Van Rompuy And Barroso Announce €440 Billion EFSF Fully Functional; Now, How Do They Expand It To €3 Trillion?
Following the Slovak approval vote earlier, the EFSF is now fully functional, or so say Europe's two unelected leader Herman Van Rompuy and Jose Barroso (full statement here). Which is great, considering it only took Europe 3 months to ratify something that was supposed to be operational 2 months ago, and take over for the ECB's SMP declining bond purchases sometime in mid-September. And now, as Zero Hedge explained back in July, comes the hart part where the Eurozone realizes that the EFSF, which recently has found it has more uses than a Swiss Army Knife and can be used as a central bank, as a guarantor, as an insurance policy, as a CDO squared, cubed, etc, etc, or at least so the rumors go, has to be expanded from $440 billion to €3.5 billion. Recall: "slowly the sell side is coming to the realization that not only will the EFSF have to be expanded (that much was known), but that Germany, and specifically the outright economy, will be on the hook by an unprecedented amount of money. And expanded it will have to be: not by two, not by three, but by a cool four times, to a unbelievable €3.5 trillion which according to Daiwa's Head of Economic Research, Grant Lewis, is an act which will be necessary to convince financial markets of euro area resolve to save Italy and Spain." That was two months ago. Finally, the governments, which back then religiously denied such reporting as scaremongering, are getting on the bandwagon. It was none other than Le Figaro, mouthpiece of the country that has the most to lose from the inability to ringfence a Greek fallout, that said yesterday: "The euro area reflects one of several options to increase by up to five times, or more than 2500 billion euros, the firepower of its relief fund for countries in financial difficulty (EFSF), said on Wednesday AFP European sources." In other words, the target number is now known, and nobody is ashamed to put it out there: between €2.5 and €3.5 trillion. The only question is what form it will take: yesterday it was a bank, today it is an insurance "fund", tomorrow who knows - gotta keep those rumors a surprise after all: they don't call the EFSF the modern version of the Swiss Army Bailout knife for nothing.
And since the rumor du jour, until it is formally rejected by the market as impractical, is the use of the EFSF as an insurance net, here is Dow Jones with its take:
France said Thursday that allowing the euro-zone rescue fund to provide insurance on bonds issued by countries that cannot tap markets is one of the options being considered to increase the vehicle's firepower, as the bloc seeks to reassure investors that it can deal with the fallout from the deepening sovereign debt crisis.
France favors turning the euro zone's bailout fund into a bank that can easily leverage its resources, but recognizes there is strong opposition to
the idea, a senior French official said Thursday.
"The best option is still that the fund becomes a bank...and acquires leveraging capacity," the official said, speaking ahead of the meeting of finance ministers and central bankers from the Group of 20 industrialized and developing countries. "It's an uncertain hypothesis because the ECB has already given a negative opinion."
If the EFSF were to operate as a bank, it could buy sovereign debt and use that as collateral to borrow further funds from the ECB. Germany opposes allowing the bailout fund to tap ECB funding, because it fears it would place too many risky assets on the central bank's balance sheet.
Faced with the stiff opposition, other ideas are making progress in euro zone negotiations, including using the EFSF to insure bonds or bringing in the support of other European or international funds, the French official said. The official did not go into details on how other funds could be brought in but said the bond insurer idea is known to be effective. "It's part of the hypothesis that we've been discussing and working on," the official said. "It's a system that works well...which can encourage foreign investors to return to the euro zone and would be a deterrent form of leverage."
A proposal put forward by German insurance giant Allianz SE (ALIZF, ALV.XE) estimates the fund could cover EUR3 trillion of bonds if some 20% of debt issued is insured. It was unclear if the French official was referring to the Allianz plan.
And so on, and so on, all in keeping with whatever is the ridiculous meme du jour.
The only problem, yesterday, today and tomorrow, is the open answer to the question of who will pay for this €2.5-3 trillion rescue net? Because we now know that China, which is busy bailing out its own banking system is out of the picture, while the US has its own major problems - the last thing the Fed needs is for the general populace to realize the Fed is once again directly bailing out failing European banks, like it did with Dexia.
So, once again: who pays for this wacky, wonderful, rumor mill, which is the only thing that drives markets these days?
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Amateur Night in Dixie - Eastern Edition
unelected bitchez.....
“The best option is still that the fund becomes a bank...and acquires leveraging capacity”
http://www.youtube.com/watch?v=N_5kv8QeBBc
How they expand it? Well. As the German pope would say : " go forth and multiply!"
looks like they are trying to jack their sheet up to where the Fed is going
Exactly - but they'll never catch up to US FED.
