http://www.telegraph.co.uk/finance/debt-crisis-live/9289109/Debt-crisis-live.html

13.36 BREAKING NEWS...

The president of Catalan has said his region needs help from theSpanish government. It is running out of debt and financing options.

Artur Mas: "We don't care how they do it, but we need to make payments at the end of the month. Your economy can't recover if you can't pay your bills."

13.13 Juergen Fitschen, Deutsche Bank AG's co-chief executive: "Greece is a failed state."

He adds that Greeks can't be blamed for transferring funds and the country "can't see light at the end of the tunnel". The figures to reviveSpanish banks are "staggering".

12.31 German central bank head Jens Weidmann on eurobonds:

You don't give your credit card to someone who can't keep their spending under control.

12.20 European Central Bank council member Panicos Demetriades has refused to rule out a bailout for Cyprus.

12.16 Most Germans are against the idea of eurobonds, which would pool eurozone debt to help fight the crisis, and are against Greece remaining in the euro, according to a poll.

The survey for ZDF public television found that 79pc of those asked said they opposed the introduction of eurobonds, in line with the position of Chancellor Angela Merkel's government.

Fourteen percent backed the tool, which is being spearheaded by new French President Francois Hollande but which Berlin argues would remove pressure for reform in spendthrift countries and also undermines market discipline.

Germans have also become increasingly sceptical about Greece's membership of the eurozone, with 60pc against, while 31pc backed its continued use of the single currency, the poll showed.

12.05 Belgium's deputy prime minister, Didier Reyners:

There is no organised discussion at the European level along the lines of: what do we do [if Greece leaves]. Now, if central banks and companies are not preparing for the scenario, that would be a grave professional error.

11.54 ECB Executive Board member Peter Praet (see 08.19) says the 17 countries that use the euro need an "urgent overhaul" of their banking and financial system to deal with the debt crisis.

11.49 International Financing Review has claimed that Spanish banksmay need further long-term loans from the European Central Bank - citing bankers advising the lenders.

“Liquidity is a big concern,” said the head of Spain at one investment bank advising lenders. “Some have money to get them through the summer, but by the autumn if we haven’t seen additional measures then they could be in a very difficult situation.”

“The only way out is another bazooka,” he added, adding that some banks will need further loans from the ECB and a possible injection of capital.

and...

http://www.zerohedge.com/news/tale-two-cities

A Tale Of Two Cities

Submitted by Tyler Durden on 05/25/2012 08:22 -0400

European Central Bank

European Union

Eurozone

Finland

From Mark Grant, author of Out of the Box

A Tale of Two Cities

Euro bonds “didn’t find much support” at the EU conference.
-Jean-Claude Juncker

“A majority of European Union leaders at a Brussels summit this week backed joint euro-area bonds.” -Mario Monti

Encapsulated in these two comments is the problem that Europe is now facing. Two views, two radically different positions and no agreement on a middle ground because there is not one. Of course the periphery countries, the weaker nations want Eurobonds because it would dramatically drop their cost of funding. Of courseGermany and their stronger EU countries do not want it because it would dramatically raise their cost of funding. Nations, in the end, will act in their own self-interest, this has been proven more than enough times in history, which is why I stand by my conclusion that Eurobonds will not be forthcoming regardless of the polite rhetoric attached to them. Germany cannot and will not ever accept Eurobonds not only for this reason but because it would not only raise the cost of their borrowing dramatically and because it would lower their standard of living, over a period of time, to the median of all of the Euro-17 nations and that would not only be political suicide in Germany. I therefore state that regardless of any and all pandering in the Press that Eurobonds will not happen because it is a political non-starter in Germany, Austria, Finland et al. They are like the Titanic; dead in the water.

Beyond this single issue is also the widening rift between the European Socialists and the Conservatives. Without assuming any moral high ground; Europe is now split between one view of the world and a distinctly separate second viewpoint and this will make the governance of Europe not only difficult but very close to impossible. I fully expect any number of issues where you have a Socialist majority and an intransigent German led Conservative minority where vetoes will be used, threats will be made and no compromise will be found. All of the pushing by the weaker nations will result in a backlash where the funding countries will not allow themselves to be impaired by the lifestyles of the poor and begging and the flare-ups could become quite intense. Nothing was achieved at the summit this week and nothing of substance will be achieved at the one in June and floundering on the beach may be the only actual result. The fish is out of the water; let the sputtering commence.

