Portugal Bails Out Three Banks

Tyler Durden's picture

The past two weeks it was Spain, now it is back to Portugal, which overnight announced it is bailing out three banks to the tune of €6.65 billion. If at this point who is bailing out whom is becoming a confusing blur - fear not: that is the whole point. From AAP: "Portugal will inject more than 6.65 billion euros ($A8.49 billion) into private banks BCP and BPI, and the state-owned CGD to meet criteria established by the European Banking Authority. "In all, the state will inject more than 6.65 billion euros in these banks," though five billion euros is to come from an envelope worth 12 billion included in a financial rescue plan drawn up in May 2011, the finance ministry said. Portugal last year became the third eurozone country after Greece and Ireland to be bailed out, receiving an EU-IMF package worth up to 78 billion euros in return for a commitment to reform its economy and impose austerity measures." And surely that will be it, and Portugal will be fixed. Just like Spain was fixed, until someone actually did some math and found a hole up to €350 billion out of left field. Funny how those big undercapitalization holes just sublimate into existence, usually moments before client money is vaporized.


European Union and International Monetary Fund auditors said in April Portugal was meeting debt-rescue targets and could be strong enough to borrow on financial markets next year but is in a deeper recession than thought.


In neighbouring Spain, Economy Minister Luis de Guindos warned last week that 30 per cent of the country's banks faced similar problems, after Bankia called for the biggest banking rescue in that nation's history.


Bankia, born out of the merger of seven spanish savings banks in 2010, is asking the state for 19 billion euros to repair its books, in addition to 4.5 billion euros already injected.


Spanish banks are at the heart of fresh market fears that the eurozone's fourth-largest economy might have to seek an international financial bailout

And finally, it appears Timmah has been here too:

Spanish Deputy Prime Minister Soraya Saenz de Santamaria said the United States and Spain have discussed the possibility that direct loans from Europe's emergency fund could be a solution for ailing European banks.

Well, if the US has given a green light over German involvement, all is well then.

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firstdivision's picture

...aaaaand WTI, DX_F, and the 10Y are buying the rumor and this bailout as risk on.

Colombian Gringo's picture

The only risks faced are by the public who will ultimately bear the bill for the bailouts through austerity.  Austerity equals larger bankster bonuses.

jeff montanye's picture

the bailouts don't work economically/financially and, especially when combined with austerity for the already poor, are evil as well.

as jesse has said every day for years: The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained growth and recovery.

Soul Train's picture

impeccable timing, isn't it???

The charade of it all. Pure manipulation and spin.

Period. Out.

Rock on, Fight Club. We got their number.

AAA's picture

Yohoo hoo and a bottle of rum

f16hoser's picture

Privatized Profits, Socialized Losses! God I love the Banking Industry and the captured politicians that support it....

Ghordius's picture

at least we europeans are playing our strenghts here, historically we are slightly better and more efficient when it comes to nationalizations vs. our American cousins.


I'd wish someone would just remember how Sweden fixed (really, fixed for good and with no government expenses at the end) their banking crisis in the 90's.


here the NYT is writing about it in the heydays of 2008, though they are talking of 4% of GDP "invested" and 2% "recuperated". The better publications realized it was all recuperated.


Ghordius's picture

mhhh... 5 minutes and already two reds? let me see... bankers? not liking the Swedish Model? ;-)

jeff montanye's picture

really.  how stupid (or corrupt) are those who downed that post?  the swedish (nordic) model is exactly what the world should do to its banks.  if one doesn't know what is being discussed, find out!   

the nordic model or the japanese model?  the u.s. and europe are trying the latter for all it's worth, even though history has shown, for over twenty years, that it results in failure.  the nordic model was a complete success in five years.  learn more dear readers.

ThirdWorldDude's picture

I didn't junk you, but you seem to need some further clarification:

In the 90's, Sweden "solved" the problem by ordering the banks to sell off assets, mostly RE, and write off debt. The banks, on the other hand, lowered the requirements (up to 200 years mortgage period) and interest rates for the peasants to get new loans on RE and thus created perfect environment for blowing up a new, this time even bigger bubble. 

See what happened in Denmark recently and why Moody's lowered thecredit ratings to the Danish banks. When the housing bubble bursts in Sweden (if the global trend continues, I can see it hapening this autumn, as the Swedish CB's interest rate is currently at 1.5% and can buy itself some more time before imploding), it's gonna get much more bloody then Spain!


Here's a few examples on the overall Swedish debt from a Swedish blogger (use Google translate):




Ghordius's picture

so you are saying that for the price of 4% of GDP the Swedish Government kicked down the can for twenty years and it got it's taxpayer's money back.

I will read with pleasure the blogs, but seriously, a "solution" like the above would be heaven, compared to the others that are being fielded.

I repeat: twenty years of care-free bliss for no money.... sheesh, how much did Paulson's job cost and how much time did it buy?

ThirdWorldDude's picture

At the time it costed 4% of the GDP, but when the devil returns to take his tribute it will probably cost over 40% of the GDP. I agree that the Nordic model is better than the Japanese, but in essence, both are questionable because they address the wrong issue.

The problem, Ghordius, is that it's just kicking the can, not solving the problem!!!

