European Status Update: No Progress

Tyler Durden's picture

The math of the European bailout (using the EFSF or otherwise) is so easy even a cave-EUReaucrat can do it: It doesn't work. But leave it to Europe's financial ministers to figure this out in the literally last minute. As Bloomberg reports, "A 10-hour meeting in Brussels failed to yield a blueprint for banks’ role in a revamped Greek rescue as European finance ministers haggled over what they called a “credible firewall” against fallout from deeper writedowns." And now it's 5 start dinner time: "The ministers’ meeting broke up at about 7 p.m. after reaching agreement that European banks may need about 100 billion euros ($139 billion) in capital after marking their sovereign-debt holdings to market values, according to a person familiar with the discussions. This amount is needed to reach a core tier 1 capital level of 9 percent based on a European Banking Authority test, said the person, who declined to be identified because discussions are private." No, it's not, it's a joke. The number, once again for those who dare to approach "stuff" mathematically is anywhere between €400 billion and €1 trillion. But we give the EUReaucrats another 2 months before they comprehend this simple fact. Which means that tomorrow's summit which was supposed to be the "come to God" meeting which was expected to resolve all of Europe's problems, much to our, and every other non-momo's relentless snickering, will be a complete and total disaster. But fear not: because Europe has another 3 whopping days after that until Summit #2, when everything will be fixed. For realz.

Or not:

The struggle to get an accord on bank capital was just one piece of solving the two-year-old financial crisis. Governments also are pushing for deeper writedowns on banks’ holdings of Greek debt, a step the investors are resisting.


“Discussions are making progress, albeit limited,” Charles Dallara, managing director of the Institute of International Finance, the umbrella group for 450 of the world’s biggest financial companies, said in a statement late today.

No, Chuck. They are not. But keep saying that. Next thing you know Greek debt-to-GDP will be back to 100% because Europe willed it to.

The negotiations were part of a six-day stretch of talks aimed at stopping contagion spreading to Spain and Italy as the turmoil pushes Greece closer to default, roils global markets and dents confidence in the survival of the 17-nation currency. Finance ministers now yield the conference tables after two days of talks to leaders, who meet tomorrow and on Oct. 26. 


Negotiations among finance ministers from the 27-member European Union, including U.K. Chancellor of the Exchequer George Osborne, were repeatedly extended and the plenary discussion eventually broke off into small groups focused on particular issues after 4 p.m. Brussels time.

"Peak Lies"

“We’ve had a 10-hour meeting, but we have made real progress and we have come to important decisions on strengthening European banks,” Osborne said. “That is just one part of the package and obviously there’s more work to do.”


Well, you have had a 10 hour meeting, that's right. But you haven't made any progress: the €100 billion number was floated a week ago, and has already been ridiculed by everyone with an HP-12C.  Speaking of, in addition to printer cartridges from Hewlett Packard, can the firm with the rotating CEO please send some god damn calculators to Brussels? For god's sake!

THe BS continues:

Plans now being considered involve an exchange with a 50 percent reduction in net present value, or upfront bond exchanges into either AAA rated bonds from the European Financial Stability Facility or new 30-year Greek government debt, according to people familiar with the matter. Upfront exchanges could involve a 50 percent discount off face value.


“We remain open to explore options on a voluntary approach built on a realistic outlook for the Greek economy and restoration of Greece’s market access,” Dallara said.

Realistic outlook - like the 2013 Greek debt to GDP forecast mysteriously surging from 150% to 190% in... oh... 16 months ? And as we explained earlier to the 5 year old idiots who are in charge of Europe, a 50% haircut on Greek debt means that within 1 month or less, every other European country's debt situation will mysteriously deteriorate as first Ireland, then Portugal, then Italy, then Spain will all demand the same treatment! And if Europe thinks that its €100 billion recap of French banks (to call a spade a spâdé) will be sufficient once every PIIG lines up at the German taxpayer fund trough, we can't wait to quote this article in mid-Novemeber and copy and paste this line: "no, you pathological liars, it is not enough - total exposure to the PIIGS is trillions and trillions. A 50% haircut on Italian debt alone will push every bank on the continent into bankruptcy."

