Spain: It Is Not Contained

[Realistbear]

http://www.telegraph.co.uk/finance/economics/8374754/Spain-downgrade-sparks-storm-over-rating-agencies.html

Spain downgrade sparks storm over rating agencies

Moody's has reignited the storm of controversy over the power of rating agencies after it downgraded Spain, and warned that the bank clean-up will cost vastly more that claimed.

.../

Moody's cut Spain's credit by one notch to Aa1 and said Madrid's estimates of €20bn (£17.2bn) of fresh capital needed to rebuild the banks and cajas is too low. "The overall cost is likely to be nearer €40bn to €50bn," rising to as much as €120bn in a "stressed scenario".

A thread a couple of days ago discussed the planned stress tests and the fact that they had been weakened--no doubt in anticipation of more poisons hatching out from the mud.

I suspect it is nowhere near contained and that the Euro will have another bad year.

[Realistbear]

http://www.telegraph.co.uk/finance/currency/8374651/Euro-crisis-is-far-from-over-what-the-experts-are-saying.html

Euro crisis is far from over – what the experts are saying

Moody's cut Spain's debt rating on Thursday, pushing the euro lower and deepening the sense of crisis in the currency bloc on the eve of a crucial summit.../

The euro hit an intraday low against the dollar of $1.3791 and traders warned it could fall further in coming days due to market concerns that Friday's 17-nation meeting and a summit of the full 27-nation European Union on March 24-25 may fail to agree on decisive action to tackle the debt crisis.

"If officials make no progress and Germans remain unwavering in their demands, the likelihood of a capitulation (in the euro) will be significantly higher," said Jessica Hoversen, currency strategist at MF Global in Chicago.

No longer a buy signal for the Euro which has been soaring vs the $ recently. Lots of bad days ahead, especially if we get civil disorder over bankster rip offs and austerity for some while the fat cats get fatter.

Euro up slightly this morning which demonstrates contrarian buying is still strong:

1.38042

Edited March 11, 2011 by Realistbear

[papag]

http://www.telegraph.co.uk/finance/economics/8374754/Spain-downgrade-sparks-storm-over-rating-agencies.html

Spain downgrade sparks storm over rating agencies

Moody's has reignited the storm of controversy over the power of rating agencies after it downgraded Spain, and warned that the bank clean-up will cost vastly more that claimed.

.../

Moody's cut Spain's credit by one notch to Aa1 and said Madrid's estimates of €20bn (£17.2bn) of fresh capital needed to rebuild the banks and cajas is too low. "The overall cost is likely to be nearer €40bn to €50bn," rising to as much as €120bn in a "stressed scenario".

A thread a couple of days ago discussed the planned stress tests and the fact that they had been weakened--no doubt in anticipation of more poisons hatching out from the mud.

I suspect it is nowhere near contained and that the Euro will have another bad year.

I spend a lot of time in Spain just got back yesterday and the Banks I can tell you are in a real mess some are not even accepting Bank Cheques off each other(Cam/ Lloyd's International) I attempted to pay in 880 euros on Tuesday and was informed only cash now sir we no longer accept cheques, I know of people living in Bank owned apartments free without any problems for months up to 3 years without any rent or any demands to leave etc.

[geezer466]

Readers Comment Col Blimp is right on the money.....

Only those who actually look on the ground will see the full horror of the debts looming for banks & cajas who have financed development of hundreds of thousands of apartments, particularly in the coastal holiday regions.

Many of these developments are partially completed, others are completed and mostly empty, still running on builder's electricity and lacking first occupation licences.

Dozens/hundreds of developers have gone bust, leaving the banks & cajas holding these dubious assets, as security for their advancing a good proportion of the development costs.

These lenders are now desperate to offload the houses and apartments and are offering them at prices reflecting only the bank's advances, often around 60% of the final construction costs.

100% mortgages are offered, thus converting debt money to "asset" money.

The result, of course, is that properties bought in the "good years" are seeing their value, in real terms, cut by 50% of mortgagors original valuations.

There is chronic unemployment: in Andalucia, heavily dependent as it has been on construction, unemployment is truly running at around 25%.

Ordinary folk are defaulting on mortgages, as are quite a few expatriate owners with their own cash flow problems.

These properties are, no doubt still shown as "assets" in the bank's books - the full horror of building associated debt losses has yet to be fully admitted.

Anyone who believes that Spain's debt crisis has peaked has not got on their bikes and looked!

There is going to be much pain in Spain in the years to come for the ex pat community that have bought and thought they had achieved their dream retirement....The scale of this looks to be so bad that it could be decades before values once again reach the levels seen at the height of the boom.

[VeryMeanReversion]

Anyone else get the feeling that we are just about ready for western financial crisis II ?

[Realistbear]

If banks are no longer honouring cheques from other banks Spain will break down in the next 48 hours.

It seems that this thing is far far from contained.