What would Chavez do?
It actually pisses me off beyond belief, even if it's going to make me rich if they keep fucking it up.
Googletranslate this.... Z Á K O N 350/1996 NÁRODNEJ RADY SLOVENSKEJ REPUBLIKY o rokovacom poriadku Národnej rady Slovenskej republiky§ 96(3) Ak národná rada návrh zákona neschválila, nový návrh zákona v tej istej veci možno poda? najskôr návrh zákona v tej istej veci možno poda? najskôr o šes? mesiacov odo d?a neschválenia návrhu.
Now Eu put 440bilion in the banks and banks leveraged 10times 440c10= 4 trillion or wait they can use Goldman FX-equity platform x400 and make it 40 trillion. And short squeeze all the mtf in the world who masturbate on a bad news....
van Romper and Barroso will soon meet their fate.
They will end like Fra Dolcino did in the 14th century.
that thumping sound is Banzai kicking himself for not thinking of this one first, haha
I'm afraid Europe will find our Debt Star quite functional when they try to restructure Greek debt.
Witness the power of this fully armed and operational EFSF!
http://youtu.be/r1VKpldKrDU
Does that mean Trichet will throw Von Rompuy down an elevator shaft whilst an injured Nigel Farage looks on?
EDIT* mike's clip is better.
Rebel alliance for life.
+1000 if that is Star Wars
European leaders are nuts to use leverage. The correlation risk is unbelievably high. If the PIIGs bond yield continues higher, and Europe enters a 1-2yr recession, pushing debt:tax revenues higher, and given the correlation risk, Germans can wave goodbye to a secure financial future.
let's not forget the effects of a Chinese hard landing on Europe.
If the EZ implodes, so does the rest of the world, so yeah--thanks Europe, for leading us into the apocalypse, right when I should be graduating.
p.s. Hasn't the mathematical model by the CIBC guy--Lin--used to value CDO risk been disproven? So how is Europe evaluating risk for a monoline EFSF? I understand the sunk cost in the European project, but sinking more $$ into it is going to overturn the world.
is graudating like a donkey punch or blumpkin or are you satirizing the state of our education system?
what evs. I have basic hunting/shelter survival skills. I'm ready for the apocalypse. Unfortunately, I'm a heavy sinner, so I won't be raptured.
p.s. watching Europe build the leverage EFSF, is like seeing the Manhantten Project unfold. They are building a financial atomic bomb; a weapon of mass destruction. And if you believe contangion will be contained, then you're foolish--they may prolong the inevitable for a few months, but the fuse is lit.
And when that EFSF bomb goes off, we are all f*cked.
are youse talking to me? Must not be--I'm with you brother, been riding Paul Revere style for months and praying they aren't actually stupid enough to follow through with this. Just let damn bondholders take haircuts, we can all make a little money shorting into the crash, then buy stocks cheap (no, like really honestly cheap, not Bloomberg cheap) and eke out a few percent a year for the next decade of Japan style blow growth. Sure, some pensions will have to fail, but that beats a trade war cum real war cum fiat currency collapse....
(p.s.--manhattan)
Darth Geithner FTMFW!!!!
doesn't matter the destination is the same
their aim is to end the USD reign...the euro is just a stalking horse..for new DM reign.
Here's your problem. You're assuming that the CB's are not willing to kill themselves in the hope to maintain the current status quo. There is no logic, no rhyme, no reason. Just pure madness.
Seems to me that you're studying Fin Eng. You should have went to med school, I'm wishing I had.
zEURo coming soon!
Bank licence, I guess.
It's really quite easy actually. First off you start with "the big sweaty wad of dough"...go get your magic pixie dust...sprinkle...and WHAMO!...from sweaty wad to Cool Trillion.
Krugman says that the Martians are now bailing out their own banks and stock market...Went on to say that Uranus has plenty of money and is ready and willing to bail out planet Earth.
he never saw a bail-out he didn't like
i hope he gets his keynesianism so over-stimulated
that he starts twittering his styooopid ideas
w/ tyler
un·sus·tain·a·ble? ?[uhn-suh-stey-nuh-buhl]
adjective: not sustainable; not to be supported, maintained, upheld, or corroborated.
Example: "Johnson stop coming into my office and telling me we're losing money on the bottom line! The only thing that matters is our revenue is up!"
"So, once again: who pays for this wacky, wonderful, rumor mill, which is the only thing that drives markets these days?"
Martians, DUH!!!
But seriously, that really is the question, just piling debt on top of debt WTF!!! It can't be paid off, must be a worldwide default.
The Contagion is spreading to Mars...
