Spain in focus - back in recession and the latest bad bank scheme

http://www.eurotrib.com/comments/2012/4/29/101734/036/49?mode=alone;showrate=1

Eurointelligence Daily Briefing: On to the next diversion: The EU now plans a Marshall Fund

El Pais reports that the European Commission is planning a €200bn Marshall Fund type project by bundling and redirecting resources from the European Investment Bank; goal is to focus on infrastructure and green technologies; there is no fiscal component to the plan, and it involves no change whatsoever of the austerity policies; Angela Merkel puts her weight behind the plan, but says she opposes any attempts to water down the fiscal pact; says she wants to pursue growth through structural reforms; the latest poll in France shows Francois Hollande at 55% against 45% for Nicolas Sarkozy; Mediapart says Ghaddafi had offered $50m to help finance Sarkozy's 2007 campaign; French billionaire Francois Pinault, a former Sarkozy supporter, says the president was losing his mind, as he is now lurching towards the right; Holger Stelzner accuses Hollande of a failure to understand globalisation, Stephan Cornelius is shocked that Hollande wants to challenge the carefully crafted euro rescue strategy; Wolfgang Munchau welcomes Hollande because he is going to challenge that consensus; Dominique Moisi says Hollande is going to win, but his impact in Europe is going to be incremental; economists are calling for direct ESM capital injections in banks; Le Monde says the ECB should tolerate higher inflation; the latest polls in Greece put Pasok at 20% and New Democracy at 25% - enough for a majority of parliamentary seats; Mario Draghi says he has no plans to relax attitude on Irish promissory notes; Larry Summers, meanwhile, says the eurozone government have misdiagnosed the crisis, and are now pursuing policies that will lead to a debt explosion.

http://hat4uk.wordpress.com/2012/04/30/spanish-collapse-last-but-one-piece-of-the-doom-jigsaw-about-to-be-slotted-in-3/

SPANISH COLLAPSE: Last but one piece of the doom jigsaw about to be slotted in.

Spain, which was never going to need a ‘bad bank’ is in talks to assemble one.

The “bad bank” scheme is the latest attempt by the centre-right government of Spanish PM Mariano Rajoy, to avoid a Troika-style rescue. This rescue is that last remaining thing that Spain was never going to have that hasn’t already been had. So the end is getting nearer. 

Rajoy’s Popular Party – give him his due, it’s a great name – has deepened fiscal austerity, reformed Spain’s labour market, and ordered banks to set aside an extra €54bn of bad loan provisions and capital buffers this year. But the banks have now somewhat sheepishly come back to say that’s about a third of what they need. That’s worrying, because translating bankspeak into English, it probably means it’s about 5% of what they need.

Events today have already made thing worse for Spanish bond sales: Standard & Poor’s (S&P) Ratings Services just announced it is lowering the credit rating of 16 Spanish banks  most importantly, those of Santander, and its vital subsidiaryBanco Espanol de Credito. They’ve been downgraded from A- to A-2 and A+ to A-1 respectively.

But when the markets are in a mood to think the best of a disaster, it’s amazing how much excrement you can chuck at them before they decide it tastes bad. Spain’s statistics bureau said last Friday that the country’s jobless rate rose to 24.4% in the first quarter, from 22.9% in the fourth quarter of last year; but because the recession forecast was pessimistic by 0.1%, European stocks rose.

It doesn’t take a lot to get European stocks rising these days. Thanks to all that QE and Zirp, large concerns and their bankers can buy their own shares if necessary. But 0.1% in one country about to topple over a cliff is the best bippy so far in terms of a crazy rationale for confidence. I hear there’s a donkey auction on Spetse tomorrow. Stand by for a bull market on the main Greek bourses of they sell two hind legs more than expected.

and....

http://globaleconomicanalysis.blogspot.com/2012/04/spains-latest-bad-bank-non-bank-non.html

Spain's Latest Bad-Bank, Non-Bank, Shell-Game Proposal; Can One-Winged Pigs Fly?

Spain has floated a number of bad-bank proposals recently, all of which were fundamentally flawed and doomed from the start.

The latest shell-game proposal will supposedly take bank assets, put them in a non-bank, while forcing the banks to come up with sufficient capital to cover losses.

Please consider Spain in Talks Over ‘Bad Bank’ Scheme

 Spain’s government and its banks are discussing a new scheme to segregate problematic property loans into one or more asset management companies to relieve the burden on struggling lenders, according to officials and bankers.

The “bad bank” scheme is the latest attempt by the centre-right government of Mariano Rajoy, prime minister, to avoid an international rescue programme of the sort required by Greece, Ireland and Portugal.

Ministers had decided they had no need of an Irish-style bad bank. But economists say the crisis is so dire that weak banks will need further recapitalisation of about €100bn.

Government officials insist that the scheme should not be called a bad bank, because it will not be a bank and participating lenders will be able to park assets in it only if they have set aside sufficient bad loan provisions, independently valued.

The scheme is being developed by Luis de Guindos, economy minister, and is in line with a recommendation by the International Monetary Fund.

Can One-Winged Pigs Fly?

If banks have sufficient loan-loss reserves then why don't they simply take the losses now? If they can raise capital now, then why don't they? If they cannot raise capital now, how will will they be able to do so in the process of moving the assets to a non-bank bank?

This ludicrous plan has the flight capability of a one-winged pig.