Ireland And Portugal Resume Their Places Among Europe's Teetering Dominos

Tyler Durden's picture

While all eyes are focused on Greece (and contagiously Spain), they have forgotten that two far weaker countries still exits - and combined have the power to do as much (if not more) damage than Spain. Portugal and Ireland have moved back into the Red-Zone of risk in Europe's credit markets. Ireland back over 700bps and Portugal back over 1200bps reflects both their idiosyncratic issues (that we have discussed at length) or the systemic issues (which we discussed most recently this morning here). In the case of Portugal, it appears the Dan Loeb trade (we said to fade it) is now being unwound en masse as the reality of the fundamental risks we discussed here seem to be realized. In the case of Ireland, not only is there a rising chance of a 'no' vote at the forthcoming referendum (discussed here) but as Deutsche Bank notes today, via Bloomberg, that Irish banks may face a further $5.1 billion capital call to cover loan losses as "A new, even modest, increase in capital requirements could deter sovereign investor participation and tip the balance in favor of the sovereign requiring a second loan program." Of course the CDS reflect not just the chance of these nations restructuring but also the probability of a EUR devaluation (since the instruments are denominated in USD) but still - we thought Ireland was the template for the success of austerity?

Ireland's risk is breaking out...

and via Citigroup:

"We believe a second program would be forthcoming if requested, probably initially without private sector involvement unless the Irish government itself insisted that PSI is needed, which is unlikely in our view," said Citigroup economists including Juergen Michels and Michael Saunders in a note. "With Ireland’s high government debt level and low potential growth, the risk of eventual government debt restructuring (PSI, Official Sector Involvement or both) also is likely to persist."

and Portugal is critical again...

and this was a disaster in the bond markets...

from our earlier note:

"All-in-all, Portugal remains totally unresolved as a nation mired in unsustainable debt, is likely to need a second bailout very soon and probably a restructuring and while bonds may appear to have rallied, this is entirely due to LTRO and Basis-trade effects and only the long-end (less affected by these technicals) reflects the considerably less sanguine state of this nation's future."

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Cognitive Dissonance's picture it a good time to summer in Europe for this ugly American?

Just askin'

barliman's picture


Not yet ...

... wait for the euro to fall below parity with the dollar - say July timeframe


Cognitive Dissonance's picture

Just kidding. I'm afraid that if I left the country they wouldn't let me back in.

Wait.........isn't that what I want........out from the Insane Asylum?

malikai's picture

Whatever you do, don't go to Ireland for a holiday. Unless you miss fall, winter, and spring. You get all those everyday there, particularly in the west. No summer, sorry.

barliman's picture



... and in one day, too!

Now to be fair, I did enjoy an incredibly beautiful summer afternoon filled with blue skies, bright sunshine, soft winds, good beer and a delightful waitress that looked EXACTLY like Meg Ryan when she was 21.

It was on a Friday, in Dublin, from noon to 6:00 PM.

Yea, if it's the west of Ireland you're in ... no summer at all.


Carl Spackler's picture

Well, Judas Priest.

My Trifecta Box ticket has Greece, Spain, and Ireland (the added longer shot brings a bigger payout, you know) in Default RAce 1, as the first three horses in the default race.

Can somebody other than Ben Bernankne please get in Portugal's Portugal way?!

barliman's picture


You too?

My wife is talking about New Zealand ... of course she also commented the other night, "It's all about the PIIGS. You were 100% correct two years ago you depressing bastard."

Does New Zealand allow you to bring your dogs with you?


Winston Churchill's picture


Do not talk about your wife like that.

barliman's picture


Nudge, nudge. Wink, wink.

My wife is a beautiful woman who does not even remotely look her age and has put up with my odd ways for many years (If you can read this, please send help. She made me write that after ..... arrgghhhh!)


She is, by her own acknowledgement, even crazier than I am.


Cognitive Dissonance's picture

The only thing worse than a smart ass is one who's also correct. A contrarian is rarely welcomed to the party.


Dr. No's picture

Even if you cant get back in, rest assured the IRS will continue to send you an invoice.

barliman's picture


Good point.

My forwarding address:

1235 Boulevard de Phuqyew

Rio de Janeiro



Cognitive Dissonance's picture

I'm a little it took me a while to recognize the 'f**k you'.


barliman's picture


Down arrow?

For practical advice and a reality check?

Somebody is going to be a leetle grumpy (in a"going postal" kind of way) by the time September rolls around.

What? Did you really think the Chinese would come in and bail you out with their money so you can work less than they do?


jcia's picture

LOL. This is full retard indeed.

El que este' libre de pecado, que tire el primer peñón.

icanhasbailout's picture

no - this is your fault and they know it

Buck Johnson's picture

It will be the good ole days of going to Europe and being an American, when they say your a rich American.  Buying foods and stuff and services for a few dollars.  It will be like the days of toe nuevo rich back in the 50's and 60's who ran to europe and their money went far.  And don't think the pound is getting  out of this, it won't.

barliman's picture


Do you suppose Goldman Sachs ...

... has secret team buidling seminars on how to keep all of the pie plates spinning like those guys on the Ed Sullivan show used to do?


vmromk's picture

Europe to FUCKHEAD Bernanke......Initiate Swaps, over.

bigdumbnugly's picture

roger that, europe.

delta bravo out.

jus_lite_reading's picture

As they're at DEFCON1 right now at the Federal Ponzi you can be sure that Ben hears everything loud and clear!! "Turn the printers to full max now! We're going down! Let no man leave!"

sbenard's picture

I like an occasional horror flick. Bring it on!