But, hey who are we to predict the future. After all we have career politicians (advised by JP Morgan none the less) and well-paid Economic Ph.D. out there coming up with far more "credible" solutions with every passing day.

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GeneMarchbanks's picture

Simple arithmetic be damned, they will get this done!

SilverDoctors's picture

Couldn't agree more GeneMarchbanks- a failure to bail and print will instantly bring the credit derivative crisis to a head and bring an instant worldwide depression.  Why do you think The Fed moved $75 Trillion of Bank of America's worthless derivatives from BOA's Merrill investment unit to its depository arm this week- SO IT CAN BE BAILED BY THE TAXPAYERS!!
QE will continue to Infinity...AND BEYOND!!!

GeneMarchbanks's picture

A couple things, the derivative unwind has to happen no matter what measures/bailouts/extensions the Eurocratz propose. The only question is the trigger event(s) and timing.

The BAC figure is 53t last I checked not 75t.

Quixotic_Not's picture


Lech Walesa Not Attending #OccupyWallStreet in New York After Discovering Hard-Left Organizers

The Polish champion of freedom and liberty, founder of Solidarity, winner of the 1984 Nobel Peace Prize, and first President of modern Poland Lech Walesa had been rumored to possibly be traveling to New York to stand with Occupy Wall Street protesters.

Based on our discussion and intervention, President Walesa is not going to get involved with the OWS.  He is not comfortable with the “organizations” behind the movement.

This spring, when President Obama visited Poland, President Walesa refused to meet with him.

America is a center-right country politically.  The Occupy movement, at its core, is a hard-left movement. If successful, America would cease to be governed on our founding principles of freedom and liberty. Thus, we react to the news that Lech Walesa will not support the OWS movement with much thankfulness.


ZeroPower's picture

After the well-received Solidarity movement in Poland, the country is a million x better off than before. Walesa, while not the most diplomatic at times, certainly always had his country in mind when starting the uprising, so id think he knows a thing or 2 about such type of events.

Im assuming if he'd go to NYC itd would be to ridicule the hipster socialist teenagers living off their parents buck. Rightfully so.

macholatte's picture

He also knows a thing or two about Marxism and Communism and the Soros-Clinton machine that the sheeple don't.

AldousHuxley's picture

You are confusing Rubin with Soros. Soros doesn't approve Obama. Clinton's Jewish son-in-law works for Goldman sachs.


EuroPEONS are taking a while though on this bailout business unlike Hank Paulson's 1 pager for no recourse $700,000,000,000 he asked from US CONgress.


Use of Weapons's picture

You can copy/paste that a few more times, it doesn't stop the source being... a little bit biased.

Ex- Communist Secret Police... nice source!

"On 15 April 2010, during a civil trial brought by Wa??sa against former fellow activist Krzysztof Wyszkowski over the collaboration allegations, a retired MO and S?u?ba Bezpiecze?stwa officer appeared in court and confirmed the fact of Wa??sa's collaboration in a sworn testimony.[46] The officer, Janusz Stachowiak, was in charge of keeping documentation on Wa??sa from December 1970 to 1974 (which shows these documents were not fabricated later), although never met him in person. He stated that Wa??sa was convinced to cooperate by SB Capt. Henryk Rapczy?ski and SB Capt. Edward Graczyk, after a two-hour interrogation, albeit without the use of threats, and signed an agreement to keep his cooperation with SB in secret.[47] The officers asked him to "calm down" the atmosphere in the shipyard after protests were bloodily suppressed. Wa??sa kept meeting regularly with the secret police, reportedly receiving substantial sums of money,[47] but after about 4 months he started to "withdraw" (although it was not until June 1976 when he was unregistered, because of his "reluctance to cooperate").