"Waste forces within him, and a desert all around, this man stood still on his way across a silent terrace, and saw for a moment, lying in the wilderness before him, a mirage of honorable ambition, self-denial, and perseverance. In the fair city of this vision, there were airy galleries from which the loves and graces looked upon him, gardens in which the fruits of life hung ripening, waters of Hope that sparkled in his sight. A moment, and it was gone. Climbing to a high chamber in a well of houses, he threw himself down in his clothes on a neglected bed, and its pillow was wet with wasted tears."

-Charles Dickens, A Tale of Two Cities

The Strategic Death Wishes

Eurobonds will be forthcoming shortly.

The ECB will be doing another round of LTRO any day now.

Greece will not exit from the Eurozone.

Spain will not need to approach the EU for financial assistance.

Germany and France will reach a compromise position.

Portugal and Ireland will be just fine and not need any further funding.

America has decoupled and will not be impaired by the recession in Europe.

The Euro is stable and will not decline further.

Treasuries cannot have lower yields from here.

http://www.guardian.co.uk/business/2012/may/25/eurozone-crisis-live-battle-lines-eurobonds#block-8

12.38pm: News in from Athens where our correspondent Helena Smith reports yet another twist to the debt crisis.

Greece's caretaker prime minister Panaghiotis Pikrammenos has JUST proved once again that this is a [debt] drama with more contradictions (or perhaps theatrical ploys) than a Molière play. One day after the EU summit, the high court judge as diplomacy dictates, spent the morning back in Athens briefing Greece's head of state president Karolos Papoulias. The summit was he said especially "positive." "I'd like to tell you that contrary to the rumours of the last few days and contrary to what has been written in newspapers, all of our European partners want our country to remain in the euro zone. And because of this we discussed at length taking certain measures that could help our country in the direction of development and combating unemployment," he said.

Readers will recall that addressing reportersin the wee hours of Thursday after the summit, the prime minister revealed that Angela Merkel, the German chancellor had expressed her irriation at all the "scenarios" about Greece exiting the euro zone during a private meeting he had had with her. It has not been lost on commentators here that most of those scenarios have been cultivated by venerable institutions like the Bundesbank in Berlin.

11.21am: Greece should be ok if the next tranche of bailout money is delayed for a few weeks, a German finance ministry spokesman told Reuters.

"As far as I am aware, there is no current need for external financing up until beyond the first half of the year," spokesman Martin Kotthaus said at a regular news conference in Berlin. He added that a delay of a few weeks would be "unproblematic".

He also said that Greece's lenders will need a positive report on their reform progress before a planned second tranche of aid worth €4bn is released at the end of June. Greece holds a second election on 17 June after an election in early May produced a messy result. Syrizas, the radical leftist party opposed to the EU-IMF austerity programme, is expected to do well.

10.15am: Over to Greece where our correspondent Helena Smith says an emergency meeting is about to be held at the economy ministry to discuss dramatically declining state revenues.

Clearly alarmed by plummeting budget revenues, attributed in part to the country's political instability following inconclusive elections earlier this month, Greece's caretaker government has decided to take action. Figures released by the state general accounting office show revenues down by almost a third – some €1.35bn - compared to May last year.

The dramatic decline will be the focus of an emergency meeting called by Finance Minister Giorgos Zannias to discuss ways of plugging the budget black hole. Officials have blamed the precipitous fall on the failure of tax authorities to collect revenues – partly because of the uncertainty that has followed Greece political limbo and partly because of cuts to salaries and wages. Ministry officials say they are now considering extending the deadline for the submission of tax returns from 15 June to the end of the month.

9.56am: More from Kate Connolly in Berlin.

Bild is reporting the carefully coordinated contingency plan to enable Greece to leave the euro.

The travel agency TUI is insisting on having a drachma clause in all its contracts, to protect it from financial loss should a currency switch take place.
supermarket chain Metro is making plans to allow customers in its Greek shops to pay in Drachma. It's making preparations for pricing labels and cash machines to be changed, according to the paper.

Deutsche Telekom has sent experts to its Greek partner, OTE to help plan for a change from euro to drachma. German banks have reportedly written off all their junk Greek funds and investments so that a Grexit will not affect them. In addition the paper writes, the European Central Bank is working out practical ways in which Euro notes could be switched ie by stamping them with a special magnetic stamp. The ECB also needs to work out what it does with the €40bn worth of Greek bonds it possesses. In the event of Greece going bankrupt, or leaving the eurozone they could end up being worthless.

