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Dominoes Tumbling: Catalonia Informally Requests Bailout As Spain Considering Credit Line Request

Tyler Durden's picture


Things in Spain are now in freefall, and as a Spanish economist admits to El Economista "we are alone" which is not surprising: the country has cried not wolf then wolf one too many times, and following yesterday's warning by Moody's that Germany is now officially on the hook should it continue bailing out the insolvent periphery, it is no wonder that Germany will leave Spain to the same wolves it may or may not have been observing for months. Sadly, much more pain is in store for the rhyming country, but first of all for its north-eastern region of Catalonia which is responsible for a fifth of the country's economy output, and which has €13 billion in debt redemptions until the end of 2012. From El Nacional: "The Government of Artur Mas call on the help of regional liquidity fund that created the central government with 18,000 million euros, as confirmed by the spokesman Francesc Homs. After Valencia and Murcia, who have already made ??their intentions, Catalonia would be the third autonomy to resort to the rescue of the state. For its part, Andalusia may try to avoid government aid and negotiate a private loan of 800 million euros. Homs has emphasized that the decision to seek the liquidity mechanism has not yet been taken formally and according to him it is not in any case not a rescue or intervention, and that the Government of Artur Mas is studying the fine print of the conditions the fund." At least FC Barcelona has some good collateral to post to the the various German entities that will ultimately be funding the rescue. The same can not be said for Spain, however, which the same publication says, is on the verge of begging, and may demand a credit line so it can finance its funding neeeds for the remainder of the year.

From El Economista:

At stake is to avoid an imminent financial collapse. Because this danger is real. Analysts are unanimous: If perseveres pressure on Spanish bonds and Treasury loses its access to market-that is, you could not stop, 'Spain can not cope with the massive debt maturity that awaits it in October, close to the 28,000 million. These outflows be even greater if, in addition, the Treasury has to funnel money to the regions requesting the help of special liquidity fund created by the central executive.


Therefore, sources close to the government have admitted they are considering other alternatives. Like, for example, the negotiation of an overall rescue tender. That is, that Europe give Spain a temporary line of credit with which to address the maturity of its debt, and even financial assistance from the Autonomous Communities in 2012.


This option is based on a premise well known in the eurozone, of buying time. That money would serve to dampen fears today, waiting for the agreements reached at the June summit, as the implementation of a single banking supervisor, are in place and that the Stability Mechanism (Mede) is already in operation and available financial resources and instruments to find solutions.

Sadly, what one can deduce from all of this, is that Europe is now totally lost and that solutions are being made up on the fly without any regard for credibility or viability. The problem with a credit line, of course, is that it demands even more stringent collateral than what the ECB would accept, and as is now well-known to everyone, Europe, and especially Spain has no collateral: sorry underwater seaside villas and Spiderman Towels: you just don't cut it for a 60% LTV calculation.

But we do wish Spain all the best: we are confident that Germany will not let it flounder immediately. Instead the bloodletting will be slow and methodical, just as we have claimed since the beginning - after all it is only Merkel who benefits from a gradual drop in the EUR, coupled with a periphery that is so insolvent it will accept a German Debtor in Possession loan at any price and under any condition. Even if it means a peaceful sovereign control handover.

Which of course is Germany's goal as it itself has publicly stated all along.

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Tue, 07/24/2012 - 09:37 | 2645213 punxsutawney phil
punxsutawney phil's picture

GOLD above 1300 priced in EUR!!!!

Tue, 07/24/2012 - 09:39 | 2645216 GetZeeGold
GetZeeGold's picture



But did you see it's shadow?



Tue, 07/24/2012 - 09:37 | 2645214 Fips_OnTheSpot
Fips_OnTheSpot's picture

That's why anything just spiked? :)

Tue, 07/24/2012 - 09:38 | 2645217 zero19451945
zero19451945's picture

The IBEX is down again??????

RobotTrader, what have you done???? I took your advice and put every dime I had in the IBEX after you said the "lows were in"!!!!!!!!!!!

Have I been scammed?

Tue, 07/24/2012 - 09:39 | 2645218 GetZeeGold
GetZeeGold's picture



It's a possibility.


Tue, 07/24/2012 - 09:43 | 2645225 the not so migh...
the not so mighty maximiza's picture

You have been RobotTraderized

Tue, 07/24/2012 - 09:55 | 2645252 Doubleguns
Doubleguns's picture

Your a muppet!!!!   Stay back I hope that shits not contagious.

Tue, 07/24/2012 - 10:00 | 2645263 GetZeeGold
GetZeeGold's picture



You don't look so good.....are you feeling OK?


Tue, 07/24/2012 - 09:41 | 2645222 ShortTheUS
ShortTheUS's picture

Oh, those Germans and their visions of global dominance...

Tue, 07/24/2012 - 09:44 | 2645227 MassDecep
MassDecep's picture

Oh, those "elites", that run Germany and their visions of global dominance...

Tue, 07/24/2012 - 09:41 | 2645223 mm17101978
mm17101978's picture

€ 1307 an ounce is wonderful to see but hopefully this summer the Golden Rally will not be denied! :))))

I will keep buying anyway...... :)

Tue, 07/24/2012 - 11:08 | 2645475 reload
reload's picture

I am also buying - physical.