There is some serious money to be made in the next 48 hours on the FX. But watchagoingtodo? I am doing nothing but getting ready to buy a house.

[MrFlibble]

Anyone else get the feeling that we are just about ready for western financial crisis II ?

The last one (2007-2008) was a rehearsal if you ask me. Since nothings been fixed then I fail to see how we can escape this crisis. Just because we want to escape it and move on doesn't mean we can or will.

[Realistbear]

1.38160

Contraboost for the Euro--nothing like a financial meltdown to get the buy orders rolling!

Sterling seems to be the weak man today.

EDit: ECB to hike--might not help save the Euro:

http://www.bloomberg.com/news/2011-03-11/trichet-bypasses-unsung-growth-mandate-as-ecb-reacts-to-hints-of-inflation.html

Jean-Claude Trichet is bypassing the European Central Bank’s little-known secondary mandate as inflation propels policy makers toward the first interest-rate increase in three years.

1.38160

Edited March 11, 2011 by Realistbear

[interestrateripoff]

I spend a lot of time in Spain just got back yesterday and the Banks I can tell you are in a real mess some are not even accepting Bank Cheques off each other(Cam/ Lloyd's International) I attempted to pay in 880 euros on Tuesday and was informed only cash now sir we no longer accept cheques, I know of people living in Bank owned apartments free without any problems for months up to 3 years without any rent or any demands to leave etc.

Now that is worrying if they don't even trust each other!

[Realistbear]

http://www.bloomberg.com/news/2011-03-10/eastern-europe-uses-euro-debt-crisis-to-delay-currency-adoption.html

Eastern Europe Uses Euro Debt Crisis to Delay Currency Adoption

By Agnes "Aggie" Lovasz - Mar 10, 2011 11:00 PM GMT

The euro-region debt crisis is giving Poland, the Czech Republic and Hungary an excuse to delay getting their economies in shape to join the single currency.

The European Union’s largest eastern members are slowing euro preparations as western governments struggle to end a debt crisis that nearly ripped the currency apart in May. Without a fixed timetable, buying the bonds of these countries is no longer a one-way bet on falling yields, said investors including Jean-Dominique Butikofer, who helps oversee about $1 billion of emerging-market debt at Union Bancaire Privee in Zurich.

It spreads as confidence starts to erode. Run on Euro or a major buy signal?

[Nationalist]

I can't see why they wouldn't allow a cheque to be deposited. It would either bounce or be honoured. Either way there's no real downside to the receiving bank.

[Realistbear]

I can't see why they wouldn't allow a cheque to be deposited. It would either bounce or be honoured. Either way there's no real downside to the receiving bank.

The implication is that the banks no longer have confidence in the system. If this is allowed to spread things will turn very dark very soon.

Is this going to be black Friday?

[stuckmojo]

The implication is that the banks no longer have confidence in the system. If this is allowed to spread things will turn very dark very soon.

Is this going to be black Friday?

It could be

seeing the tsunami and so on.

[Realistbear]

http://www.telegraph.co.uk/finance/currency/8374651/Euro-crisis-is-far-from-over-what-the-experts-are-saying.html

Euro crisis is far from over – what the experts are saying

Moody's cut Spain's debt rating on Thursday, pushing the euro lower and deepening the sense of crisis in the currency bloc on the eve of a crucial summit.

[fluffy666]

It could be seeing the tsunami and so on.

I was about so say, all we need is a major natural disaster hitting a 1st world country as well... and an outbreak of revolution in a major oil producing country or two.

The only thing that seems to hold the stock market up is the perception of safety..

[mijas99]

http://www.telegraph.co.uk/finance/currency/8374651/Euro-crisis-is-far-from-over-what-the-experts-are-saying.html

Euro crisis is far from over – what the experts are saying

Moody's cut Spain's debt rating on Thursday, pushing the euro lower and deepening the sense of crisis in the currency bloc on the eve of a crucial summit.

I've lived in Spain for many years and I can confirm that yes there are 100,000s of empty recently built properties. However, for the average Spaniard there is little impact, as these places are either on the Costas and been built for foreigners or Spanish 2nd home owners, or big empty mini-cities built in the near-desert close to Madrid (only 1 or 2 of these) where few people bought. Where most Spaniards actually live property is probably 10-20% down on peak prices, so similar to the UK. On the foreign parts of the Costas property values are down at least 50%, this is where the real bubble was.

As far as exposure to bank debt, well the big multinational Spanish banks like Santander and BBVA have a diverse portfolio across the world, I'm pretty sure they can absorb the property losses from Spain that will be coming onto their books. The Cajas are the ones in big trouble, the government has passed some laws recently to force vulnerable Cajas to merge, but I cant see how some superficial restructuring will change anything.

One big Q I have, with the British press talking about the weakness of the Euro all the time (and it does seem to be ONLY the British press doing this), then how come the Euro is so strong against the pound sterling and dollar? Maybe I need an economics lesson?

[Patfig]

The implication is that the banks no longer have confidence in the system. If this is allowed to spread things will turn very dark very soon.