KandiRaverHipster's picture

i'm completely over this irrational short term self-reinforcing bullshit.  everyone knows the banks are weak.  credit spreads soar. banks "appear" weaker.  people decide they're going to withdraw deposits.  banks actually become weaker  . europe needs to let their balls descend and stabilize and get over this 70 year fear of inflation.

barliman's picture



Because the last time they experienced hyperinfaltion in Europe it was no big deal!

Tell me, does the wind whistling in one ear and out the other distract you while you try to make your way cluelessly through life?


KandiRaverHipster's picture

it was almost 100 years ago.  get over it.  what precipitated that inflation?  the treaty of versailles that europe forced on Germany.  what were they supposed to do, NOT pay up by not printing money?

BTW ad hominens are played out

Caviar Emptor's picture

Oh you innocent boy. All wars before that time were settled with reparations and there was no hyperinflation. The hyperinflation in Germany after WW1 was engineered by the elite (read aristocrtic landowners) to topple the democratic government (which lived for about 5 minutes) and return to feudalism which was the situation prior to Weimar. There never was a unified Germany, just feudal states that had fought with each other for centuries. There was fear of land and propoerty seizures and education of the peasants. 

KandiRaverHipster's picture

yesh i know they were paid in gold/silver/land/physical thing.  but that doesn't mean it was without issues i.e. price specie flow mechanisms and what not.  i doub it was engineered. 

PulpCutter's picture


In a post-credit bubble liquidity trap, govt can stimulate without causing inflation.  That is an objective fact.  Look at America going into WWII, Japan for the last 15 years, etc.. 

Those who've predicted an inflationary bonfire "any minute now", for the last several years - where is it? 

Govt stimulus can be inflationary - absolutely!  But not when demand & spending power are so low, as they are now, after the credit bubble.  Meanwhile, a generation of recent college grads put their energy and skills to work, can't learn to apply their new skills in the real world, can't be productive and have no money to spend.  When GDP goes down, paying off debt gets harder.  In the 1930s, many argued America's employment struggles were 'structural'; caused by weak and/or non-matching skillsets.  Then employment surged 7%, between 1939 and 1941, in the manufacturing buildup to WWII - oops, guess it wasn't structural after all.  We can fix the current problem that quickly, as well.

Time to wake up, and think rationally about this, folks.

bdc63's picture

Oh yeah ... Ireland and Portugal ... kinda forgot about them ... we never "fixed" them? ...

Oldrepublic's picture

That's a good book. I saw hyperinflation at first hand in Argentina and Bolivia. In the first country goods on the shelf were cheaper in the back

and the merchants changed prices twice a day! In Bolivia money was not counted but measured in inches!

Olympia's picture

How is it possible that the European Union allows the weak states to enter the international money market and borrow the money they need without help – based on their own potentials? How is it possible that the “chain” of interests of euro can let its weak “links” exposed to outside pressuresHow is it possible for a “herd” with common interests to let each “ship” defend itself against the wolves, without help, and its general security threatened? How is it possible for Greece, which represents a minor 3% of the Eurozone’s economy, to be allowed to threaten the other 97% of that economy, due to the latter’s weakness?

The European Union should be the one borrowing from the national banking system – thus dealing with profiteers itself based on its overall potential – not its weak “links” alone. The latter should be under the EU’s protection and constant monitoring. They should borrow from it at a subsequent time and if they became victims of profiteering, the problem should be kept in the bosom of the euro. Domestic profiteering should bring profits to Europe’s influentials, therefore bring profits in the euro area, and not threaten it.

From the Wall Street Crash of 1929 to the Global Financial Crisis of 2007


Authored by Panagiotis Traianou

Olympia's picture

Global Debt Crisis

The greatest private fraud of human history.
Who are the great fraudsters who are becoming the murderers of the human kind? How does the economy "illness" threaten Democracy and the freedom of people?
By knowing what happened in indebted Greece, where loan sharks created “bubbles” and the current inhuman debt, one can understand the inhuman plan in total ...understand where this plan started just to bring all states at the same end ...understand how this type of plans are established...


debtor of last resort's picture

What's the problem? I like gardening!

Fearganainm's picture

More scare tactics to force the Irish to vote YES in the referendum on the 31st , right? Right? Bueller?

Stuck on Zero's picture

There's is getting to be a lot of cans to kick down the street.

yogibear's picture

Ireland and Portugual : "Bawww! Wahhhhhhhhhh! Wahhhh! (like a crying baby) we want the debt holders to eat losses, just like Greece!"

Morrotzo's picture

As bad as Portugal and Ireland are, Italy is just about as bad. Remember the banking crisis report that said various Mafias were lending more money than Italian banks? I bet they've got much better balance sheets, too.

And as bad as MafiaBank is, Spain is even worse!

Makes you wonder why so much talk has been about Greece?


WallowaMountainMan's picture

to the extent that there is an end game that counters the zh mathfactuals, my hats off to those who thought of it ahead of now. the zh is so far in the lead, with math just pushing them father faster, that the outcome is clear.

and sad.



WallowaMountainMan's picture

"Global Debt Crisis

The greatest private fraud of human history."


legalizing corporations. limited risk. unlimited reward.