9.53am: Our Berlin correspondent Kate Connolly has just sent this in.

Der Spiegel is just coming out with a report saying it has information about a German government 6-point plan to encourage growth in Europe, under which crisis countries like Greece would receive tax concessions, on condition though that they reform their labour markets, like Germany did in the early days of the euro.

The plan involves creating special economic zones in the crisis-struck parts of the eurozone. Foreign investors would be lured with tax incentives and more relaxed regulation. The crisis countries would be required to establish German-style privatisation agencies or privatisation funds to sell off/part privatise parts of the public sector.

Sueddeutsche Zeitung is writing on its front page that internally the eurozone partners are very seriously preparing for a Gexit, while externally wanting to create impression that Greece is staying.

9.17am: Shares in Spanish lender Bankia have been suspended "due to circumstances that may affect the normal share trading," the Spanish stock market regulator CMV said this morning. The shares closed down 7.4% yesterday.

Bankia will ask the government for more than €15bn in bailout money when its new management team presents a restructuring plan today, Reuters reported, citing a financial sector source. More from my colleague Giles Tremlett in Madrid here.

8.48am: Today is Bankia day in Spain, with taxpayers likely to discover how much money they must inject into the ailing part-nationalised bank, reports our man in Madrid, Giles Tremlett.

Last night's reports of €15bn are partly the result of the new management team setting a lower valuation for the bank's parent company BFA in a revised version of the 2011 accounts, according to Expansion newspaper.

That may provoke trouble with the 400,000 shareholders who bought into Spain's fourth biggest bank when it floated shares in July.

The move generates losses at BFA, according to Expansion, which explains why the size of the capital injection it needs from the state has shot up. A board meeting today should provide greater clarity.

El País, meanwhile, continues to insist that the government is studying turning Bankia into a massive nationalised bank by merging it with other troubled cajas - the savings banks that have found themselves drowning in toxic real estate left over from a 2008 housing bust.

It says Bankia might absorb Catalunyacaixa and Novagalicia, two of Spain's top ten lenders. Other smaller banks that have been rescued by the state might also be thrown into the pot.

8.17am: "The euro bails out," says Simon Smith, chief economist at FxPro. Here are his morning musings on the single currency:

Markets approach the end of what has been a pretty difficult week. The single currency has made news lows for the year (vs. the dollar) and markets have no more faith in the ability of eurozone leaders to quell speculation around a Greek exit as anti-bailout parties retain their lead in the Greek election opinion polls. We've also seen the capitulation of the single currency, something which we talked about earlier this month, where the euro has been the weakest currency in a period of dollar strength, rather than the more traditional high-beta currencies, such as the Aussie. The price action on the single currency this week means that we run the risk of short-covering activity into the weekend. Also, the Swiss franc is worth keeping a small eye on after yesterday's volatility (at least compared to recent activity), which was mostly on the back of - so far - denied rumours of further measures to quell currency strength.

A major rift has opened up between Germany and France for the first time since the crisis began, our Europe editor Ian Traynor reported yesterday from Brussels. The new French president, François Hollande, insists that eurobonds are the only way forward and together with the Italian prime minister, Mario Monti, is piling pressure on German chancellor Angela Merkel.

Michael Hewson, senior market analyst at CMC Markets UK, says the "battle lines" are beginning to get drawn over eurobonds.

It can't be any surprise to see the countries that would benefit the most from lower borrowing costs are looking to leverage off Germany's position as the strongest EU economy, and its triple-A rating.

In any case Germany is not isolated on this issue with Austria, Holland and Finland coming out against the proposals, all countries who don't have large debts.

In Greece, new kids on the political block Syrizas, who oppose austerity measures, are moving ahead in opinion polls at the expense of Samara's New Democracy party who are in favour of the bailout plan.

The FT is reporting that some of Europe's biggest fund managers are dumping euro assets amid growing fears over a Greek exit from the eurozone and more euro turmoil. The euro hit a fresh 22-month low at $1.2514 yesterday.

and.....

http://www.zerohedge.com/news/europe-its-asking-bicycle-repairman-fix-jet-engine

Europe: "It's Like Asking A Bicycle Repairman To Fix A Jet Engine"

Submitted by Tyler Durden on 05/25/2012 07:52 -0400

Bond

European Central Bank

Get the feeling that in the past two weeks Bazooko's Circus has come back with a bang? You are not alone.

