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"Spain Requests Bailout On September 14" - Goldman's Definitive Post-Mortem On Europe's Third Bond Buying Attempt

Tyler Durden's picture




 

Yesterday, when Bloomberg leaked every single detail of today's ECB announcement, which thus means today's conference was not a surprise at all, yet the market sure would like to make itself believe it was, we noted that everything that was leaked, and today confirmed, came from a Goldman memorandum issued hours before. Simply said everything that happens at the ECB gets its marching orders somewhere within the tentacular empire headquartered at 200 West. Which is why when it comes to the definitive summary of what "happened" today, we go to the firm that pre-ordained today's events weeks ago. Goldman Sachs.Perhaps the most important part is this: "September 13-14: Spain to make formal request for EFSF support at the Eurogroup meeting. With a large (and uncovered) redemption looming at the end of October (and under pressure from other Euro area governments), we expect Spain to move towards seeking support." In other words, Rajoy has one more week before he is sacked and the Spanish festivities begin.

From Goldman's Dirk Schumacher

ECB meeting: Introducing the OMT

The announcements made at today’s ECB press conference were broadly in line with our expectations. An overwhelming majority of the Governing Council agreed to “address severe distortions in government bond markets, which originate from, in particular, unfounded fears on the part of investors of the reversibility of the Euro”. We view the ECB’s determination to provide a “fully effective backstop” as credible and, while we will only learn over time the practicalities of implementation (such as the range of yields the ECB deems consistent with an ‘irreversible Euro’ and thus will tolerate), today’s decision has nonetheless reduced tail risks in peripheral countries, at least in the shorter term. This should buy peripheral economies time to implement the consolidation and reforms needed to provide fundamentals consistent with continued Euro participation.

Details of the OMT

In order to qualify for the new Outright Monetary Transactions (OMT) program, countries will need to be participating in either a full or precautionary EFSF/ESM programme and accept the implied conditionality. IMF involvement will be sought in this context and the IMF has meanwhile released a press statement “strongly welcoming” the ECB’s decision, saying that it would cooperate with the ECB “within our framework”. Failure to fulfil the conditions established in the programme would lead the ECB to cease purchases. Existing programme countries can also qualify for the OMT “if they have regained bond market access”. What this means in practice (i.e., will it be necessary to issue a certain volume in order to prove that there is market access?) remains to be seen.

Purchases will concentrate on bonds with a maturity from one to three years, and will be fully sterilised. The ECB is already sterilising the purchases made under the SMP through weekly reverse tenders. These tenders drain the amount of money from the banking system that the ECB spent on buying peripheral bonds. The specifics of how OMT purchases will be sterilised have not been announced, but our base case is that they would take place in the same manner. The ECB will demonstrate greater transparency in publishing the magnitude, duration and country composition of the debt holdings accumulated under the OMT.

In the legal documentation establishing the OMT, the ECB will explicitly renounce any claim to seniority of its sovereign debt holdings under the programme. The Securities Markets Programme (SMP) will now be terminated, with the ECB retaining its senior creditor status for bonds purchased under the SMP.

Activating the OMT

With the ECB now having outlined its sovereign bond purchasing framework at least in skeletal form, the ball is now in the governments' court. Front and centre lies Spain.

Looking forward, we expect the following time-line in our base case:

  • September 12: German constitutional court gives its blessing to the ESM. Although we expect some procedural riders to be attached to the decision, this would allow German ratification to be completed and the ESM to be established in relatively short order.
  • September 13-14: Spain to make formal request for EFSF support at the Eurogroup meeting. With a large (and uncovered) redemption looming at the end of October (and under pressure from other Euro area governments), we expect Spain to move towards seeking support.
  • Second half of September: Conditionality required by EFSF will have to be accepted by the Spanish authorities, presumably requiring a parliamentary vote. In parallel, approval of other Euro area countries for the provision of EFSF support will need to be obtained: in some countries (notably Germany), this will also require parliamentary approval.
  • By end-September / early October: Memorandum of Understanding (MoU) codifying conditionality is signed, formalising the availability of EFSF support for Spain. At this point, the necessary conditions established by Mr. Draghi for ECB purchases of sovereign debt will have been met, well ahead of the large Spanish bond redemption.

At that point, the ECB would stand ready to purchase short-dated Spanish government securities should rates back up. Market conditions at that stage will dictate whether such interventions take place. Risks to this base case are largely political: a Spanish reluctance to seek EFSF support given the current lower level of yields; or German parliamentarians deeming the agreed conditionality too light. Even if these political risks materialise, we would still expect Spain to be forced to seek EFSF support in the course of October as market conditions deteriorate as a result of the delay.

