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Endgame ahead

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Spain downgraded… again

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Just a quick note, since it was just a matter of time anyway…

Overview

  • The deepening economic recession is limiting the Spanish government’s policy options.
  • Rising unemployment and spending constraints are likely to intensify social discontent and contribute to friction between Spain’s central and regional governments.
  • Doubts over some eurozone governments’ commitment to mutualizing the costs of Spain’s bank recapitalization are, in our view, a destabilizing factor for the country’s credit outlook.
  • We are therefore lowering our long- and short-term sovereign credit ratings on Spain to ‘BBB-/A-3’ from ‘BBB+/A-2’.
  • The negative outlook on the long-term rating reflects our view of the significant risks to Spain’s economic growth and budgetary performance, and the lack of a clear direction in eurozone policy.

Rating Action

On Oct. 10, 2012, Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating on the Kingdom of Spain to ‘BBB-‘ from ‘BBB+’. At the same time, we lowered the short-term sovereign credit rating to ‘A-3’ from ‘A-2’. The outlook on the long-term rating is negative.

Oh well… So, who’s next?

Written by mo

October 10th, 2012 at 11:17 pm

Posted in Europe

Tagged with ,

Meanwhile in Spain…

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Meanwhile in Spain, people don’t seem to get that Europe is once again saved… Oh those silly Spaniards.

As Spain announces more austerity, the country has erupted in violence. This report, which dives into the heart of the violent protests, reveals a shockingly deep divide between government and people.

“The government is trying to scare the people,” one protester says, following the government’s dubbing of a protest outside the congress as a possible coup d’etat. It ramped up the already tense mood among a people that blame the right wing government for Spain’s economic problems. As protesters refuse to leave and sit down in non-violent protest, the police break off into small groups and chase them down. “The police started to charge indiscriminately toward anyone. We are returning to fascist repression.” Rubber bullets and bricks fly back and forth in street exchanges of a shocking intensity. “We are not animals! We are people!”, one woman pleads with the police. But the police don’t wait long before storming down the streets, shooting rubber bullets at close range into fleeing crowds. The streets may be clear for now, but as the crisis in Spain deepens with no end in sight, popular resistance towards the government and it’s austerity project is only intensifying.

Jihan Hafiz

Written by mo

October 1st, 2012 at 3:06 pm

Spain’s Stock Exchange halted

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Due to “a technical glitch” (riiiiiiight) Spain’s stock exchange is currently down and has been for some hours now. According to a spokesman for the operator, there’s currently no estimate for the resumption of trade nor any kind if further information on the nature of the “glitch”.

Nothing to see here, move along.

Written by mo

August 6th, 2012 at 12:55 pm

Spain gets a bailout

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Who’d have thought – looks like Spain will get a bailout for their banks as well:

The Eurogroup supports the efforts of the Spanish authorities to resolutely address the restructuring of its financial sector and it welcomes their intention to seek financial assistance from euro area Member States to this effect.

The Eurogroup has been informed that the Spanish authorities will present a formal request shortly and is willing to respond favourably to such a request.

The financial assistance would be provided by the EFSF/ESM for recapitalisation of financial institutions. The loan will be scaled to provide an effective backstop covering for all possible capital requirements estimated by the diagnostic exercise which the Spanish authorities have commissioned to the external evaluators and the international auditors. The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to EUR 100 billion in total.

Following the formal request, an assessment should be provided by the Commission, in liaison with the ECB, EBA and the IMF, as well as a proposal for the necessary policy conditionality for the financial sector that shall accompany the assistance.

The Eurogroup considers that the Fund for Orderly Bank Restructuring (F.R.O.B.), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned. TheĀ  Spanish government will retain the full responsibility of the financial assistance and will sign the MoU.

The Eurogroup notes that Spain has already implemented significant fiscal and labour market reforms and measures to strengthen the capital base of the Spanish banks. The restructuring plans in line with EU state-aid rules and horizontal structural reforms of the domestic financial sector.

We invite the IMF to support the implementation and monitoring of the financial assistance with regular reporting.

What’s that? Only 100 billion Euro? Hardly worth mentioning then…

Of course it’s just for the banks, not for the government. After all, as everyone knows, it’s only the banks that are broke, not the country itself. Rest assured, your bonds are totally safe and not just a bunch of paper, worth hardly more than any other empty promise. But why safe the banks then? Why of course so they can continue buying those government bonds, as nobody else in their right mind would buy them…

Update, June 11th 2012: Guess what? Looks like the bailout already starts to fall apart

Nothing like figuring out your hare-brained bailout attempt was a failure from the beginning. Ok: Here are the problems with this band aid:

  1. Unfunded
  2. Temporary, and eventually will be replaced by the ESM. Markets can, luckily, still discount.
  3. Negative pledge issue still exists as Finland made all too clear. Countries will demand extra security interest while under EFSF regime and until ESM priming comes in play.

Finally, all of this, is just semantics.

Well, that didn’t take too long.

Written by mo

June 9th, 2012 at 8:06 pm

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