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Europe Scrambling To Avoid Subordination Threat

Tyler Durden's picture




 

It just gets more and more mind-numbing by the moment. The latest from Europe, which earlier confirmed that ESM loans would get preferred creditor status:

  • SPANISH BANK RECAPITALIZATION LIKELY TO BE IN EFSF BONDS, SIMILAR TO GREEK RECAPITALIZATION - EU OFFICIAL
  • EUROZONE MONEY FOR SPANISH BANK RECAP COULD COME FROM EFSF TO AVOID THE ESM'S PREFERRED CREDITOR PROBLEM - EU OFFICIAL
  • SPANISH BAILOUT COULD LATER BE TAKEN OVER BY THE ESM, BUT EXTENDED LOANS WOULD NOT BECOME SENIOR TO OTHER DEBT

Nothing like figuring out your hare-brained bailout attempt was a failure from the beginning. Ok: Here are the problems with this band aid:

  1. Unfunded
  2. Temporary, and eventually will be replaced by the ESM. Markets can, luckily, still discount.
  3. Negative pledge issue still exists as Finland made all too clear. Countries will demand extra security interest while under EFSF regime and until ESM priming comes in play.

Finally, all of this, is just semantics. To quote from SocGen earlier: "If the loans are paid by the ESM, the loans given to FROB will be more clearly senior to SPGBs, though we expect de facto seniority in any case."

Ball is in your court Europe.

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Mon, 06/11/2012 - 10:11 | 2514282 EscapeKey
EscapeKey's picture

I predict a sharp rise in bailout rhetoric.

Mon, 06/11/2012 - 10:13 | 2514294 SilverTree
SilverTree's picture

No pain no gain.

Mon, 06/11/2012 - 10:21 | 2514334 Manthong
Manthong's picture

Meanwhile, in other vicious squeeze news:

“Indian state-owned refiners will halt planned oil imports of 173,000 barrels per day from Iran when European sanctions take effect in July, unless the government permits them to use insurance and freight arranged by Tehran

http://in.reuters.com/article/2012/06/11/india-iran-oil-idINL3E8HB48B20120611

Mon, 06/11/2012 - 10:22 | 2514342 Chris Jusset
Chris Jusset's picture

I've been to circuses that are better run than these Euro-Ponzi bailouts.

Mon, 06/11/2012 - 10:27 | 2514377 Chief KnocAHoma
Chief KnocAHoma's picture

Wow... Hitler must be kicking himself right about now and saying..."Why didn't I think of that? You can conquer Europe by loaning the lazy money. Brilliant!"

http://annoyanidiot.blogspot.com/

 

Chief

 

Mon, 06/11/2012 - 10:51 | 2514561 RoadKill
RoadKill's picture

Works in every strategy game Ive plyed too. Loan money at cheap rates. The interest burden slowly erodes the borrowers abillity to fund a millitary and the interest income allows the lender to slowly build a superior force. By the time you get to bankrupcy one side has 30 year old muskets held by prisoners and the other side has the highest technology tanks and planes. So the borrower cant default without surrendering land.

Mon, 06/11/2012 - 10:14 | 2514284 the not so migh...
the not so mighty maximiza's picture

setting sail for the bailout fail; time for a new telephone conference.

Mon, 06/11/2012 - 10:12 | 2514287 DaveyJones
DaveyJones's picture

Ironic Statement of the Year Award:

"The future of the Euro and our banking system all won new credibility yesterday"

- Mariano Rajoy, Spanish PM  

Mon, 06/11/2012 - 10:54 | 2514566 HarryM
HarryM's picture

last sentence should be "Balls are in your  face,Europe." 

Mon, 06/11/2012 - 10:12 | 2514288 fonzannoon
fonzannoon's picture

They need a summit. ASAP. Sometime in August should work.

Mon, 06/11/2012 - 10:28 | 2514376 stocktivity
stocktivity's picture

Yes...another "summit". 5 star hotels, 7 course meals, in a luxury setting so they could concentrate, and all on the tax payers dime. Maybe 2 or 3 "summits" are needed this summer.

Mon, 06/11/2012 - 10:33 | 2514424 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

quick, call the caterer, lets see whats on the menu.

Mon, 06/11/2012 - 12:03 | 2514959 DaveyJones
DaveyJones's picture

He suggests the hors d'oeuvres be something called soylent

Mon, 06/11/2012 - 10:33 | 2514428 LULZBank
LULZBank's picture

It has to look important, no?

Mon, 06/11/2012 - 11:19 | 2514699 Alpacanio
Alpacanio's picture

Oh, don't worry. Many more summits will come.

Mon, 06/11/2012 - 10:34 | 2514436 Nobody For President
Nobody For President's picture

Dummits at a summit. Yep, that should work.

Mon, 06/11/2012 - 10:13 | 2514289 Zola
Zola's picture

this kind of has a 2008 feeling to it

Mon, 06/11/2012 - 10:18 | 2514314 SilverTree
SilverTree's picture

2008 x 100

Mon, 06/11/2012 - 10:36 | 2514441 Chief KnocAHoma
Chief KnocAHoma's picture

Now now... don't everyone shit the bed... after all... Bernanke is on it.

Okay... now shit the bed!

http://annoyanidiot.blogspot.com/

Chief

 

Mon, 06/11/2012 - 10:13 | 2514291 Alpo for Granny
Alpo for Granny's picture

All your hare-brained bailouts are belong to us.