No rate cut - renewed deterioration needed for further easing

Returning to the ECB’s announcements this afternoon, as far as standard policy measures are concerned, policy rates were left unchanged as the Governing Council saw no need to change its economic or inflation outlook on the back of the latest data. The ECB staff growth forecasts were revised down significantly, moving substantially closer to our own macroeconomic projections for 2012 and 2013. A renewed deterioration of the Euro area economy, however, could well shift the majority in the Governing Council towards a further easing. In any case, we think the Governing Council views it as more pressing to ensure that low policy rates are actually passed on to the real economy in those countries where this is needed most. Unclogging the monetary policy transmission mechanism, by means of its non-standard measures, therefore remains the main priority of the Governing Council.

Changes to the collateral framework, but nothing more on non-standard measures for now

The ECB also widened collateral eligibility to foreign currency denominated bonds and, for countries benefiting from EFSF/ESM support, suspended the minimum credit rating threshold on sovereign debt. There had been, according to President Draghi, no discussion of another LTRO. We saw the possibility that the Governing Council would reduce haircuts for some assets that are being posted by banks as collateral (and the elimination of the 'cliff' risk associated with sovereign downgrades in programme countries should have such an effect) but, at least for the time being, the focus is on the OMT. That said, remarks made by President Draghi during the Q&A part of the press conference suggest that the ECB may contemplate other non-standard measures if credit conditions in peripheral countries do not improve. Such measures could include the outright purchase of private bank debt and/or corporate debt.

 

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Thu, 09/06/2012 - 15:56 | 2769239 gdogus erectus
gdogus erectus's picture

I am shocked.

Thu, 09/06/2012 - 16:00 | 2769242 Dalago
Dalago's picture

Its all a manufactured rally!  All we need to know is how is the collapse going to happen?  Manufactured?  Organized chaos?  Complete chaos?  Where does inflation start?

Thu, 09/06/2012 - 16:03 | 2769257 JPM Hater001
JPM Hater001's picture

Who's this goldman guy again?

Thu, 09/06/2012 - 16:16 | 2769293 Manthong
Manthong's picture

“The specifics of how OMT purchases will be sterilized have not been announced,”

It’s really easy, but they won’t tell you they just toss the ledger into the fireplace.

Thu, 09/06/2012 - 16:26 | 2769327 nope-1004
nope-1004's picture

unfounded fears on the part of investors of the reversibility of the Euro

Dear Shmuck:  Please give us sound, rational proof that the Euro (and systemically GS, JPM, HSBC, MS, DB, Barclays, and a bunch of others) aren't totally fucked?

lol

Thu, 09/06/2012 - 17:05 | 2769474 Mactheknife
Mactheknife's picture

One thing for sure...Germany is totally fucked ....but hey, that's what you get when you have "We're all in this together!"

Thu, 09/06/2012 - 17:42 | 2769592 Manthong
Manthong's picture

Collective Damnation.

Fri, 09/07/2012 - 01:42 | 2770713 MiltonFriedmans...
MiltonFriedmansNightmare's picture

There will be no *recognized inflation*, at least by the authorities, as it will be hidden by fudged indicies and outright lies, even more so than today.  Gasoline price increases will be blamed on the evil futures market speculators. It is possible though, that sheeple will catch on when they need to bring a wheelbarrow of cash to buy the groceries....just possible.

Perhaps Ben will find a way to print a loaf of bread as that is our only hope.

Thu, 09/06/2012 - 16:30 | 2769337 knukles
knukles's picture

Shocked, I say.
Round up all the usual suspects.  Tim McVeigh, Rodney King, Alastair Cook, Pete Rose, Larry Flint, Momar Ghadaffi's Ukrainian he-she nursemaid, Linda Lovelace, her costar Betty Cockgobbler, Minnie, Mickey and Annette Funachello, Bush (it's all Bush's fault), Adolph, Joe Stalin's ghost, any Austrian economist you can find, Vince Foster, Billy Carter, Jeremy Whazizname, Jesus and King Neptune.

Thu, 09/06/2012 - 17:21 | 2769533 Panafrican Funk...
Panafrican Funktron Robot's picture

And George Foreman.  For making me buy that stupid, stupid grill.

