The Death of The PIIGS Illustrated

Tyler Durden's picture

Yesterday we pointed to the fundamental reason for Europe's angst - that of dramatic imbalance across nations finances. Today we look at the implications of the growing concerns at sustainability of the Euro-area itself. Deposits are fleeing the PIIGS at ever faster rates, growth remains a dream as PMIs for most of the PIIGS trend towards (or are at) record lows, and despite all the liquidity provision of the two LTROs, credit extension to the real economy dropped once again. The Greek PSI remains front-and-center from a headline perspective but yesterday's dismal Euro macro data combined with the reality of these three factors appears to be increasingly repriced into sovereign credit spreads as CDS drag manipulated bonds wider in the last week.


1. Deposit growth (or losses) remain a huge problem and as Arnaud Mares of Morgan Stanley noted, the fungibility of money across time deposits in European nations is increasingly questioned as Europe is far from a union...


2. PMIs for the PIIGS are low (and lowest in some cases) and given austerity budgets there seems little hope for improvement anytime soon...

3. Credit Creation is still dropping as loans to non-financials from MFIs dropped even after the two LTROs - providing little hope for organic growth...

And with Spain openly dismissing the new fiscal compact's deficit targets, we suspect this vicious circle is far from over.

Charts: BARCAP

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battle axe's picture

GREECE DEFAULT!!!!!! I mean, it can not get any worse...

Careless Whisper's picture

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Schmuck Raker's picture

"This Call-Girl may be monitored for quantity assurance purposes."

Dermasolarapaterraphatrima's picture

Mattress on top of car...but she was off duty!

As Niall Ferguson pints out:

"The U.S. ranks 86th in the world for the costs imposed on business by organized crime, 50th for public trust in the ethics of politicians, 42nd for various forms of bribery, and 40th for standards of auditing and financial reporting."

peekcrackers's picture

holy never ending death seen..

Bunga Bunga's picture

Finally the homeless got a dry, clean and warm place to stay, 3 meals a day and medical service.



SheepDog-One's picture

Yea really, for the love of God just DEFAULT already Greece! Been 2 years of this bullshit drama and its ENOUGH just go default and fuck off!

kito's picture

Sorry sheepie, but we have another year of this crap before Greece gets jiggy wit it.............

whirlybird rules's picture

tomorrow at 21:00 hours Greek time, private investors must agree to the swap or hold out and fight it out for a payout ontheir CDS'...  the lunatics running the asylum think they've got it under control..  it's been a creepy day...  I think tomorrow 21:01 Greek time is the beginning of a new phase for this crisis. 

PersonalResponsibility's picture

"I think tomorrow 21:01 Greek time is the beginning of a new phase for this crisis."

Agreed.  Another new phase where, at that time when they agree to further discuss what they may agree upon regarding to what the majority would like them to agree upon, they'll finally maybe agree there's an agreement.  Forthwith they shall speak. 

whirlybird rules's picture

yes, it is possible, but the EC/ECB/IMF do not have an unlimited amount of funds (although God knows it seems that way)...  I believe it will unravel slowly at first and then ???  like a cartoon character that runs off a cliff, realizes that he is in mid-air, faulters, tries to fly, stops briefly and then plummets...

StychoKiller's picture

Oh, but it can!  Reference Portugal, Ireland, Spain & Italy waiting in the dugout...

Tsar Pointless's picture

Buyer and lender of last resort=Central Banks.

Just the way it was designed and destined to be.

LongSoupLine's picture



"What's any of this have to do with iPad III?!?!" - Dudley

Dr. Engali's picture

I wish I understood how the Piigs think they can continue to spend when they have no money. You hear that Piigs? There is no money!

stiler's picture

long lipshtick.

Lotus's picture

Michelle Caruso Cabrera   says "its to complicated for cable''  


youngman's picture


Hippocratic Oaf's picture

In other words, she also doesn't know whet the fuck is going on.

youngman's picture

How does anyone know...there are so many lies coming out...hints...leaks...lies..rumors...whatever...

SO we loan money to banks to buy soverign debt..which in time will be cut in half if not more...and then we loan them more to buy more...what an economic model this is...I am so glad I am a drunk...because if I was sober...I would be very angry

battle axe's picture

But she does have a great rack on her. 

Lotus's picture

Exactly..she just can't bring herself to have the guys who sign her paychecks see her make shit up, as she stands on a hotel balcony with the mediterranean air blowing through her hair.

yup she's connected

(hang on maybe thats the plan)

surf0766's picture

Meaning the people who watch cable and work in cable have what? An IQ below ???

