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Spain's Economic Collapse Results In Whopping 5% Deposit Outflow In July

Tyler Durden's picture





 

Yesterday, Spain was kind enough to advise those who track its economy, that things in 2010 and 2011 were in fact worse than had been reported, following an adjustment to both 2010 and 2011 GDP "historical" data. Today, we learn that Q2 data (also pending further downward adjustments), contracted by 0.4% sequentially in Q2, in line with expectations, but somehow, and we have to figure out the math on this, the drop on a Year over Year basis was far worse than expected, printing at -1.3% on expectations of just a -1.0% decline. However, while its economic collapse is well known by all, the surprise came in the deposits department which imploded by a whopping 5% in July, plunging to 1.509 trillion euros at end-July from 1.583 trillion in the previous month. Keep in mind this is after the June 29 European summit which supposedly fixed everything. Turns out it didn't, and the people are no longer stupid enough to believe anything Europe's pathological liar politicians spew.The good news: Greek deposits saw a dead cat bounce after collapsing by ridiculous amounts in the past several years: at this point anyone who puts their money in Greek banks must surely realize that the probability of getting even one cent back is equal odds with going to Vegas and at least having a good time while watching one's money burn.

Reuters first has some data on Spain's relentless depression:

Spain's economy shrank further in the second quarter of the year and a slump in domestic spending accelerated, signalling a protracted recession as the country presses on with efforts to slash its public deficit.

 

Gross domestic product fell by 0.4 percent in the second quarter of the year, according to final data that confirmed a preliminary reading. But on an annual basis it dropped by 1.3 percent, worse than initial estimates of 1.0 percent.

 

Spain's economy fell back into recession in the first quarter of the year, when output fell 0.3 percent, and government estimates show GDP will probably fall for this year and next year as it pushes through further measures aimed at slashing a bloated deficit.

 

The data came a day after Spain said its economy performed less well than expected in both of the last two years.

 

On Tuesday, the National Statistics Institute, INE, also revised down 2011 fourth quarter GDP to -0.5 percent from -0.3 percent.

 

Close to record high borrowing costs and an economy showing little sign of picking up any time soon is nudging Spain closer to calling for a European bailout, which analysts say is only a matter of time.

 

"With much more fiscal austerity in the pipeline and unemployment at astronomic highs, the risks are clearly tilted towards a more protracted recession," said Martin van Vliet, economist at ING.

 

He expected Spain to make a formal request for additional external financing in mid-September or October. Spain has already negotiated up to 100 billion euros in aid for its ailing banks.

Keep expecting buddy: as long as the ECB ponzi scheme allows Spanish banks to buy Spanish bonds, repo to the ECB, and pretend all is fine, keeping yields at or around 6%, Rajoy will never demand a bailout.

As for the deposits...

A rush by consumers and firms to pull their money out of Spanish banks intensified in July, with private sector deposits falling almost 5 percent as Spain was sucked into the centre of the euro zone debt crisis.

 

Private-sector deposits at Spanish banks fell to 1.509 trillion euros at end-July from 1.583 trillion in the previous month.

 

However, in a more positive sign, Greek banks stopped bleeding deposits in July after June elections decreased the worst fears of the country dropping out of the common currency bloc, European Central Bank data showed on Tuesday.

 

Speculation about Greece possibly quitting the euro was intense in May when anti-bailout parties saw a strong showing in elections, but the Greek central bank said the process had reversed after the elections.

Then again, with both nations and banks now entirely reliant on central banks for funding, who needs deposits... or taxes?

 


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Tue, 08/28/2012 - 05:31 | Link to Comment PontifexMaximus
PontifexMaximus's picture

bullish, London HF must cover positions, looking ahead to JH-meeting, look at EURUSD.

Tue, 08/28/2012 - 06:30 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

Yes, but when the Central Banks have to print to save their shitty mega banks and broke ass governments... this will not be bullish for the Euro.

Tue, 08/28/2012 - 05:35 | Link to Comment Temporalist
Temporalist's picture

Ay caramba!

Tue, 08/28/2012 - 05:40 | Link to Comment malikai
malikai's picture

I wonder how much of those outflows is an actual run vs. people just being without jobs and spending their savings.

Tue, 08/28/2012 - 06:25 | Link to Comment mick_richfield
mick_richfield's picture

5% is pretty bad.

I wonder how much worse the real number was.

Tue, 08/28/2012 - 06:55 | Link to Comment Peter Pan
Peter Pan's picture

The second possibility is far worse than the first.

There is also the possibility that a great many transactions are now conducted in cash which bypasses the banking system in transaction after transaction so as to avoid value added taxes as well as income taxes.

Tue, 08/28/2012 - 07:51 | Link to Comment malikai
malikai's picture

Are you implying that raising taxes leads people to evade? HOW DARE YOU!

Of course, nobody could see that coming.

Tue, 08/28/2012 - 08:22 | Link to Comment Ar-Pharazôn
Ar-Pharazôn's picture

i would say this is not a possibility, but something sure!

Tue, 08/28/2012 - 05:42 | Link to Comment Peter Pan
Peter Pan's picture

Given that Spanish and Greek deposits are secured against real estate whose prices are plummeting and against government bonds which are no better, anyone with common sense will realise that deposits are not worth 100 cents in the euro.

The same goes for US and Chinese banks.