Thu, 09/06/2012 - 17:58 | 2769546 slewie the pi-rat
slewie the pi-rat's picture

...and slewie!

and youie, tooie, k-nuk!   L0L!!!

still the headline's main point is well taken altho i got it from zH,  not bloomie

but it was covered here on zH:  angela said she expected the short-term financing and printing to continue till the pastryChefCourt rules and maybe till germany gets ready on how to proceed very possibly by voting on something or other TBD

she is neither on the "side" of the ECB nor the blunderbanksters she just wants to respect the process and do the will of the mineral-water high-colonic or something equally healthy and "voluntary"

maybe greece was permitted some notes here also?  tyler has not mentioned the "military coup" rumor for a day or two...

so, no the "system" was not destined to fall due to "no money" today and on one of the doomer articles yesterday i even get down with :>  "here comes your 19th nervous short-squeeze..."

perhaps this is just kinda guaranteeing the spanish-flying bank deposits as they head out the door, anyhow...  they hafta go somewhere;  only the shadow-system knows?  L0L!!!

the court is expected to rule 9.12.12; coincidentally just post-globalJihad moFoComedyand twinTowerRevue

slewie imagines that the "wording" of the decision is even now being "reviewed" by a committee of 80,000 "technocratic advisors" m/l...

you may or may nor recall that timmah visited spain (with christineL wasn't it?) just before antonioSam formed up the greek goobermint with gPap's V-man to go wath the soccer game and suffer "detached something" of the eye

now spain invites the EU into its kitchen which, hopefully, has been at least partially disinfected by now

see ya!

Thu, 09/06/2012 - 17:04 | 2769473 CrashisOptimistic
CrashisOptimistic's picture

You know what's weird.

Not one word has been spoken about subordination.

Thu, 09/06/2012 - 16:00 | 2769247 LawsofPhysics
LawsofPhysics's picture

"Dirk Schmmucker", does he double as a porn star?

Sell the news - LOP, out.

Thu, 09/06/2012 - 16:01 | 2769251 Vincent Vega
Vincent Vega's picture

So the new plan is: lie about your financial status, pledge any piece of juck as collateral, receive bailout funds. Sweet.

Thu, 09/06/2012 - 16:30 | 2769341 knukles
knukles's picture

Waaiiiiiiiiiit.
That's the same as the old bailout plan.
You can't kid me...

Thu, 09/06/2012 - 16:44 | 2769384 Vincent Vega
Vincent Vega's picture

Shhhhhhhhhh! Don't be tellin' everybody.

Thu, 09/06/2012 - 17:46 | 2769594 slewie the pi-rat
slewie the pi-rat's picture

but this time it's different V_V!

they are gonna goto insovereign to stave off insolvent or goto 2-tiered EZ bankstering, possibly using the IMF whose director was recently treated to the benign canine at theHoleyHole sniff-around;  or maybe goto hell and liquidate?  nah!

no offense, bro...

it was archetypal tho, they had to blow them apart with a firehose;  they spared them the bazooka of monetization 'cause it mighta hurt the poor dog...

they will decide something different in the next 6-10 weeks or maybe never,  for all i know...

nothing much before the november elections here;  most likely just after we "decide"

the german pastryChefCourt rules next week

and then...  ?   and then...  ?

Thu, 09/06/2012 - 16:03 | 2769253 Ignorance is bliss
Ignorance is bliss's picture

The stock market rallied hard during the Weimar Republic's printfest as vaporpaper chases real assets. History does not repeat itself, but it does rhyme.

Thu, 09/06/2012 - 16:02 | 2769260 SheepDog-One
SheepDog-One's picture

New and improved 'just fake it' plan to run world economy on.

Thu, 09/06/2012 - 16:04 | 2769264 J 457
J 457's picture

I'm still trying to wrap my head around what exactly happened today and how SPX is up 2% to 1,431.  Who is buying into this "rally" and does the volume suggests the market will go higher from here?  Up is down, down is up...

Thu, 09/06/2012 - 16:20 | 2769274 DormRoom
DormRoom's picture

S&P @ 1431 & 47 Million Americans on food stamps.  There seems to be an internal contradiction within the system..

Thu, 09/06/2012 - 16:21 | 2769305 J 457
J 457's picture

Exactly, and don't forget the USA borrows another 3.5 billion every day with 16 trillion in debt.  It doesn't add up.

Thu, 09/06/2012 - 16:39 | 2769364 Manthong
Manthong's picture

Don’t waste time wrestling with it anymore.

The only thing that makes sense is to apply Occam’s Razor.