Previously, in 2008, Capt. Edward Graczyk (long thought to be deceased and as such not summoned to testify in the 2000 trial) was interrogated by the IPN about his contacts with Wa??sa[48] and subsequently interviewed by Gazeta Wyborcza.[49] In the interview, which somewhat contradicts his earlier testimony, Graczyk recounted Wa??sa's cooperation, but denied his own actions had been "recruitment" of an agent. He also denied giving money to Wa??sa. The other of the two officers, Capt. Henryk Rapczy?ski, was never interrogated.

In February 2011, in an interview with Monika Olejnik about the Smolensk disaster, Wa??sa finally admitted that he had signed a "commitment to cooperation" with the secret police S?u?ba Bezpiecze?stwa in 1970,[50][51][52] simultaneously downplaying the importance of the fact. Although marking a significant change of tone compared to Wa??sa's previous statements, the declaration went relatively unnoticed, and did not receive international media coverage."



Surprised he isn't supporting OWS? I'm not. 


Hint: the ex-soviet informant stuff is hardly a revelation for the times, but I'd check who was paying his fees for the last decade before using him as a pawn in this game.

Quixotic_Not's picture

OWS: The Perestroika Deception Develops a Face

In recent weeks, every American has watched with morbid curiosity as swarms of hate-filled, sputtering communist loons and Hippie-wannabees have taken to the streets, shutting down cities and leaving a path of destruction wherever they go.  Although many Americans disagree with the stated agenda of these radicals, most think them harmless, dismissing their acts as pathetic attempts to resurrect the failed social movements of the sixties.

But this group of determined radicals is not to be laughed at.  Lisa Fithian, the primary OWS organizer, is an unrepentant communist and proponent of government and economic destabilization as a means of achieving totalitarian centralization along communist lines.  Writing for a socialist rag, Fithian once stated, “I have no issue with property destruction…We’re in a society where property is idolized, so a lot of people don’t get it yet that it doesn’t really matter.”

While this should shock Americans (and would, if the facts were being reported) this is nothing new.  This is just the latest tactic in a long-term strategy that has been quietly moving forward for decades.  I am speaking of a high-level strategy designed to thwart American resistance to communist infiltration known as “Perestroika.”

Use of Weapons's picture

Ok.. you're trolling, right?

If you're serious, then we can dance. For one, "communist loons and Hippies" is about three decades out of date, and totally rubbished by data from the protests themselves. Or when was the last time you spoke to any high level Russian government source?


I'm guessing never. Shit... Snake got old, and he got fucking stupid. Or he's a paid shill. Let's dance.

AldousHuxley's picture

Hippies are wrong on shower frequency, but they were right on Vietnam. Waste of lives and tax payer money.


Now hippies can get a tiedyed t-shirt made in vietnam and get their nails done by their US supporting comrads.


Vietnam is actually trying to open the country up for tourism to attract boomer vets.


Check out Google in Vietnam

Use of Weapons's picture

We're aware of the trade in faked dog-tags.


Aldous, you're an interesting poster, but please assume I'm an alpha when you post, I think our interactions will be a lot more sparky if we both just went full out. I'm apparently in the 1% - fluid & crystallised g architect INTP that is. And even then, I get fucking annoyed and blast the bandwidth with noise - a week of 20+ units / day is a tool, a la Nietzche. I'm waiting for a solitary voice to calm my storm.


'High-hearted son of Tydeus, why ask of my generation?
As is the generation of leaves, so is that of humanity.
The wind scatters the leaves on the ground, but the live timber
burgeons with leaves again in the season of spring returning.
So one generation of men will grow while another dies

45north's picture

Although many Americans disagree with the stated agenda of these radicals, most think them harmless, dismissing their acts as pathetic attempts to resurrect the failed social movements of the sixties.

I don't think that the Communists ever really gave up.  They have seen the Soviet Union dissolved and the boundaries moved eastward by a 1000 km.  An organization cannot survive a hiatus of 20 years but a movement can.