We must go to mars then! Fire up the rocket Charles!
its so obvious these Tylers are betting on a euro collapse. iow, talking thjeir book.
you don't "Bet" on an inevitibility. You capitalize on it.
http://www.zerohedge.com/node/13972
The good thing is that Sulik's chances on blocking ESFS are not bad right now. AFAIK they cannot do 2nd round of voting immediately. Parliament have to wait 6th months before another vote. Constitutional court ftw
This can has been kicked so many times, there must be a lot of bloody toes in Europe.
Ahhh... the sound of a can getting kicked and the distinct sound of tin hitting concrete only a few feet further down the road.
Time for the hot potato to be tossed back here to the US where we will once again have a turn to roast on the spit of financial insolvency.
Can't wait to see what tricks are up our master's sleeves this time. Are we on a slow grind into dismantling Western Civilization? A strategy of buying time until China implodes? Afloat on nothing more than stupidity and multitudes of idiots all tugging the same rope? Who knows.
United Nations of Ponzi
They give the money to JPM, who practices fractional reserve lending at 40x. JPM then returns the EFSF a loan of 3 trillion plus a 17 trillion line of credit to make the interest payments on that loan for a the next 20 years.
Who are you who are so wise in the ways of science?
fuckiing bailout world. Bailout the rich, fuck to common man. TO THE STREETS! Oh shit I can't I have a job.
ooops. replied to wrong comment. Carry on!
HAHA. Who knew you Germans were such a generous lot. Looks like you didn't learn your lesson from this experiment the 1st time around... time for a refresher course. (PS- Good luck enforcing those "tough" austerity measures.)
> "$440 billion to €3.5 billion"
Did you mean €3.5 trillion?
I agree. And 4x 440B is 1.76T, unless leverage is used (which increases the risk).
The Germans are not going to commit economic suicide,i don't know why this THING still has legs
Because bullshit walks...on legs like this.
Is perceived as mutually assured financial destruction. The EU "is" Germany, and Germany "is" the EU at this point. They can cry all they want, but they are as trapped in this nightmare right along with everyone else. That is, unless they want to go through the temporary pain to get out. Either way, it is pain. Therefore, it seems to me that max pain will come the wrong way before it turns around and goes the right way.
it's a centipede.
Because they're long and SEXY. And tptb know "all you got is a pocket pussy."
>The Germans are not going to commit economic suicide
They did it twice last century. What makes this century any different?
American hubris, that is the cause of this melt down that the world has to assume. Or accept doom. Its pax americana that has to die and in its death there will be blood. Financial or otherwise.
Please explain how "American hubris" is responsible for other countries using fiat currencies, fractional reserve banking, inflationary monetary policies, Baron Keynes' bogus pseudoscience, socialistic policies, etc.?
If 1+1=3 isn't working out for you, maybe you should try consulting the metric shit-ton of knowledge available for free on the Internet.
http://mises.org/Books/humanaction.pdf
http://praxeology.net/anarcres.htm#heritage
http://mises.org/literature.aspx
Do you know how to count and contextualise past facts? The crisis of Euro sovereigns is the same as that of US 2008 FIRE/WS hyperinflated asset melt down. Same banks running like headless chickens, not wanting to recognise the huge debt accumulation on their books of CDO type US toxic assets, like Dexia and french banks. Sucked into international world wide financial ponzi, they then upped the financial ante further, trying to balance their books by taking on 'supposed easy money earner' the 'sovereign debt'; that ALL bond issue regulators and advisors like S&P, Moodys and the Squid said were riskless, as covered by the ECB and Germany's back stop!
"You can't lose money on euro sovereign debt, as ECB will bail you out and its "risk free" institution, as secondary emitter of alternative reserve currency of the world." Those were their very words of these financial shills!
Based on this impeccable assessment by the 'regulatory capture' of these financial regulators who were not only above reproach, but ALL on the same financial page, the Euro Banks bought into it massively,to recoup their CDO toxic losses; forgetting that Portugal and Greece were not Germany and France. That is called being sucked into the Madoff ponzi. Capische?
Now this sacred financial bortherhood of banks, with more opaque off-balance sheet, shadow banking investments, that they had accumulated in a mad spiral, than they would never, EVER, have dared to publicly avow to their shareholders, in their wildest dreams, have their collective butts perilously hanging in an abyssal void between two fragile stools. They are in financial purgatory like never before.