Silveramada's picture

Just a matter of time before we see the final act of this whole tragedy/comic/ sci-fiction world economic system...

Vampyroteuthis infernalis's picture

Let me correct that RSloane, "We have years to go before the final act ends".

zrussell's picture

"Potter's not sellin... Potter's buyin!!!"

Vince Clortho's picture

Sure there is a bit of bad news for Portugal, Ireland, Italy, Greece and Spain.

but look at the bright side: the Cental Banking Mafia now owns every Equity on the Stock Exchange.

Sandmann's picture

Wonder where the great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money  is in all this ?

Die Weiße Rose's picture

the ECB President Draghi now holds 3 trillion €uros of Junk on his ECB balance sheet

There is a rift among top-ranking officials at the ECB,

and it also extends between the majority of the ECB's Governing Council and the Bundesbank. First, two leading German ECB officials - chief economist Jürgen Stark and Bundesbank President Axel Weber - resigned because the monetary authority was buying up sovereign bonds from Greece and Portugal. Then Weber's successor Weidmann objected to the ECB's purchase of government bonds from heavily indebted Italy. Now, Weidmann is rebelling against the manner in which Draghi is giving European banks one new cash injection after another.

Last week, the conflict escalated to a new level. Weidmann complained in a letter to ECB President Draghi that the central bank was accepting increasingly lower-grade collateral in exchange for its cash injections. This poses a danger, he warned, as the central banks in the north of the euro zone are owed ever growing amounts of money by their counterparts in the south. If the euro zone broke apart, the Bundesbank would be left holding a good deal of its bad debt from so-called TARGET2 loans, which currently amount to some €500 billion ($660 billion), he warned.

This may sound somewhat technical to most laypeople, but among leading ECB officials the letter was seen as violating a taboo. TARGET2 refers to the central banks' internal payment system, which has accumulated massive imbalances during the course of the euro crisis. These inequalities aren't problematic as long as the monetary union remains intact. So far, the Bundesbank has always played down this risk. But Weidmann's about-face is a "disastrous signal," say ECB executives because, for the first time ever, the Bundesbank "is no longer ruling out a break-up of the euro zone."

On the surface, the wrangling revolves around loan conditions and interest rates, but in reality it has to do with the basic course of European monetary policy: the question being whether a debt crisis can be combated with even more debt, or whether it will spark the next, possibly even greater crisis.

Although debt and cheap money triggered the global financial crisis, the central banks of the US, Japan and the UK continue to reduce interest rates, flood the markets with liquidity and make it easier for companies, banks and countries to acquire new debts

Part 2: Cash as Camouflage

That is also happening under Draghi's monetary program, which has done nothing to change the fundamental problem plaguing the European financial sector: The banks no longer trust each other. For their part, German banks are hoarding huge sums that they park in so-called overnight deposits at the ECB. Meanwhile, financial institutions in Italy and, of course, Greece are left high and dry. Even banks in France are repeatedly having problems acquiring fresh capital.

The ECB's supportive measures will "win time" at best, says Michael Kemmer, general manager of the Association of German Banks. But they can by no means replace the private bank market, he argues.

If there's anyone who knows precisely what Kemmer means, it's Commerzbank CEO Martin Blessing. The Frankfurt banker has watched helplessly while his bank's ailing subsidiary Eurohypo has ruined his annual results, year after year. Eurohypo is a relic from bygone days. Initially, it set out to make a fortune by bankrolling, of all things, sovereign states and real estate deals -- a business model that has probably been relegated to the dustbin of history since the outbreak of the financial crisis. What remains is a bloated, toxic balance sheet amounting to €200 billion, brimming with sovereign bonds and real estate loans from troubled states like Spain, Italy and Greece.

Eurohypo should actually be liquidated. Nevertheless, Draghi has given the bank some breathing room, once again. The real estate bank borrowed €10 billion from the ECB to pay off internal loans from Commerzbank. Likewise, the Düsseldorf-based IKB Deutsche Industriebank, which hasn't really gotten back on its feet since it nearly collapsed in 2007, has also reportedly taken a handout from the ECB. Analysts say that the French-Belgian Dexia bank, which recently produced losses of €11.6 billion and is now finally about to be broken up, has only been kept alive thanks to regular ECB contributions.

