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As Final EFSF Details Emerge, German FinMin Says Bail Out Fund Won't Halt Crisis
Some (non-news!) final details are coming out from Europe this evening on the EFSF structure, size, and funding. We provided a framework for understanding the entity this morning, along with some views on just how successful it would (or would not) be. EFSF CEO Regling stated that various approaches will be used simultaneously, providing the entity with more funding flexibility, which is odd since in the next breath he notes the decision to tap the short-dated debt markets in December (seems with all that flexibility you might want to go a little further out). The current lending capacity is EUR 440bn, and they expect a 20-30% partial protection approach meaning they could theoretically leverage around EUR 250bn by around 3-4x. What is most ironic is German FinMin Schaeuble's comments, via The Telegraph, that "although Europe desperately needed a fund "capable of action", plans for the EFSF were too "intricate and complex" for investors to understand", further noting that the fund won't stem the debt crisis.
But maybe the most damning statement comes from the architects of the fund themselves, Regling and Juncker, who said that it is "not possible to give one number on EFSF leveraging" and that the "EFSF firepower will be less than EUR1 trillion ". Case closed.
EFSF 10Y yields are around 4% currently - almost 150bps wide of the mid-September levels. Perhaps this helps explain the need for short-term funding.
Full EFSF Statement (in which there is nothing new and realistically no specifics):
Brussels/Luxembourg – Euro area Finance Ministers agreed on 29 November on the terms and conditions to extend EFSF’s capacity by introducing sovereign bond partial risk participation and a Co-Investment approach. Ministers also adopted amended EFSF guidelines concerning intervention in the primary and secondary debt markets and precautionary credit lines in order to use leverage. Klaus Regling CEO of EFSF commented “Both options are designed to enlarge the capacity of the EFSF so that the new instruments available to the EFSF can be used efficiently”.
Under the partial risk protection, EFSF would provide a partial protection certificate to a newly issued bond of a Member State. The certificate could be detached after initial issue and could be traded separately. It would give the holder an amount of fixed credit protection of 20-30% of the principal amount of the sovereign bond. The partial risk protection is to be used primarily under precautionary programmes and is aimed at increasing demand for new issues of Member States and lowering funding costs.
Under option two, the creation of one or more Co-Investment Funds (CIF) would allow the combination of public and private funding. A CIF would purchase bonds in the primary and/or secondary markets. Where the CIF would provide funding directly to Member States through the purchase of primary bonds, this funding could, inter alia, be used by Member States for bank recapitalisation. The CIF would comprise a first loss tranche which would be financed by EFSF.
Chris Frankel CFO and Deputy CEO of EFSF commented “Following extensive discussions with investors covering all types and geographical regions, a number of them have given their positive views and signalled their willingness to participate.”
EFSF will now implement these two approaches to be ready early in 2012 to use them effectively in the context of the guidelines for the new instruments on market interventions.
EFSF will be able to use both leverage options simultaneously. The final amount of “firepower” achieved through the use of the options will depend upon the concrete use and mix of the instruments and particularly the exact degree of protection between 20% and 30%. EFSF has currently a lending capacity of €440 billion and firm commitments regarding Ireland and Portugal totalling €43.7 billion.
EFSF is also expected to finance a second aid programme for Greece and fulfil tasks such as financing recapitalisation of financial institutions in non-programme countries. Without knowing the exact amounts needed, EFSF should be able to leverage own resources of up to €250 billion. Deployment of either instrument using leverage will only be made following a request from a Member State. Any support from the EFSF will be linked to strict policy conditionality, monitoring and surveillance procedures.
So, in summary, after extensive discussions with probably every sucker sovereign wealth fund in the world, the highly complex structure credit product and its various entities will only be able to find private funds via short-term debt markets? And that is what will save us all? Forgive our incredulity as we tend to agree with Wolfgang that this won't work.
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actually that sounded pretty cool to me. can we add some New Orleans to it while we say it?
http://www.youtube.com/watch?v=VhcinJ03idI&feature=player_detailpage
Jesus. So Finnegan ended up in New Orleans.
Nice wake.
That's why they are called coon asses below the I-20 freeway.
excellent book by one of my favorite authors...thanks
Not quite me Lord. The EURO is the un-dead. It is the ECU (anyone still remember the ECU) that the EU cleptocrats brought back from the dead. And just like a vampire and the steak through its heart of yore, the EURO is on a mission to find its silver bullet that will once and for all put it out of its misery:)
Alleged CIA operative exposes the "red", "blue" and "yellow" categories,
into which people in the U.S. will fall on their way to FEMA elimination camps.
http://www.youtube.com/watch?v=yLnpkD4EiBY
Prepare your local militia, they will come at 4:00 a.m. in the morning to get you.