Do you get the picture Dr Acula, paragon of virtual free market baloney...? That's where we are, and its not a question of french banking 'garlic' thinking, or Greek 'moussaka' thinking, or Italian 'spaghetti' thinking; its international debt finance that has its nuts on the executioner's anvil...It's gonna hurt... its an international banker's mind set...inspired by Reaganomics mantra...said differently...by AMerican Hubris... That's the basic issue that new financial regulation must reign in, world-wide. Get the picture...Herr Doctorr...?
Its a chain reaction world wide of cause and effect...It prefigures the end of an age of a certain mind set. The Reaganomics mindset, signature tune of a certain age that lasted thrity years....American financial geopolitical hubris, based on NWO.
Romney wants to go back there...good luck to him!
Soverign debt default in Europe would kill Bretton Woods 2(Fed/dollar ponzi). Obviuosly the American tax payer is paying for this in a round about way and not the German tax payer.
The US has more to lose if its world wide financial architecture fails. I don't dispute that. When you build a financial empire you assume the efficiency and global outcome of your global design, if you pretend to Caesar's role. As you are the main beneficiary when times are good, of USd reserve currency status, of 'exorbitant privilege'. You assume also the down side when you lose your legions, its standards and its surrogate spear carriers. If in the fall out of that failure, those surrogates declare their independence that is normal. Either you come back as lead player, or else you resign!
Future taxpayers are on the hook for the leveraged system. Pay later, pay later, pay later, pay later........
When this bitch finally blows it will really be quite spectacular.
It's outright theft. Taxpayers on the meathook to pay off lazy, shiftless bondholders and bankers.
Bye-bye 'real economy', hello lost generation.
Just like in the USA! The global leader in Mickey Mouse applications...in all dimensions of life.
Wait, why are they talking about this if they already had total agreement on a detailed plan that will be unveiled at the end of the month???
Yippee! Eu 440 BILLION to buy TOXIC CRAP from DECLINING STATES. Time to go shopping for SHITTY BONDS! Boy oh boy, the world is saved!
Surely it's a bit optimistic to assume that the general public would particularly notice the bailout this time either?
Right toe!
Sadly, 99% of us 99%-ers are 100% asleep.
Oh my gosh! Look what I have done! I have lit myself aflame by dousing myself with gasoline and thusly striking a match!
I will attempt to stop the burning of my body by dousing myself with more gasoline.
That is not insanity, is it?
Well, if one was to build a debt bomb, they had best use as much debt as possible. Nothing worse than too small a device and having wounded left over to deal with after it is detonated! Way too messy. Just doesn't do a proper job of wiping out those pesky unfunded liabilities.
And why don't they do what JP Morgan did and use half of the ESFS funds to bet against PIIGS debt and profit from this so their GDP will skyrocket
that's typical WS play : the right hand doesn't know what the left does. It gets you fast into the dustbin...Don't expect the germans to be as dumb as WS.. and US Congress...this is all to end pax americana...So the Euro is just a stalking horse to bring down king Dollar ..then Deutschmark will be uber-alles in the ruins of anglo-saxon financial Armageddon. You can't win em all ya know...
its gonna be denominated in Zimbabwe euros... Or libyan euros...once France starts its libyan colony working full throttle. Or Gabonese euros...or Qatari euros...or maybe...Putin Euros.
How about Chinese euros...printed in Oulanbatour. Anything goes, all participants welcome.
OT, but CNBC is talking about investing in gold by NOT investing in gold. I heard, "invest in RE in mining towns", "invest in XX gold stocks/ETFs", even "don't worry about it, BECAUSE IT'S PROBABLY IN YOUR 401K." I can('t) fucking believe it on so many levels.
Breaking on Bloomberg:
German banks are preparing for losses of as much as 60 percent on their Greek government debt holdings as European officials push for more private-investor involvement in a rescue of the debt-stricken country, said three people with knowledge of the matter.
The country’s banks held a conference call this week and participants discussed the potential for losses on Greek bonds of between 50 percent and 60 percent, though no final figure has been set, according to the people, who declined to be identified because the talks are private.
http://www.bloomberg.com/news/2011-10-13/germany-s-banks-said-to-prepare...
Europe, if you sprinkle sugar on top of shit, it is still shit.
"What if we sprinkle it with POWDERED sugar?"
"Shit."
"How about if we smother it in 12 inches of sugar?"
"Shit."
"What if we cover it in 12 inches of sugar, open up a line of credit against this sugar to buy even more sugar and then sprinkle that on top?"
"Still Shit."
"Ok, how about if we do all of that but then offer the sugar as collatoral against bond sales at such an incredible multiple there is no way anyone could see our sh.. , sorry assets because by then it will be impossible to decifer between the true value of anything! It will all be sugar!"