YesWeKahn's picture

Even 500 billion is too much, how can tax payers be able to cover 53 trillion?

Why they can't slowly unwind all that ?

oogs66's picture

stop with the credit derivative hype....cds is small...the banks are actually short credit through cds as a whole...the problem is too much debt


ZeroPower's picture

Wait, you mean CDS are NOT the work of the devil? Surely you must kill babies and hate gold too.

knukles's picture

Word has it that oogie eats babies, Hilary's cooch and gold bars.
Survivalist type :).

Buck Johnson's picture

And hyperstagflation will come into being first hyperinflation adding in stagflation.  Eventually you can't print enough money to bailout the planet.  And if you don't think that we won't see this on our shores, your in for a major shock.  The US is doing what can't be done and never has worked.  To print themselves out of a problem is bad enough, but to get the rest of the world or western europe out of the problems isn't possible.  This is going to end in tears for the Western banking system and our economies.

X.inf.capt's picture



RobotTrader's picture

These guys are not stupid.

They know what is at stake.

Some kind of deal will be reached eventually.

Heh, maybe they call up the BoJ, PBoC, Russian Oligarchs, etc. for some "external assistance" to stop "one way markets"...


ZippyDooDah's picture

Uh, yeah, 'cause...anyone with any capital at all is just dying to ship it off to the Euro black hole.  At some point black holes do fill up, right?

binky's picture

A good brain surgeon can get himself out of trouble. A really good brain surgeon does not get into trouble in the first place. 


These guys are not brain surgeons. They are stupid.

FinHits's picture

Pfft, I rate this one merely SNAFU


from Urban Dictionary

  One of a progression of military situational indicators: 

1. SNAFU - Situation Normal, All Fucked Up - Thing are running normally. 
2. TARFUN - Things Are Really Fucked Up Now - Houston, we have a problem. 
3. FUBAR - Fucked Up Beyond All Recognition - Burn it to the ground and start over from scratch; it's totally destroyed. This day started out SNAFU, but then my machine went all TARFUN. The place was totally FUBAR after that.

X.inf.capt's picture

and one were used to...


Bend Over Here It Comes Again...

AldousHuxley's picture

even the best brain surgeon cannot operate on oneself.


IMF can't help Europeons. 

dasein211's picture

Thats like sayin i make 15k a year but me and the ferrari guy are gonna make a deal for me to get that car!!! Just keep tellin her that... She'll figure out your full of shit sooner or later no matter how many times you tell her its in the way.

Earl of Chiswick's picture

Agree with Robo, they are not stupid so the question is, what is the endgame.

DeadFred's picture

Everyone is failing to use good logic. "The number, once again for those who dare to approach "stuff" mathematically is anywhere between €400 billion and €1 trillion."

Logic says they can only afford 100B so therefore they don't need 400+B they only need 100B. Euro-logic at its finest.

jcaz's picture

Of course they're not stupid.    But they're dishonest and disingenuous, and they've been operating with a kick-the-can-down-the-road mentality;

Problem is, that road comes to an end eventually, and usually exponentially.

There ya go, here we are.

Eally Ucked's picture

The only solutions available for Europe and US are: 1. Default now, 2. Print like crazy - inflate, with 20x leverage they know how much they have to print, 3. Print partially - kick the can down the road, then they will come to the same point in the future when 1.&2.&3. will have to be considered again. That's all, there are no miracles!

macholatte's picture

I say #3 is where they're at.


Alliance - in international politics, the union of two thieves who have their hands so deeply inserted in each other's pockets that they cannot separately plunder a third.
Ambrose Bierce

knukles's picture

With respect to all the above here, I beg to differ.
They are stupid.

No sane rational intelligent folk would let the situation get so fucking far out of control and pretend it's normal....
Well, other than practicing alkies and addicts just before (their final crash and burn, perpendicular to the earth, 110% full military power afterburners full, options none...) reaching bottom.