Is this going to be black Friday?

or blue Monday

[indirectapproach]

I think that is because European interest rates are much higher than UK and US ones.

So long as the euro has confidence it should be strong, 'or stronger?', with things at this level.

The questions seem to me,

Will the structural imbalances (Spanish downgrade while Germany booms), lead to euro fracture?

or,

Will the Germans get really rich while all the countries on the rim go to the dogs?

And c. 20% unemployment in Spain sounds a little more than "little impact" to me.

http://www.barcelonareporter.com/index.php?/news/comments/unemployment_rate_spain_2011_-_spanish_jobless_rises_again_in_february/

[Bloo Loo]

Spain is NOT the EURO.

its how the ECB will react that is the pricing for the EURO....bail outs all round could be expected...hence the strength...or inflation of the EURO.

[fluffy666]

I think that is because European interest rates are much higher than UK and US ones.

So long as the euro has confidence it should be strong, 'or stronger?', with things at this level.

The questions seem to me,

Will the structural imbalances (Spanish downgrade while Germany booms), lead to euro fracture?

or,

Will the Germans get really rich while all the countries on the rim go to the dogs?

And c. 20% unemployment in Spain sounds a little more than "little impact" to me.

At the moment the Eurozone is looking more like a commercial empire where the colonized countries end up being used as involuntary markets for the colonizers (Germany plus a bit of France..) Think British Empire, Soviet Warsaw pact satellites, etc..

[LiveAndLetBuy]

I've lived in Spain for many years and I can confirm that yes there are 100,000s of empty recently built properties. However, for the average Spaniard there is little impact, as these places are either on the Costas and been built for foreigners or Spanish 2nd home owners, or big empty mini-cities built in the near-desert close to Madrid (only 1 or 2 of these) where few people bought. Where most Spaniards actually live property is probably 10-20% down on peak prices, so similar to the UK. On the foreign parts of the Costas property values are down at least 50%, this is where the real bubble was.

As far as exposure to bank debt, well the big multinational Spanish banks like Santander and BBVA have a diverse portfolio across the world, I'm pretty sure they can absorb the property losses from Spain that will be coming onto their books. The Cajas are the ones in big trouble, the government has passed some laws recently to force vulnerable Cajas to merge, but I cant see how some superficial restructuring will change anything.

One big Q I have, with the British press talking about the weakness of the Euro all the time (and it does seem to be ONLY the British press doing this), then how come the Euro is so strong against the pound sterling and dollar? Maybe I need an economics lesson?

Yes many people make the mistake of thinking there is some common Spanish property market, when in fact there are many different Spanish markets that have different influences. In the UK if someone built a million empty homes in the Scottish Highlands then how much would that affect the London property market? Not much I imagine.

However I really wouldn't be too confident about any of the Spanish banks ATM - how much dodgy Caja debt is Santander holding? Maybe none - maybe they offloaded it to the German banks instead? Who knows?

As for the wekness of the euro - the British press has only been talking about the weakness of the eurozone, and especially the economies of certain countries within it, which will get weaker as the euro gets stronger. AFAIK it has not been talking about the weakness of the euro currency, which could well end up being Deutschmark v.2.

[mattyfc]

http://www.telegraph.co.uk/finance/economics/8374754/Spain-downgrade-sparks-storm-over-rating-agencies.html

Countdown to anti austerity political parties taking control of most of southern Europe. Greece is clearly stuffed, debt 150% of GDP already, negative growth 15% unemployment, huge deficit and the coup de grace, massively uncompetitive with the core due to years of higher inflation.

Germany / France should get a history book and read what happens when you try and squeeze money out of country that is not in a position to pay it.

The only way out is Germany / Northern Europe or the periphery leaving the zone. Either is possible although preventing a huge bank run in the event of a weak country leaving would require some planning.

[papag]

The implication is that the banks no longer have confidence in the system. If this is allowed to spread things will turn very dark very soon.

Is this going to be black Friday?

It is 100% correct ,my cheq was from Lloyds Bank International made out to Cam Bank Spain with an account number, this was at the Torreblanca La Mata Branch, I was told the only way they would pay into the account now was by Bank transfer or by cash, many other people were also refused and just going outside to Cams own cash machine drawing out cash then rejoining the queue to pay into their nominated account, I couldn't do this as my amount was above my card withdrawal limit so I arranged a bank transfer.

[Deckard]

Will the Germans get really rich while all the countries on the rim go to the dogs?

Yes, for as long as the Euro survives in its present form.

Edited March 11, 2011 by Greener Pastures

[Milton]

I know of people living in Bank owned apartments free without any problems for months up to 3 years without any rent or any demands to leave etc.

Really? Excellent. Are they sneaking about? Professional squatters? Or do they have jobs etc, and the banks just have so many properties, they cannot keep track?

Have they put the utilities in their own names? What is the Spanish equivalent of Council Tax?