Hurricane Kathrina was a trial run, to find out whether it is feasible to round a whole town full of people up for elimination.
The NWO want to usher in the "age of satan", the "age of lucifer" in the U.S. .
My militia always sleeps in. I guess we're toast.
They won't have to go through that trouble.
Just announce another "Black Friday" sale at Walmart. Have the crowd enter through the front and drag them out through the back.
Frankenstein,what about canada?
the exhortation to "start opening your bible & read. . ." towards the end is hardly "helpful" - nor of any interest.
the world is being run by idiots and madmen
Just by Satanists.
They like to see people suffer.
It gives them a boner.
they'll soon lose the boner as they get close to the guilotine
Well as I'm pushing down on a torqued up piss hard on, they can run through the wave of round's my other hand is firing at them at 4 a.m.
Time to re-Open Gold Windows
Countries with a Surplus simply Buys Gold, and/or Silver and Copper on the open market and Take Delivery
This is the only way and what worked great before
Paper assets becoming less and less trustworthy
Could have started already
I'm waiting for a Howard Beale moment; someone to take over the airwaves or go viral on the internet, spewing forth terrible truth in a way that stampedes the herd and then there goes the whole thing collapsing in upon itself like Bldg 7. But I'm an optimist......
" I don't have to tell you things are bad. Everybody knows things are bad. It's a depression. Everybody's out of work or scared of losing their job. The dollar buys a nickel's worth, banks are going bust, shopkeepers keep a gun under the counter. Punks are running wild in the street and there's nobody anywhere who seems to know what to do, and there's no end to it. We know the air is unfit to breathe and our food is unfit to eat, and we sit watching our TV's while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that's the way it's supposed to be. We know things are bad - worse than bad. They're crazy."
someone could be telling the truth hourly on the "airwaves" - but if you haven't been paying attention up to this point, the mind will just disregard the noise.
seriously, you have to lay the neural pathways down when you go for the truths, else it all just sounds like. . . interference.
That yield chart looks like its going parabolic.
Just like silver did when it was approaching $50
Of course, at that time, everyone thought it would keep going straight up.
LOL......
The unraveling and unwinding of all these bearish credit positions is going to be one for the record books.
right up there with the cut off of supplies to a 100,000 man American miltary in Afghanistan. Laugh a minute!
Considering that those 10Y EFSF bonds are denominated in a currency which might not exist in 10 years, 4% seems like a pretty low rate to me. And even if the euro survives, its purchasing power after 10 years of ECB printing might well only be a half or third of what it is today.
Robo titties,
You can't be completly serious are you? lol, good grief man.
Are you erin burnet?
Give that man(finance minister)a cigar! Probably best to buy that cigar soon.
Blaring headlines on Drudge Report:
"Businesses plan for the end of the Euro!"
November 29 article in Financial Times:
"Businesses plan for possible end of euro"Now we know that Robot Trader gets its advice second hand from Drudge Report.
I call that Winnnning.
I wouldn't put too much emphasis on the fact that Drudge picks something up a couple of days later. News aggregators tend to do that. The key emphasis should be that he picked it up at all.
There's a rule of thumb about news souces/flow in the US. The loony left hates it, but it is this. The Drudge Report and Rush Limbaugh: If you make it onto their radar, you have made it :)
As Zerohedge moves within earshot of its third year anniversary, certain things are abundantly clear:
Contrary to popular local opinion, this whole thing is NOT going to fall apart faster than most people think.
Other things that are abundantly clear are that nobody who can make things better has the slightest incentive to make things better, nor prevent what happened from happening again, nor legally stop those who broke the law from breaking it again, nor hold anyone who has accountable, nor is there anyone who can or will change any of this, no matter whether that anyone is a single person or an entire society.
There is rage, but it is impotent. There is guilt, but there is no punishment. There are laws, but there is no enforcement. There are right paths to take, but there is no leadership. There is optimism, but there is no hope. There is no change we can believe in, because nothing changes.
Failure is rewarded, sin is praised, crime is a virtue, integrity is a character flaw.
Three years in is there a story that has not been told? Is there a comment that has not been stated? Is there anything left to learn?
Awwwww TITS!...So whaddo we do now?
Well said.
However, while I understand your astonishment, I believe it will collapse.
These things always do.
What's going on now is just the Jackals stealing as much as they can before the inevitable.
Let me be the first to give you a green arrow Chindit.
Cogently put. You can write. I like people who can write. Would you like to be my special friend? ... grab a bottle of merlot and throw on some Neil Sedaka ... oh wait .. sorry .. that's another blog altogether my bad .....
