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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EscapeKey's picture

I predict a sharp rise in bailout rhetoric.

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

Chris Jusset's picture

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

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

 

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.

the not so mighty maximiza's picture

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

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  

HarryM's picture

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

fonzannoon's picture

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

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.

WhyDoesItHurtWhen iPee's picture

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

DaveyJones's picture

He suggests the hors d'oeuvres be something called soylent

LULZBank's picture

It has to look important, no?

Alpacanio's picture

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

Nobody For President's picture

Dummits at a summit. Yep, that should work.

Zola's picture

this kind of has a 2008 feeling to it

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

 

Alpo for Granny's picture

All your hare-brained bailouts are belong to us.

pleseus's picture

Like trying to put a fire out with gasoline

Barry McBear's picture

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

Sockeye's picture

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

LULZBank's picture

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

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.

the not so mighty maximiza's picture

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

DaveyJones's picture

true, at least their job description is honest

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.

Al Gorerhythm's picture

Nothing of substance to see here. Move along.

RobotTrader's picture

NEM down 74 cents

GLD down 76 cents

JPM flat

That pretty much says everything.

EscapeKey's picture

Yes, of course it does.

 

 

IBEX 35 Index

current: 6,613

day high: 6,940

 

 

old naughty's picture

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

DaveyJones's picture

yes, two seconds in a world of cataclysm

WaEver's picture

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

old naughty's picture

experts...you mean the Ivy Leaguers?

So Kermit and gonzo...They become muppets.

Hummmmmmmmmmmm.

EscapeKey's picture

Now I wish it was Gonzo and Kermit.

Village Smithy's picture

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

percyklein's picture

What is the matter with  these people?

Al Gorerhythm's picture

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

LULZBank's picture

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

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)

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."

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!

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