From Newedge:

Last thing I asked before I went traveling was "try not to break anything" while I’m away. I get back this morning and it looks like a bunch of teenagers have had a particularly messy drug-fuelled rave in the market’s front room. The day-on-day charts hide the roller-coaster ride we've seen on the back of the Euro. Bond markets are in lock-down awaiting what-ever-next “liquidity bomb” the authorities can find to drop. Aside from some minor bond crosses, there has been zip activity outside zero-coupon bunds, gilts and treasuries. There is more liquidity in the Atacama desert.

And the mood has changed. I’m concerned at Draghi’s increasingly open direction – his espousal of radical ideas and his suggestion Eurobonds are closer than we think looks like a head on collision between the ECB and Germany is on the tracks.

On the investment side, it’s not about trying to lighten up positions that might widen if the Euro crisis deepens. Now investors are looking to sell whole portfolios on redenomination risk. You might be confident that block of Cedulas pays back at par. You just don’t know what currency you might get 100 in. Two excellent notes by David Oakley and Gillian Tett in the FT are well worth a read on the scale and form of investor fears.

Yet it’s not all doom and gloom. Although there is entirely justifiable anger over what’s happening, there is also cautious optimism on the future. No matter how hard the Euro Elites, over-zealous regulators and other parasites of this modern financial age strive to wreck markets, there must be opportunities – and the upside is coming. What will drive it? The next rabbit the ECB pulls out the hat? Don't know what, but it's Boy Scout time - Be Prepared. The news and environment gets remorselessly worse… which means at some point the mother and grandmother of all rallies is on the cards! What might it be? More SMP, a renewed LTRO 3, growth policies linked to proper European QE?

Stories in the market suggest recent upside in Euro govies is largely technical on the back of the Swiss National Bank neutralising CHF sales. Makes sense - I can't see any fundamental reasons for demand at this time. The Russians say Greece already has plan C - a parallel currency. That'll work, they are already in some kind of bizarre parallel universe!

Its 5-years since the sub-prime crisis first became apparent, so it seems extraordinary we are mired in increasingly volatile markets. What makes this crisis so difficult to put back on track? At the moment it feels pretty bad. Greece, Spain, Italy, Hollande et Merkel, Eurobonds, deposit-guarantees, pick and choose your poison. Overhanging the negativity remains the "still can't believe it" losses at JP Morgan. Get over it. You can't ever underestimate the basic human capacity for delusional stupidity. It happens and will happen again and again and again. That's why banks hold capital.

Yes, there was a time when banks held capital against their investments in assets they knew like corporates, mortgages and retail lending and do things they were good at. They made the mistake of getting over complex and the resulting crisis of 2007 gave regulators the chance to move up from repairing punctures to servicing Mach 2 jet fighter engines. And haven’t they done a good job.. billions of unreadable pages of finance-ocrat verbiage has made markets worse and less efficient. Regulatory compliance, risk-reporting and tick-test filing departments greatly outnumber bankers on the ground. Overnight then regulatory nonklematura drew up draconian new liquidity rules forcing banks to load up on sovereign debt, killed liquidity by a slavish insistence on dangerous irrelevances like Mifid, and destroyed market-making by declaring trading a dangerous speculative heresy. Killed what they didn't understand. (Actually, as JPM just demonstrated... neither did they!) Brilliant: the ultimate regulatory success - nothing will go wrong because they've effectively closed the markets.

Since 2007 only one major investment bank has actually gone bust - Lehman - but today you can count the number of real fixed-income investment banking market participants on a single hand. The days when a veritable host of banks competed to top the Eurobond league tables, to advise and trade on behalf of investors, seems like a dim remembered vision of paradise lost. Great opportunity for brokers like us – but at the moment liquidity is pants.

And yet regulators and the Euro Elites are so insensitive to reality they have the temerity to declare "Markets are Malfunctioning." Which is completely bottom over chest.

King Canute was a particularly successful Danish/English king. His fawning court tried to curry his favour by suggesting such was his power and fame he could command the sea. Canute famously sat on his throne as the tide came in, told the waves to stop and smiled as his feet inevitably got wet.

Canute understood the sea obeys no one. It reacts to immutable forces - the moon's gravity, tides and currents. Markets are similar. They react to the tides of regulatory bollcocks, the gravity of politics, the currents of fiscal and monetary policies and growth. When markets mal-function it's because of the environment - traders deciding to short the bejesus out of France are simply responding to the environmental inputs.