I like the Wiki cited Betrand Russell version “"Whenever possible, substitute constructions out of known entities for inferences to unknown entities."[15]  (  http://en.wikipedia.org/wiki/Occam's_razor )

Until someone lays open the books of the ESF, the FED and the TBTF’s, the only logical assumption is that it is all Fake and a Ponzi.

But that won’t happen because the F_ckn’  Law stipulates that they can operate with secret books and  phony public books for purposes of national security.  

Bernie Maddoff, Sam Israel and Russell Wasendorf have nothing on these guys.

So K.I.S.S. and feel good knowing that the law is there to protect us.

Thu, 09/06/2012 - 16:12 | 2769283 scatterbrains
scatterbrains's picture

Today was just so that oblahblah can now say tonight that I've been president for 4 years and the stock market is at 4 year highs.  Please vote for me

Thu, 09/06/2012 - 16:24 | 2769314 J 457
J 457's picture

Good point.  If Romney wants any chance of winning in Nov the market can't be at current levels.  I'm about to close all positions and tune this market out until some level of reality comes back.

Thu, 09/06/2012 - 16:04 | 2769268 e-man
e-man's picture

"...and accept the implied conditionality."  You mean by a 2/3 majority vote led by Antonio Villaraigosa?

Thu, 09/06/2012 - 18:38 | 2769720 machineh
machineh's picture

Whispered from backstage: 'They're going to do what they're gonna do.'

So just bend over and grease up ...

Thu, 09/06/2012 - 16:06 | 2769269 Meesohaawnee
Meesohaawnee's picture

all pre conceived theater.. funny.. odd on the night obummer makes a speech? Coincidence? Romney doest deserve to be president if hes not all over this. low hangin fruit. all staged. never mind the man behind the curtain. The MSM has its orders from the king .. everyone proclaim "Market at 5 year highs"  Now Mush!

Thu, 09/06/2012 - 16:43 | 2769375 knukles
knukles's picture

Most of the plebes I know will react poorly to the market being at a five year high since their 401(k) got wiped out to 01(k) and they figure the only folks in the market (rigged) is the 1%ers.

Gotta whatch where one treads these days.

Kinda like throwing God out of a platform and declaring that "Government is the only thing we all belong to." (Which is grammatically as incorrect as can be, so much for the War on Stupidity) meaning that....
It establishes the perfect refutation of freedom and liberty being Natural Laws (as in Nature and Nature's God) replacing Government as the Grantor of Liberties and Freedoms which it might dispense and withdraw inequitably at a whim.

Great news for all atheists, agnostics, spiritually inclined and religious! Nice admission of atheistic statist gubamint re-founded in a void of principle.

Thu, 09/06/2012 - 18:01 | 2769642 slewie the pi-rat
slewie the pi-rat's picture

but k_nuk!

it's evolution-airy  L0L!!!

Thu, 09/06/2012 - 16:10 | 2769277 86up
86up's picture

Goldman Sachs needs a black swan before they can relly cash in, to fool the sheep with plausible deniability. Maybe a black swan with feta, or as Tapas.

Thu, 09/06/2012 - 16:10 | 2769278 Confundido
Confundido's picture

This all forces the Fed to keep rates low, because if they don't, the ECB won't be able to afford sterilizing the bond purchases at low rates on their deposit facility.

Thu, 09/06/2012 - 16:14 | 2769284 e-man
e-man's picture

I like the GS timeline:

 

  • September 12: German constitutional court gives its blessing to the ESM. Although we expect some procedural riders to be attached to the decision, this would allow German ratification to be completed and the ESM to be established in relatively short order.
  • September 13-14: Spain to make formal request for EFSF support at the Eurogroup meeting. With a large (and uncovered) redemption looming at the end of October (and under pressure from other Euro area governments), we expect Spain to move towards seeking support.
  • Second half of September: Conditionality required by EFSF will have to be accepted by the Spanish authorities, presumably requiring a parliamentary vote. In parallel, approval of other Euro area countries for the provision of EFSF support will need to be obtained: in some countries (notably Germany), this will also require parliamentary approval.
  • By end-September / early October: Memorandum of Understanding (MoU) codifying conditionality is signed, formalising the availability of EFSF support for Spain. At this point, the necessary conditions established by Mr. Draghi for ECB purchases of sovereign debt will have been met, well ahead of the large Spanish bond redemption.
  • By end-November: Goldman Sachs owns all of you.  Hah hah suckers!
Thu, 09/06/2012 - 16:40 | 2769370 Assetman
Assetman's picture

This is essenitally HAMP for Sovereigns.