But to your point, this isn't going to require Joe the dry cleaner from down the block stepping up to the plate. The missing position you refer to, the literal hole in our nation is called the President of the United States.
We don't have one, we have a national banker. Hence the mess you describe.
Make it a Barolo, and toss Neil for someone like Nina Simone or John Coltrane, and we can talk. Just promise to be gentle, I'm delicate by nature.
Nice OP, but get a room already :)
Go fuck yerself chindit13. Archive that.
But are you happy? Has your life been everything you hoped it would be?
Life? Like we have one.
The Elites behind the curtain want to take the system to the edge or even maybe over it so they can carry out the next phase of their vision of social/financial evolution/revolution. Take the world to the edge and offer "change", a remedy..........one global currency........one world goverment......who knows. All the unpuished corruption, unpayable debt, lies, propoganda, environmental destruction.....all of it is intended to herd the billions of (sh)people into the next great era of monetary/social/political control. You are wrong about something. It's not going to be long now....................
The Elites behind the curtain want to take the system to the edge or even maybe over it so they can carry out the next phase of their vision of social/financial evolution/revolution. Take the world to the edge and offer "change", a remedy..........one global currency........one world goverment......who knows. All the unpuished corruption, unpayable debt, lies, propoganda, environmental destruction.....all of it is intended to herd the billions of (sh)people into the next great era of monetary/social/political control. You are wrong about something. It's not going to be long now....................
yeats put it rather succinctly the best lack all conviction, while the worst are full of passionate intensity - yeats the second coming as for the collapse, i believe it is inevitable if not imminent...it is a mistake i think to measure the life of markets or the life of nations on the same time scale as a human life...the housefly lives for less than a month after all
Yeats. One of the greats.
The day I "retired", my boss asked me why I would walk away from what would be for many a dream career. I handed him this from W.B.:
The intellect of man is forced to choose
Perfection of the life, or of the work,
And if it take the second must refuse
A heavenly mansion, raging in the dark.
When all that story’s finished, what’s the news?
In luck or out, the toil has left its mark;
That old perplexity, an empty purse,
Or the day’s vanity, the night’s remorse
I now know the answer.
the choice...
excellent quote...and quite possibly the most impressive way to leave a job that i have ever heard of...i bet your boss was stunned
I was young and foolish, but also head trader, back when we owned our losses rather than our politicians, in a fund that through performance had grown to several billion AUM. I wasn't exactly walking away empty handed, so there was minimal risk. To this day I remain great friends with the recipient of the Yeats' poem.
What I can do is........continue to educate myself of the global banking cartel, learn that the world people are not all our enemies, continue to prepare in the case of a all out crash or attack, position myself and my family to stay alive and prosper if we can breath the air.
It sound's simple and stupid I am sure but we can make a difference even if it is small. The stone that start's a ripple............
they should have hired zh, could have saved themselves months of work - was obvious it wasn't going to work from start
Can someone answer this question for me....Every bank stock year to date is getting it's ass handed to it The XLF is down 25% ytd. How in the hell is FAZ and SKF negative for the year?
Probably the profits that one would make go to "fees." The VXX might be even better. I have a feeling that soon ETF's wont have anything to do with the price of the underlying as stocks are already there so why wouldn't a derivative instrument be even more abstruse.
this is the problem with leveraged ETFs...they work fine for short term trades but compounding and other factors ruin long term returns...it's better imho to just short the bank shares outright or use puts...(of course you have to worry about time decay with puts)
there are several articles online that discuss this issue...here is one
leveraged ETFs
+1 I appreciate the link, very educational for this newbie
"THE ENTITY HAS RIGHTS!!!" - A few good entities.
...and yet, we are still 1200 on the S&P. Insane. Maybe if we get another crisis we can push it up to 1400. Looking at you China...
Germany is printing DMs. Old news
http://www.tfmetalsreport.com/forum/2591/kiss-euro-goodbye-germany-print...
This other idea, of floating AAA(core) Bonds might work. The AAA countries will on-lend the money to the PIIGS and make their own bilateral agreements with regards to collateral and
"policy conditionality, monitoring and surveillance procedures".
In this way at least the creditors will get a direct stake in their PIIGS. It will help curbing corruption and put Italy and Spain back on a sustainable path.
The implemented controls will grow into institutions that will be copied widely, especially in the Arab world.
Sorry ZHers, for being rather positive on this.
Spoken like a true European patriot. Go on my son :)
Reminds me of the SIV Rescue Fund, circa October 2007, with the PIIGS playing the SIVs. That one worked out well, as I recall.
China down almost 4%.....ooooooooo
Not looking pretty out there tonight.