Sort out Europe and markets will work. But, of course, Merkel is absolutely right to reject joint and several Eurobonds until fiscal union becomes a fact. If they were launched today, it would simply be a massive trade down to the lowest common denominator. The German electorate won’t be fooled if German funding costs move from the current 0.07% to same level as Spain...

http://ftalphaville.ft.com/blog/2012/05/25/1014681/on-the-ecbs-attempts-to-ring-fence-its-balance-sheet/

On the ECB’s attempts to ring-fence its balance sheet

Posted by Simon Hinrichsen on May 25 12:24.

The European Central Bank has recently started talking more about risk, and in particular the risks to its balance sheet. Yesterday, Standard Chartered analysts Thomas Costerg and Sarah Hewin had a note out talking about how the ECB was concerned about capital outflows from the periphery being replaced by TARGET2 inflows, and how TARGET2 imbalances might lead to a more fragmented policy. From StanChart:

ECB President Draghi recently hinted that managing risks was his utmost priority, further differentiating the ECB from other major central banks (Japan, US, UK), which have shown less reluctance about conducting broad-based quantitative easing (QE).

So the ECB is starting to worry about its own exposure, which mainly involves TARGET 2 liabilities, assets on its balance sheet (e.g. Greek bonds bought via the SMP), and the collateral it holds via its financing operations.

One important thing to note is where the risk is located. With LTRO, where banks get liquidity in return for posting good collateral, the risk lies with the ECB. Meanwhile, the interest rate that banks pay is low. The Emergency Liquidity Assistance (ELA), on the other hand, is decentralized to the national central banks (NCB), i.e. if a Spanish bank defaulted, then it would be the Bank of Spain that took the loss (hypothetically, of course.) The ELA is more expensive to tap (higher interest rate), but the NCBs decide on the collateral requirements, although they must also be approved by the Governing Council. Here’s a chart that shows the ECB funding to the periphery and marginal increase from ELA lending recently (via StanChart):

What’s the problem with ELA? Well, it’s rather secretive — we can’t get information about who taps it, the size, the cost, or collateral requirements:

The Greek NCB – as well as other NCBs with ELAs – does not disclose which banks receive ELA funding, the cost of the facility or the exact amount provided. It also does not communicate its collateral requirements for tapping the facility, while the Eurosystem does not communicate the overall ceiling allocated to each country. This relative secrecy is widely criticised, but the ECB has mentioned that greater transparency could increase nervousness and further fuel market panic (which could reverberate on its own balance sheet‟s risk.)

Now you might ask, why do the banks need to tap central bank funding? Why can’t they just do what they have always done — use deposits or the interbank market? Well, let’s use Greece as an example. Here are Greek banks’ selected liabilities and assets, courtesy of StanChart:

As well as losing deposits and collateral due to the lower value of assets, the interbank market starts to shut out the weak banks, leaving central bank funding as the primary source.

No surprise then that the ECB, led by the Bundesbank, is trying to protect itself in case of a Grexit. StanChart argue that a singular eurozone exit by Greece would be manageable for the ECB. However, there are caveats (our emphasis):

It is worth noting that a key feature of the TARGET2 mechanism is that while liquidity flows from the north to the periphery, the collateral remains with the peripheral NCB – it is not transferred to the north. In theory, should a peripheral bank default on its repayment obligation to the ECB, the ECB would require the collateral from the NCB. However, it remains to be seen whether, in the fluid circumstances of a Greek exit, the NCB would indeed pass on the collateral; furthermore, the value of the collateral could have diminished significantly, potentially to a fraction of its original value (for instance, if it were a Greek government bond). As a result, in many circumstances, the collateral pledge would not entirely offset the loss of ECB funds.

Because the ECB is trying to ring-fence its balance sheet, there are ever fewer options available to struggling sovereigns. Especially if they do not want to increase the vicious circle associated with banks having to support periphery sovereigns, as happened with the LTRO:

Understandably, StanChart reckons that the ECB is unlikely to be proactive at this stage:

We believe that the ECB is likely to play a more cautious role in future episodes of crisis. In particular, the bar for another liquidity injection, such as a third 3Y LTRO, is high – probably higher now than it was in Q4-2011. Before conducting another 3Y LTRO, the ECB would need to see more pronounced stress across markets, probably a combination of peripheral yields rising above 7%, rising bank CDS spreads, and stress on 3M EURIBOR (interbank) rates and EUR basis swaps spreads (a proxy for US dollar – USD – funding availability). An acceleration of deposit flight across the periphery could also be a trigger, if combined with rising interbank market stress.