IF your country is willing to jump through enough hoops, your country MIGHT be eligible for low cost financing from the ECB.

Though in this case: (a) low cost funding is short term only (and will likely need to be rolled); and (b) it is conditional upon agreement under an IMF, German... and who knows what else... framework.

That all comes BEFORE the sovereign (let's say in this case, Spain) is forced to take this Sh%t Sandwich up to vote in their own Parliament.  When the masses eventually see the details behind the Sh%t Sandwich, it will be too late.

Goldman wins.

Muppets lose.

Ordinarily, the Germans should be livid with such an arrangement (its not as if the borrower is going to pay in full anyway).  But it keeps German banks from going tits up... for at least a few more years.

Thu, 09/06/2012 - 18:46 | 2769739 viahj
viahj's picture

quote: (b) it is conditional upon agreement under an IMF, German... and who knows what else... framework.

who will be holding the keys to the sovereign gold vaults?

Thu, 09/06/2012 - 16:15 | 2769288 Rainman
Rainman's picture

This whole Euro thing reeks of banking confidence lingo. There has never been a memorandum of understanding worth a bucket of warm sterilized piss. Never will be either.

Thu, 09/06/2012 - 16:25 | 2769325 Zero Govt
Zero Govt's picture

indeed there has never been any piece of paper a banker or politician cannot piss over

look at both the EU and US Constitutions which are both ripped to shreds

Thu, 09/06/2012 - 16:21 | 2769290 Zero Govt
Zero Govt's picture

with Lloyd Blankfeins PR Tour on how banks are so productive in society imminent maybe now is a good time for Lloyd to visit the chaos in Greece for a soothing chat

explain how the usual banker-politican bed-fellows and their wild orgy of debt that saddles then collapses whole economies is good for us

and explain how cooking Greece's books to defraud your way into Europe allows your continued presence and influence at the EU top table ...honour amongst thieves?

Thu, 09/06/2012 - 16:16 | 2769292 PontifexMaximus
PontifexMaximus's picture

Come on, did you really believe, that Mario Draghi is writing his script on his own? His ghostwriter is sitting in 200 W and gets the go from the master himself. The show must go on, panem et circenses.

Thu, 09/06/2012 - 16:17 | 2769295 Winston Churchill
Winston Churchill's picture

Surely Tyler, you meant pre-mortem.

Squid only eat live food.

Thu, 09/06/2012 - 16:18 | 2769296 Haager
Haager's picture

There are two, maybe 3 doubtful events for the week to come: 12-9 German court decision; what if it won't be a clear green? It doesn't seem to be a no-brainer, so it stays at least questionable. Then: Spain asking officially for a bailout on Thursday is also not yet said and done. Stocks are high, data looks more positive, they got a truckload of cheap money today. And: There are the dutch elections, which could possibly lead to some trouble.

So, what will be the reaction if one or all stated events didn't match the desired outcome?

Thu, 09/06/2012 - 16:20 | 2769303 SmoothCoolSmoke
SmoothCoolSmoke's picture

Nice 'euphoria' schedule laid out by GS.  Always have an 'event' ready to pump the markets.  Nice.

Thu, 09/06/2012 - 16:22 | 2769307 joseywales
joseywales's picture

Ah, this is my favorite line:

"Conditionality required by EFSF will have to be accepted by the Spanish authorities, presumably requiring a parliamentary vote."

The mere pretence of democracy as the blood-sucking squid inserts its probe. 

Thu, 09/06/2012 - 16:23 | 2769315 slaughterer
slaughterer's picture

Goldman is at the top fo their game here.  The timeline provides a plausible (and very cynical) narrative of what will ensue in the next two to three months on the European stage.   Ignore it at your peril.  

Thu, 09/06/2012 - 16:28 | 2769333 holgerdanske
holgerdanske's picture

The rising stock market reflects, but does not quite match, the drop in the value of the currency. After so many years with inflation, our brains have not fully adjusted to the fact that the money in our pocket looses value the whole time. When we look, the moeny is still there, so the brain battles to accept the fact that in oder to just maintain the value, we should see a bigger and bigger pile everytime we look.

Zimbabwes stock market, seen in isolation, would look like the deal of the century, or maybe even many centuries. The reality was completely different.

Watch gold, as that is the only unadultered value system left.

It will not last, the smoke and mirrors. Either they run out of smoke or the mirror breakes. Whatever, gold is the key.