For the time being the illusion continues for all except those that have either withdrawn their cash or for the even smarter ones who have converted the bulk of their funds to silver and gold and who have thus bypassed the whole rotten system.

Tue, 08/28/2012 - 06:06 | Link to Comment Global Hunter
Global Hunter's picture

pfft Peter Pan get with the program, Spanish deposits are secured against beach towels

Tue, 08/28/2012 - 09:27 | Link to Comment Peter Pan
Peter Pan's picture

Sorry to disappoint you, but the offer was withdrawn almost immediately by the banks. They have effectively thrown the towel in.

Tue, 08/28/2012 - 05:47 | Link to Comment hugovanderbubble
hugovanderbubble's picture

SPAIN IS IN DEFAULT. PERIOD

Tue, 08/28/2012 - 05:51 | Link to Comment THX 1178
THX 1178's picture

Yes. I'm shocked the general public look for this to be said explicitly in the media... "Until they announce it on television, it isn't so." Seriously, what do they expect?

Tue, 08/28/2012 - 06:04 | Link to Comment hugovanderbubble
hugovanderbubble's picture

YEs, sir

 

Whole people has been manipulated by politicians and some biased media, to " dont live with the total bailout spanish scenario".

 

I can assure that its impossible with current and next 18-24 months financial and real economic conditions that spain can fight a big contraction in GDP and massive crash in Small & MediuM entities.

-Spanish GDP 2013 ---> -5-7%

-Spanish debt haircuts from 10-35% depending tranches

-Most of the hedge funds are loading shorts in CAC and DAX, cos Spain and Italy cannot be short sell as (Short ban rule is applied)

- DONT INVEST IN SPAIN till Real Estate Prices in CITIES drops 35-50% more vs curren price till Spanish Mean Average price hits 1.200 euros p.sq meter

-Occupancy rate is below 65% in offices with net yields below 4.8%

-Spain Ibex Target 4.800-5.300 next 12 months

Signed: HugoVanderbubble

Tue, 08/28/2012 - 06:31 | Link to Comment mick_richfield
mick_richfield's picture

The general public is complicit in its own deception.

Perversion of truth on this scale cannot be imposed from above.

The people beg the Money Power to save them.

Slaves begging for the security and comfort of their chains.

Tue, 08/28/2012 - 05:50 | Link to Comment hugovanderbubble
hugovanderbubble's picture

For ZH readers:

Whole spanish subgovernment bonds - Those Issued by Regional Comunidades Autónomas are in technical default- ISDA Must consider Trigger-Credit Event- No reprofiling Allowed

Tue, 08/28/2012 - 06:00 | Link to Comment Sudden Debt
Sudden Debt's picture

So instead of having a catastrophic economy... it's even a bit worse...

Tue, 08/28/2012 - 06:03 | Link to Comment Global Hunter
Global Hunter's picture

Its bullish because if deposits decline by another 5% in August it will be a lower total amount of outflows this month.  If outflows continue at a 5% per month clip, in absolute terms, less and less money will be withdrawn from the system each month.

Tue, 08/28/2012 - 07:19 | Link to Comment itstippy
itstippy's picture

On the banking world's ledgers, deposits are liabilities.  Hopelessly shitty loans and shaky sovereign bonds are assets. 

If all the depositors pull out, the banks' books will be in great shape - no liabilities!  Boatloads of assets, redeemable at the UCB for nice crisp Euros!  The Spanish banks would pass the next stress test easy peasy under such a scenario.

Tue, 08/28/2012 - 08:26 | Link to Comment Ar-Pharazôn
Ar-Pharazôn's picture

people's feeling are not regulated like that.

 

if a major event happen, that month could be a -10% on bank deposits.... so.....

Tue, 08/28/2012 - 06:19 | Link to Comment Muddy1
Muddy1's picture

And what is the outflow rate from American banks?  I neither hear this discussed nor know where to find such information.

Tue, 08/28/2012 - 06:33 | Link to Comment mick_richfield
mick_richfield's picture

I'm not an economist, but as I understand it  -- a significant outflow from banks would require that we had money saved in them.

Tue, 08/28/2012 - 17:54 | Link to Comment Muddy1
Muddy1's picture

true that

Tue, 08/28/2012 - 08:28 | Link to Comment Ar-Pharazôn
Ar-Pharazôn's picture

really interesting question.... it would be nice to see some stats on this subject.

 

assuming that benny is a bitch, he could print and open fake accounts to leveling bank deposits..... :P

Tue, 08/28/2012 - 07:10 | Link to Comment andrewp111
andrewp111's picture

5% in a month isn't really all that much. It is a very slow leak. Even 5% in a day would barely qualify as a bank run.  Now 5% in an hour - that is serious business.

Tue, 08/28/2012 - 07:33 | Link to Comment adamas
adamas's picture

If Spain could just get economic growth going again with some new villa/apartment developments they could pay off their debt and the Euro would strengthen considerably

Tue, 08/28/2012 - 07:58 | Link to Comment Reefer
Reefer's picture

That's a splendid idea.

Why don't you lend them the money to get started.

Things can't get much worse, now can they?

Tue, 08/28/2012 - 08:14 | Link to Comment negative rates
negative rates's picture

Funny how that one cent you won't be getting back, just trumped the dollar in the form of commen sense. What are you missing here Tyler?

Tue, 08/28/2012 - 10:29 | Link to Comment Zwelgje
Zwelgje's picture

I say little peeps using savings for food.

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