We still think that the path of least resistance will be a 25bps rate cut in Q3-2012 as euro-area growth risks materialise.

Citi and Nomura have been putting out research in the last couple of days foreseeing a rate cut too, possibly 0.5bps in 2012.

More radical measures, meanwhile, might involve national initiatives which see NCBs taking on exposure instead of the ECB:

In particular, if Spanish banks are inadequately recapitalised and risks to their asset quality continue to grow (e.g., real estate prices continue to drop, recession persists), the Spanish central bank could embark on an ELA programme with the Governing Council’s authorisation – particularly given that the ECB has long argued for a swift recapitalisation and balance-sheet cleanup of the country’s banks, particularly the crisis-hit regional banks (cajas).

As with the recent decision on Greece’s ELA, this could cause (in the hypothetical event of a counterparty default) losses on monetary operations to be transferred to the Spanish NCB alone, rather than being split between Eurosystem members.

Though we wonder if that hypothetical event noted by Standard Chartered above is becoming a little less hypothetical by the day…

and......

http://ftalphaville.ft.com/blog/2012/05/25/1016381/totting-up-germanys-eurozone-exposure/

Totting up Germany’s eurozone exposure

Posted by Paul Murphy on May 25 11:25.

Any discussion that involves a discussion of the Euro-system’s TARGET2 mechanism carries a big fat tail-risk that this correspondent’s head will explode. But we’ll run that risk in the interests of readers…

Christian Schwarz and Matthias Klein at Credit Suisse have produced a tome entitled, rhetorically: Will Germany Continue to Pay?

It’s a substantial tome, and you’ll find further details in the usual place. But before you look at that, consider this table:

Messrs Schwarz and Klein know that it’s really, really hard to accurately tot up Germany’s commitments to the various bailouts and support mechanisms keeping Europe in a vaguely upright position. The various commitments are not really comparable. Some are already distributed, others aren’t and it’s all but impossible to judge which commitments might be drawn upon.

But they’ve had a go at producing a snapshot, along with a slightly conspiratorial swipe…

We are not aware of such an aggregate and we would not rule out that it might have been kept out of public debate by not specifically quantifying the actual amounts involved.

The big figure they arrive at is €600bn — roughly a quarter of German GDP. Here’s the thinking:

To start with, there is the German share of €22bn in the bilateral loans as part of the first Greek bailout package. In addition, Germany committed to €211bn of maximum guarantees under the revamped EFSF. Furthermore, there will be a total of €80bn of capital plus €620bn of callable capital under the ESM. Germany‘s share of those combined €700bn is €190bn. Next, it could be argued whether the EFSM and its commitment of €60bn should be included in this analysis, since the EFSM is covered by the EU budget. The EU budget, however, finances itself primarily through the contributions from the member states. The contribution keys in turn are based on their gross national income (GNI)1. Accordingly, Germany‘s share in the EFSM is roughly €12bn2.

Due to their monetary policy nature, the next two items are usually ignored when summarizing total commitments: the ECB‘s SMP program and TARGET II balances.

Although they are different in their nature and losses are conditional on European sovereigns defaulting in a politically ‗messy‘ way, including exiting the euro, we think the ECB‘s SMP program and TARGET II balances need to be included in a comprehensive summary.

The SMP program currently stands at €214bn. If all of this was lost3, Germany would lose €40bn – according to its ECB capital key of 18.94%.The net TARGET II liabilities of the five peripheral countries currently stand at €660bn4. According to the ECB capital keys, Germany‘s share is €125bn. But, in contrast to the notionally limited guarantees for the EFSF, the notional amount due to the SMP or TARGET II programs could actually increase in a worst case if other central banks were going to be unable to provide capital according to their capital key.

How scary is that? Well, for context, the Credit Suisse analysts look to the various estimates on the cost of German reunification: €450bn-€820bn for the years 1991 to 1997, or circa €1.5 trillion up until today.

Lucky that the Germans are a hard working lot.

Catharsis Ours

Friday, May 25, 2012

A Tale Of Two Cities

Europe: "It's Like Asking A Bicycle Repairman To Fix A Jet Engine"

On the ECB’s attempts to ring-fence its balance sheet

Totting up Germany’s eurozone exposure

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