"You will have an incredible pile of shit. A shit of epic proportions that will crush you when people simply figure out the sugar you used to sprinkle on the shit is shittier than the shit it covers."
"Ok.... how much will you give me for this shit?"
"Ah, finally a good question. I will give you shit for your shit, since the currency I am paying in is shit, but that just might be more in the marketplace than the next guy who asks me to buy his shit."
"So, it's all shit in the end?"
"Yes."
the market obviously only cares about the sugar high.
Actually, if you have infinity sugar the shit will disappear:
Shit/infinity = 0
Yes, but they are trying to hide the shit with more shit.
You have such a limited imagination. You don't sprinkle anything on it! Instead you make it huge and then change it's name to "poo." next thing you "people can't get enough of that shit!"
i think the pension funds and all the other herding international investors have had enough of swallowing shit from Sucks, Citi, Morgue et al
thankfully their private action (lawsuits) will do what the still worthless corrupt fukard Regulators won't do and take these Big Crooks to the cleaners
Actually shit has some value because it can be used as fertilizer. More like toxic waste.
just add water...it'll expand...really.
Eurofanatics have totally lost it. Forced actions dictated on member states, total loss of democracy, complete insolvency whether it's the overleveraged and undercapitalised banks or the sovereigns. They have a fever and they think the only cure is more debt. They've tried it with Greece and failed, then they tried it again with more debt with Ireland and Portugal and failed again. Now they will try it again with Italy, Spain and the megabanks, only this time with massive leverage and they will fail. The circular nature of the ridiculous "stability" fund in which Italy is supposed to guarantee 139 billion, Spain 92,5 billion and France 158,5 billion to "ringfence" Spain, Italy, France, french (and other) banks and continue funding Greece, Portugal and Ireland is beyond twilight zone. And all these eurofanatics are concerned is "investor confidence". WTF?! They don't even try to fix anything. They want to keep their political utopia alive and continue the same deadborn policies and debt accumulation by taking on massive amounts of new debt. And that's supposed to restore the fookin CONfidence?! And keep in mind that in case a country steps out, contribution keys would be readjusted among remaining guarantors and the €440 guarantee committee amount would decrease accordingly.
Seriously, u have to be mentally ill to buy this bullshit, not to mention to put your money in it. This, as the whole political utopia called eurozone, is doomed. Only now the repercussions will be 2.5-3.5 trillion bigger.
For the increased guarantee commitments, see http://en.wikipedia.org/wiki/European_Financial_Stability_Facility
Hmmmm... What if... What if...
It's just "dragging feet"?
Remember, Timmy gave instructions to do something, pressure is high.
Meanwhile your "Eurofanatics" are not that keen on it as you think.
This stupid guarantee-fund-might-become-a-central-bank is, if you think about it, a ready-made-bad-bank. A waste basket.
ECB's tumor, ready to grow already detached from the ECB.
Confidence? In banks & sovereigns? If you don't belong to them just stay away. Too dangerous to short, to hold, to touch...
It's easy to convert €400B to €3.5T. Just have the guy with the fattest fingers typing on the one comp that controls € printing.
There is a lot of options: http://en.wikipedia.org/wiki/Multiplication_algorithm
no just get Goldman Sucks to split €400bn offshore into 1,000 parcels and get JP Morgue to leverage it ...it's worked for decades ...until it doesn't !
Seems BNP Paribas is feeling the pressure ... and that whingy Germans are starting to dicover the more useful targets for their wrath. They might work their way back to the German banks next...
Here the initial BNP "interview" published by Handelsblatt:
http://translate.google.com/translate?sl=de&tl=en&js=n&prev=_t&hl=de&ie=...
The last useful thing we got from US were potatoes. Fuck the printing madness. I am out of this gigantic casino.
MORAL HAZARD! MORAL HAZARD! MORAL HAZARD! MORAL HAZARD!
CONTAGION IS NOTHING MORE THAN A BAD MOVIE!!! THE MORE BANKS THAT FAIL AND GET BACKSTOPPED, THE SAFER THE MARKETS FEEL. SUCH A DELICIOUS IRONY!!!! ALL THE TALK ABOUT DEXIA AND THE FALLOUT IS BULLSHIT!!! MARKETS WANT MORE EVIDENCE THAT THE SOVEREIGNS ARE THERE TO FIX THE BOO BOOS!!!! WAIT TILL GREECE FAILS AND THE MAJOR BANKS GET BACKSTOPPED!!! THE MARKET WILL TAKE OFF LIKE A BAT OUT OF HELL!!!! PWEASE DADDY---MAKE THAT BAD BAD GROWLING BEAR MARKET GO AWAY!!!