That's the nice thing about Draghi's money. It covers up problems -- camouflaging those faced not just by bankers, but also by politicians. Many governments in the Mediterranean region ran into troubled during the euro crisis when investors no longer wanted to purchase sovereign bonds from heavily indebted southern European countries, causing their interest rates to go through the roof. The bailout operation launched by the ECB, consisting of purchasing large quantities of government bonds from these crisis-ridden states, was met with decisive resistance from the Germans, though.

Rift Grows Between Germany's Bundesbank and ECB,1518,819255,00.html

posted by wr;)

ZIRPThis's picture

If Greece even survives until this summer, which is doubtful, the halting of  Mahmoud's Jihadi-House-o'Oil shipments on 7/1 will push them over the edge, and eventually the rest of us after it costs a $500 for a full tank, and maybe more for a FlukeWhore condom.  Better to default now & get out of the EU before everybody's shit hits the fan.  Come to think of it.. a lil' secession would be mighty healthy here too

Dick Darlington's picture

Nice peek under the hood of the spanish debt mobile by Edward Hugh.

bobola's picture

Der Spiegel  (not the catalog company) has a nice article about cash flowing from the PIIGS to Switzerland among other safe havens;,1518,818436,00.html

Funny thing is, the Swiss banks will probably lend it to the ECB, who will send it right back to the banks where it originally came from..........


eddiebe's picture

In the immortal words of dubbya: This sucker is going down!

Olympia's picture

Loan sharks knew that if they took the dollars printing machines under their control they could suffocate the world ...they could initially suffocate USA and after taking the USA from the Americans, they could move and suffocate the whole world and take the countries from their people.

FED printed cheap money and loansharking multiplied this money in an unnatural way within the American economy boarders and they discarded them abroad so that they did not threaten USA. USA became the first state in the world with artificial “breathing”...

It cannot be possible but just in the USA for only the last year, more than one million houses were seized. It cannot be impossible but the New World has returned to tents and shelters ..has returned to the ages of Columbus. It cannot be possible that we allow to a few loan sharks looting the toils and the assets of people...


Global Debt Crisis

Gunga's picture

"I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- Thomas Jefferson -- The Debate Over The Recharter Of The Bank Bill, (1809)

Die Weiße Rose's picture
Greek banks confirm debt swap participation

As the deadline for participation in a writedown of Greek debt approaches,

six of Greece's largest banks have reportedly lined up to take part in the deal. 

Several pension funds, however, say they will refuse.

Six of Greece's largest banks and eight insurance funds have confirmed they will accept the massive devaluation of their government bonds, Finance Minister Evangelos Venizelos said on Wednesday.

The six banks - National Bank of Greece, Eurobank, Alpha, Pireaus, Hellenic Postbank and ATEbank - hold a collective 40 billion euros ($53 billion) in Greek debt, which is to be cut by 53.5 percent of its original value.

Greek media have reported that at least four pension funds, which hold about two billion euros in Greek bonds, have announced their opposition to the debt swap, despite Finance Minister Venizelos warning that it was the best deal they could hope for.

Owners of the total 200 billion euros of debt have until Thursday night to declare whether they will take part in the haircut. An agreement on the write-down was a key condition for Athens receiving 130 billion euros in fresh emergency loans from the European Union and the International Monetary Fund.

The EU's Economic Affairs Commissioner Olli Rehn said on the eve of the deadline that he expected the deal to take place smoothly. 


IIF warns Greek bondholders over trillion euro default risk

The Institute of International Finance (IIF) has urged Greek creditors to participate in a debt swap or face a trillion-euro ($1.3 trillion) loss if Greece defaults. The IIF wants to keep a lid on contagion. (06.03.2012)  

"According to our information, the debt swap should take place without a hitch since the operation is interesting financially for the private sector," Rehn said in an interview with the French daily Le Figaro on Wednesday.

Rehn said the "risk of explosion (of the eurozone) is behind us," after official data from the EU statistics office showed the eurozone economy grew by 1.4 percent last year. However he added the mild recession that the bloc has now entered, as well as persistently high unemployment, was "worrying."

Meanwhile Greek Prime Minister Lucas Papademos announced late on Tuesday that he would reshuffle his cabinet, after the resignation of the civil protection minister. Socialist Mihalis Chrysohoidis is to take up the job, while fellow Socialist Anna Diamantopoulou was picked up for Chrysohoidis's education portfolio.

acb/pfd (AFP, dpa),,15792089,00.html

posted by wr;)

puck's picture

Treasonious rotin scoundrals, where ,who what when.... trial of puishment.