God Particle.

The resulting implosion of European Banks should generate showers of exotic particles.

Reptil's picture

A return to the famous "Zalm-norm"? I don't believe that is still possible, it's going down right NOW. Greece and Italy can't balance their books, it's delusional to expect this.


Kimo's picture

Why all this problem with lending if they can hedge their risks with derivitives?   /sarcasm=off

Rue's picture

ABN are owned by Royal Bank of Scotland. Doesn't that mean they'll be able to get funding through RBS?

Ronaldtheone's picture

Abn Amro has been split up. The part Gerrit Zalm is CEO of is government owned. An other part is owned by RBS.

Rogier's picture

ABN isn't owned by RBS. RBS bought just a part of ABN before blowing itself up. What is now known as ABN is owned by the Dutch government.