I think things may speed up somewhat now, I dont buy into the premis of the article that Germany will be able to orchestrate either peacesful handover of sovereignty OR keep the system afloat much longer without plain sight ECB printing.

Tue, 07/24/2012 - 09:42 | 2645224 jal
jal's picture

The only solution is the old solution ...

Pledge your old debts as collateral ... increase the multiple claims on assets.

Let future policy makers deal with the problems.

Tue, 07/24/2012 - 09:47 | 2645231 kito
kito's picture

does that headline read "catalonia" or "california"?

Tue, 07/24/2012 - 09:48 | 2645238 Jlmadyson
Jlmadyson's picture

"At stake is to avoid an imminent financial collapse. Because this danger is real."

What no it's not real. Far from reallity? Right? Right? But the newsman said everything was fine. Krugs said everything is fine if we just print more! Right?

Deeper and deeper into the rabbit hole we go.

Dow 20,000 onward we march!

Tue, 07/24/2012 - 09:49 | 2645239 Bahamas
Bahamas's picture

Does any one of you guys have Mario Draghi's cell phon number? I wanted to ask him when is he going to press ctrl+p on his Frankfurt keyboard.

Tue, 07/24/2012 - 11:00 | 2645452 MillionDollarBoner_
MillionDollarBoner_'s picture

...and I want to tell him to "andare a fare in tasca" ;o)

Tue, 07/24/2012 - 09:50 | 2645244 Too Big 2
Too Big 2's picture

Too many insolvent nations, states, and counties in the western world....something has to give.


Tue, 07/24/2012 - 09:54 | 2645251 new game
new game's picture

"Spain has no collateral"

I think that says it all...


Tue, 07/24/2012 - 10:01 | 2645260 Joe A
Joe A's picture

A few years ago Catalan people wanted independence, being sick and tired of Madrid and of coughing up money for the poor regions. Now they want money from Madrid.

Tue, 07/24/2012 - 10:04 | 2645279 Dr. No
Dr. No's picture

Look below the surface.  There is no quicker way to independance than continous begging for a handout.  Bilderbergers are getting pwned.

Tue, 07/24/2012 - 10:04 | 2645276 vincent van goo
vincent van goo's picture

Spain needs to hurry and take action.  Hows about retirement benefits at age 50?

Tue, 07/24/2012 - 10:11 | 2645294 milanitaly
milanitaly's picture

The first one between italy and spain that will call the euro exit will be the winner.

I am sure that italy will not pay more interests than today for Its new Lira Bonds.

If i have to pay more taxes or get less welfare i want to do it for my country not on behalf of german business.

Till now we have paid for all the bailouts like germany and much more than finland that seems now the new most powerfull country in the world.

I never saw a product made in finland. May be a wood.

Tue, 07/24/2012 - 10:30 | 2645356 Agent P
Agent P's picture


Tue, 07/24/2012 - 10:35 | 2645366 asteroids
asteroids's picture

Someone must go broke before things get better. The longer we wait the worse it'll be in the end. It looke like Greece, Ireland, Spain, and Portugal will be blowtorched. Pity.

Tue, 07/24/2012 - 10:41 | 2645383 eclectic syncretist
eclectic syncretist's picture

Spain has about 280 tonnes of gold worth 15-16 billion USD they could sell.  Word on the street is that China's a big buyer at the moment.

Tue, 07/24/2012 - 11:12 | 2645491 reload
reload's picture

So -ALL of Spains Gold reserves = 1 months debt maturity obligations. Time to revalue Gold perhaps?

Tue, 07/24/2012 - 11:13 | 2645496 eaglefalcon
eaglefalcon's picture

The most beautiful thing that can ever happen to Spain, Italy and Greece is that their government bond yield skyrockets to 500,000%. Why? Because that's the only way both the government and the people of those countries will live within their means. Isn't it absolutely wonderful that the people of these countries will turn into productive, industrous, prudent and virtuous human beings that are at least 10% as good as the Germans?

Tue, 07/24/2012 - 11:46 | 2645615 Dareconomics
Dareconomics's picture

If one looks at the Spanish central government’s debt, things do not look so bad. The Spanish debt to GDP ratio is officially 72% and they only need to obtain about €26bn in financing between now and the end of the year. The problem is that these figures do not include their regions, akin to our states. The regions have been shut out of the markets and must now be financed by the central government or default. Adding the regional debt burden together with the national, Spain needs about €62bn for the rest of the year with a Debt to GDP ratio of over 100%.

In order to meet those ridiculously rigorous deficit targets promised to the Germans, something had to give. That something was transfer payments to the regions, which are now dragging the whole operation under. A similar problem is occurring in Italy starting with Sicily, which I wrote about last week. This is not just a European problem. California has been reducing payments to its municipalities for three years now, and this has resulted in the bankruptcies of Stockton, San Bernadino and Mammoth Lakes with more to follow.

Tue, 07/24/2012 - 12:06 | 2645707 Gromit
Gromit's picture

Who will rescue the rescuers?

Tue, 07/24/2012 - 14:38 | 2646393 AAA21
AAA21's picture

The pain in Spain is well deserved!!  These idiots thought they had hit the jackpot when the Euro went live in January 1999.  These lazy fools thought they could become even lazier (where do you think Latin America got its "work ethic" from) and started borrowing and spending like there was no tomorrow.   WELL TOMORROW IS HERE!!

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