Oh fuck me, now there's a comforting thought.
No, they're stupid.... 

Return2Sanity's picture

It's not so much stupidity as it is fear. In the 2008 crisis, we learned that the big banks had tied themselves together to such an extent that if one went under, they all went under. The global debt bubble has been allowed to run far too long and get far too big. European leaders are very afraid that Greece will be the first domino in a very long line of dominoes. Nonetheless, a Greek default is inevitable.

YesWeKahn's picture

I don't see any good ending except a massive printing a la Bernanke. Inflation is the best friend of debt.

slaughterer's picture

Sarkozy: "From now until Wednesday we must find a solution...a structural solution, an ambitious solution, a definitive solution. There is no other choice."  Does that sound market friendly?

CrashisOptimistic's picture

There is a fundamental possibility that even ZH may not embrace.

There may be no solution.  Ever.  It many not be a matter of "these guys are smart and realize what is at stake and will get it done."

It may not be doable.  Math tends to be like that.

technovelist's picture

I think almost everyone here knows that there is no solution. Why do you think we don't get that?

Everybodys All American's picture

These brilliant people you speak of have been dealing with the "solution" for months and are no closer to the details of filling this deficient capital hole.

Ray745's picture

According to the 2nd stress test, the one Dexia passed with flying colors, the 90 banks looked at would need 196 billion Euros to all reach a 9% tier 1 ratio, and that is WITHOUT haircuts on ANY of the debt, so where they are getting 100 billion is beyond me.  I read they were being allowed to mark their German/UK/US debt at market values also to offset the marking of PIIGS debt, so that would be the answer I suppose, getting to mark all the other sov debt they have at 120 is useful, until it comes time when they all need to sell that debt and watch the prices go bye bye.

FinHits's picture

I bet EU is kicking itself for ever doing the 2011 EBA stress test the way they did it. They had "adverse market scenario" built in there, which replicated past losses by bank (5 year average), but they did *not* do sovereign writeoffs of any kind.

Now people are playing around with the Reuters EBA stress test bank calculator, which throws the past losses *and* the PIIGS writeoffs on the same pot, and there are some further negative adjustments on top of that.

Now it is hard to go back to realistic scenarios e.g. "all Greece government bonds -60%" and claim that is enough for Tier 1 hurdle of 9%.


It will be amusing to see British and US banks potentially being caught to the stress test, though! That might calm down David Cameron shouting for "put up big bazookas yo Eupeans and do some remorseless financial integration, pronto" and not contributing a single Pound to the loss-pot.

scatterbrains's picture

I always thought these stress tests were just designed to give the "banksters" the chance to  get a handle on who's cds to buy/sell.  Once they get a look at the books they announce "all is wonderful" and maybe even sell a small amount of cds to get the trend tighter before loading up on the buy. Maybe it's time to have a look at everyone's poker hand so they can lay their bets again. 

Stuart's picture

Washington can dither around the debt ceiling, Europe can dither on their own mess...  No need for any US smugness. 

malikai's picture

Reality will meet them both.

prophet's picture

Euro zone bank stress test calculator

Use the Reuters Breakingviews stress test calculator to calculate how the Target core Tier 1 capital ratio and sovereign haircut levels affect the amount of capital banks need to pass the stress test

EZT's picture

The only thing that can save them is if they put on a masive short position, and then let the shit hit the fan!

ZackLo's picture

Who will take the counterparty risk? Who wi9ll bail them out if they do? The great ponzi is imploding I just wish it would move faster...

kaiserhoff's picture

Merkel understands that a 50% hair cut is a good deal, and before the ink is dry, there will be a long line of other beggers/buggers who want the same deal or better.  After all, they don't smell as bad as Greece.

But she also wants to keep the Euro, more or less as it is, foreveh.

As Dear Old Dad liked to say, "people in hell want ice water."  Time to grow up Angela.