When?---- I simply don't know, but it will come.

Thu, 09/06/2012 - 18:38 | 2769721 slewie the pi-rat
slewie the pi-rat's picture

i've been saying the same thing myself;  since 1972

my dad sez i'm right, too!  just :>  "not yet"  L0L!!!

not all "financial engineering" (g/sachs &tc) is unsound or just "smoke and mirrors" 

not all leverage is "insane" leverage;  not all debt is "unmanageable"

you don't think your car runs on smoke & mirrors;  you probably think it is ok to fly even though you can't design and build a plane;  you will take an elevator up a skyscraper perhaps?

and yes, "no car" runs 4evah;  no plane flies ditto;  no currency, no corporation, no family, no planet, no star, no elevator cable, etc

each of us has his/her own perspective

i don't know how they are doing this;  i can see bits of the big picture;  some of the minutia tyler is good at;  and how it works "systemically" too;  everybody wants to be the one who could "foresee" things this time 

but i do know that it is sept, 2012 and the checks are in the mail

i have no freaking idea how; yet :>  the plane is still "flying"

gold is a good parachute if you can afford it heremost people prepare for the worst especially in times of uncertainty and we are still in "systemic uncertainty" imo

but 1972 is a long time ago, even with 2008 thrown in!

a parachute sounds like a good idea, but i didn't design this "plane" and i'm not flying it;  i am IN it so i need a parachute, b/c of that crash a few years ago and the fact that they re-engineered the same plane, didn't they?

or tried to...  ? 

Thu, 09/06/2012 - 18:24 | 2769688 Dareconomics
Dareconomics's picture

Spain is in a lot more trouble than people realize. I was reading this article Spain Bond Yields Fall but Demand Is Sluggish – WSJ.com, and I came across a very interesting sentence:

The auctions mean that Spain has now completed almost 77% of its borrowing needs for this year.

Like a lot of you, I have been following this Eurocrisis for quite some time, and I wondered if the various numbers being thrown around were accurate. In the Spanish case in particular, the mainstream media has been counting down remaining Spanish financing needs.

What piqued my interest in the 77% figure is that it has been consistently rising as Spain auctions debt, but Spain’s budget deficit has worsened from 5.3% of GDP to 6.3% officially to 8.08% unofficially based on projections from the first half. I decided to add up all Spanish debt sales year-to-date and see how they compared to the budget deficit plus the amount of old debt that needed to be rolled over.

Allow me to work through the math. (All figures rounded. Check out the chart for the exact numbers) I added up all of the bond sales including the September 6 auction. Next, I subtracted the short-term bill sales that would mature by the end of the year, because those sales do not reduce the financing needs for 2012. I obtained €102bn.

This number is supposedly 77% of Spain’s financing needs for the year based on the sentence from the WSJ above. Dividing €102bn by 77% yields an implied figure of €133bn for the rest of the year meaning that Spain has to sell about €31bn in bonds for the rest of 2012.

My calculations show that this number is way off. Spain has €98bn in debt coming due in 2012. Adding the projected budget deficit of 6.3% of GDP, €74bn, gives us financing needs of €172bn. That means remaining financing needs from now until the end of the year are €70bn, and Spain is only 60% of the way there, not 77%.

The situation is actually much worse than this...

Read more here:

http://dareconomics.wordpress.com/2012/09/06/actual-spanish-financing-ne...

Thu, 09/06/2012 - 18:37 | 2769717 Bunga Bunga
Bunga Bunga's picture

Get over it, German constitutional court is just a branch office.

Thu, 09/06/2012 - 18:43 | 2769732 machineh
machineh's picture

'The ECB also widened collateral eligibility to foreign currency denominated bonds and, for countries benefiting from EFSF/ESM support, suspended the minimum credit rating threshold on sovereign debt.'

This is a barn door wide enough to drive a team of wild horses through.

No minimum credit rating? Great, even 'D' (defaulted) bonds are A-okay as collateral.

For 'foreign currency denominated bonds' read 'US Treasuries.' Paging Helicopter Ben ...

Thu, 09/06/2012 - 20:40 | 2770037 AynRandFan
AynRandFan's picture

"Conditionality" is the same thing as a girl saying you don't need a prenuptial agreement because you can trust her.  When time comes for the condition to be enforced, forget it.

Fri, 09/07/2012 - 05:30 | 2770830 elwu
elwu's picture

Of course GS knows upfront what will happen at the ECB. Because Lloyd isntructs Mario what to do, and when. And Mario obeys.

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