Sandmann's picture

I doubt Swedish Banks wre global lenders or major Derivatives traders. In the 1990s It was a real estate bust but Sweden had a huge export sector which was 50% engineering products.

So where is the similarity ? Has the US or UK gor a healthy export surplus ? Which EuroZone countries have a healthy export sector and Banks NOT involved in Derivatives trading or CMOs ? Deutsche Bank's balance sheet negates any trade surpluses Germany may have. It is a Bank presenting systemic risk to the global economy


Sweden also has a very different economy with c. 30% GDP controlled by the Wallenberg Family througb its banking interests. Sweden is a much more corporatist economy than the US or UK and a much smaller economy with a population ogf 8 million able to export its way out of trouble in the 1990s in a way impossible for bigger countries today. Also China was not a destabilising factor in trade or capital markets back then.

ThirdWorldDude's picture

Have also in mind that the Wallenbergers and Karl Bildt are the most regular attendees on the Bilderberg conferences (Bildt is Rockefeller's right hand in charge of Europe and the real governor of Sweden). 

If you read the NYT article Ghordius attached, it says Wallenberg recapitalized his SEBank, but doesn't state how he did that. Funny to miss that, huh? Or maybe not when you know NYT is one of NWO's sock puppets.


http://www.youtube.com/watch?v=yyUShBp-iAg - we are change confronting NYT's editor-in-chief on Bilderberg

Soul Train's picture

in refutation to Ghordius, wouldn't you say that this fiasco is quite a bit more complex relatively than Sweden's little tune up?

Plus, mix in the rampant corruption of the Meds.

Ghordius's picture

perhaps. though spending 4% of GDP spent in banking stocks is a lot for conservative thinkers. And the Swedes recouped this spending.

let's see, if Uncle Sam would buy up (nationalize, of course) both JPMorgan (200bn) and the Holy Vampire Squid (60bn, if I remember well) it would spend a fraction of a fraction.

Buying all the Great Five Megabanks would cost significantly less than what Hank Paulson requested. And you don't have to use the Swedish Model, you could do it the Old American way, like the break-up of the great Bell Corporation.

couple it with a ban on derivatives (if you buy all five there is no sense in holding this kind of idiotic risks on your balance sheets) and yes, it could fix half of the problems...

the only problem with this plan is the legions of money-throwing banking lobbyists in Washington, D.C., they would simply hate it

Sandmann's picture

couple it with a ban on derivatives


Simply make Derivatives Contracts uneforceable in that jurisdiction until some sucker like London decides to be the Court of Derivatives and carry the liabilities

Ghordius's picture

IMHO New York, Washington and London are more corrupt at the moment than Lisbon, Brussels and Athens

jeff montanye's picture

more complex? yes.  in refutation?  no, no, no.  the corruption is in the banks to start with.  if they didn't think they would be bailed out they wouldn't have loaned the money in the first place.  capitalism must have failure for capitalists or it loses its advantage over feudalism.  

complexity is the banksters' smokescreen for their corruption.  reform has to be done and the sooner the better.  bank failure need not be depositors' losses.  shareholders?  yes.  bondholders? you betcha.  read william black or john hussman on the subject.



booboo's picture

When Portugal goes down the tubes and needs re-capped under forced austerity I hope those Mexicans of the Med are rewarded for their kindness by the populace..

Byte Me's picture

Any more of those €12 bil envelopes knocking about? One could maybe get me sorted 'til the end of the month.

jez's picture

I once had "an envelope worth 12 billion" and then by mistake I used it to post a birthday card to my sister, and of course she wouldn't give it back.

Damn -- I wonder if it's the same envelope?

firstdivision's picture

I believe that every political figure around the world should be forced to show their trades in real-time.

Ghordius's picture

that reminds me how the ancient Roman Senators were required to forego any speculation and only hold land. Of course the answer was nephews.

fonzannoon's picture

If they recap the banks over the shorts are gonna get killed and this is going to go on and on.

roguetraderinchicago's picture

I just wanted to see my new picture :)

sockratte's picture

when will denmark start to bailout their banks?

sudzee's picture

Austerity draining savings deposits from banks. The only deposits left are tempoary paychecks from employers to banks on behalf of employees. The bailouts must continue thruout southern europe. Every euro must be replaced with an evergrowing number of digital euros.

Arnold Ziffel's picture

So this money comes from thin air; i.e., "...the EU-IMF package...."

Printing is the 'Industry of the Future.'

El's picture

Well, boys and girls... you have created a real mess here. CLEAN IT UP!

PORTUGALIA's picture

Zero hedge readers are not so intelligent like they think they are... THE BIG PICTURE and whats important is USA to lose its world currency reserve status... and this is only possible if europe creates a major worldwide crises... thats whats really important and Portugal is doing a great job with a debt percapita LOWER compared with USA ... in fact South Europe its the alibi Europe needs in order to make the north americans believe they live in the best country in the world and are totally safe from external crises... reality its a different story... major european plan on track to destroy USD ... check... QE3 in the next 60 days... check.

jmc8888's picture

Of course that's preliminary math in regards to 350 billion euros.  Many say its 2-3x that.