Mon, 06/11/2012 - 10:13 | 2514293 pleseus
pleseus's picture

Like trying to put a fire out with gasoline

Mon, 06/11/2012 - 10:14 | 2514295 Barry McBear
Barry McBear's picture

I don't think the EU appreciates you dismembering their plans so quickly Tyler. 

Mon, 06/11/2012 - 10:26 | 2514369 Sockeye
Sockeye's picture

No kidding! (Cause their plans were oh so solid to begin with!)

Mon, 06/11/2012 - 10:14 | 2514299 LULZBank
LULZBank's picture

Rajoy, that crybaby face? Is it since birth or just after needing bailouts?

Mon, 06/11/2012 - 10:14 | 2514301 Dr. Engali
Dr. Engali's picture

What a bunch of ass clowns. I would like to know what is keeping the Euro from just collapsing with these fools running the joint.

Mon, 06/11/2012 - 10:17 | 2514313 the not so migh...
the not so mighty maximiza's picture

never thought i would think it but we might be insulting ass clowns now.

Mon, 06/11/2012 - 10:18 | 2514324 Dr. Engali
Dr. Engali's picture

You've got a good point there.

Mon, 06/11/2012 - 10:23 | 2514344 DaveyJones
DaveyJones's picture

true, at least their job description is honest

Mon, 06/11/2012 - 10:19 | 2514327 Al Gorerhythm
Al Gorerhythm's picture

It stays afloat because it is measured in that basket of turds known as currency against that supreme turd, the US dollar. They're floaters. When you float one turd you float the rest. You just can't keep a good turd down.

Mon, 06/11/2012 - 10:15 | 2514302 Al Gorerhythm
Al Gorerhythm's picture

Nothing of substance to see here. Move along.

Mon, 06/11/2012 - 10:16 | 2514305 RobotTrader
RobotTrader's picture

NEM down 74 cents

GLD down 76 cents

JPM flat

That pretty much says everything.

Mon, 06/11/2012 - 10:19 | 2514319 EscapeKey
EscapeKey's picture

Yes, of course it does.

 

 

IBEX 35 Index

current: 6,613

day high: 6,940

 

 

Mon, 06/11/2012 - 10:20 | 2514331 old naughty
old naughty's picture

...until they back-handed the "Ball" out. Then...

Mon, 06/11/2012 - 10:21 | 2514332 DaveyJones
DaveyJones's picture

yes, two seconds in a world of cataclysm

Mon, 06/11/2012 - 10:17 | 2514306 WaEver
WaEver's picture

Who are the experts assisting the euro decision makers : kermit and gonzo ?

Mon, 06/11/2012 - 10:28 | 2514379 old naughty
old naughty's picture

experts...you mean the Ivy Leaguers?

So Kermit and gonzo...They become muppets.

Hummmmmmmmmmmm.

Mon, 06/11/2012 - 10:38 | 2514463 Nobody For President
Nobody For President's picture

Krugman.

Mon, 06/11/2012 - 10:47 | 2514526 EscapeKey
EscapeKey's picture

Now I wish it was Gonzo and Kermit.

Mon, 06/11/2012 - 10:16 | 2514308 Village Smithy
Village Smithy's picture

It's amazing what you can get away with when you are TBTF.

Mon, 06/11/2012 - 10:18 | 2514320 the 300000000th...
the 300000000th percent's picture

DOA

Mon, 06/11/2012 - 10:18 | 2514321 Bansters-in-my-...
Bansters-in-my- feces's picture

"More Cow Bell...!!!!

Mon, 06/11/2012 - 10:31 | 2514409 junkyardjack
Mon, 06/11/2012 - 10:19 | 2514322 percyklein
percyklein's picture

What is the matter with  these people?

Mon, 06/11/2012 - 10:21 | 2514340 Al Gorerhythm
Al Gorerhythm's picture

They're sociopathic kleptocrats. They're entitled. They're enlightened. We need a benevolent dictator.

Mon, 06/11/2012 - 10:23 | 2514343 LULZBank
LULZBank's picture

Lack of sex, apparently as they constantly need to bailout.

Mon, 06/11/2012 - 10:19 | 2514328 spanish inquisition
spanish inquisition's picture

I was a bit surprised the Spanish bailout happened so FAST (market closed, we need money, here it is). I gotta think the fear index is pretty high before the Greek elections.

I will predict that the Italian bailout will be announced BEFORE they ask for it to help smooth out the new cycle.... (in fact, they may already have the money haha)

Mon, 06/11/2012 - 10:24 | 2514347 Al Gorerhythm
Al Gorerhythm's picture

They just use the script from greece and pass it on to the next set of technocrats. "Hey, this worked for us! Try it out on your flock."

Mon, 06/11/2012 - 10:20 | 2514330 mayhem_korner
mayhem_korner's picture

 

 

I could go to the local elementary school and watch the second-graders fight about who gets to be first in line...this is better.  Pop some corn!

Mon, 06/11/2012 - 10:21 | 2514336 Freebird
Freebird's picture

Apart from the incompetence, negligence, confusion, bullshit & general ambiguity, anyone know how delayed an ECB process is due to the need to translate all documents into a zillion different languages. Lol

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