http://ransquawk.com/headlines/228324
Austrian finance minister Fekter says cannot rule out Italy may need external help
and......
http://www.zerohedge.com/news/credit-suisse-explains-real-issue-and-why-there-two-months-tops-until-france-bulls-eye
Credit Suisse Explains "The Real Issue", And Why There Is Two Months Tops Until France Is In The Bulls Eye
Credit Suisse's William Porter is strangely laconic and oddly brief in his latest issue of the European Credit Flash titled "The Real Issue":
"It’s all about Spain”, so now we are cutting to the chase. Recapitalization of the banks versus funding the sovereign is of course a semantic issue given the nature of the interplay. But it enables the attempted finesse we describe below.
"Portugal cannot rescue Greece, Spain cannot rescue Portugal, Italy cannot rescue Spain (as is surely about to become all too abundantly clear), France cannot rescue Italy, but Germany can rescue France.” Or, the credit of the EFSF/ESM, if called upon to provide funds in large size, either calls upon the credit of Germany, or fails; i.e, it seems to us that it probably cannot fund to the extent needed to save the credit of one (and probably imminently two) countries that had hitherto been considered “too big so save” without joint and several guarantees.The issue can be finessed for a while by addressing the issues as bank issues and recapitalizing the banks by bond transfer. This hides from the (primary) market and is simply another manifestation of the “Sarko trade” given by the LTRO. That rally lasted four months.Given the market’s adaptive learning behaviour, we suspect that this finesse might last two. The eventual denouement should be flagged by symptoms of the failure of the credit of EFSF/ESM and/or France.
And there you have it. As evidenced by today's reaction to the bailout, which had a half life of 2 hours, and was a complete failure in 6, the market is learning much, much faster than expected. Which also means that Porter's estimate for the length of time before the next wave of the contagion tsunami strikes somewhere in the middle of the 8th arrondissement is furiously optimistic, but we agree: 2 months tops.Which is in keeping with the Soros' estimate of T minus 3 months before the Eurozone ends without a major intervention by Germany (which will eventually happen, courtesy of a Berlin-funded DIP loan, but purely on Germany's terms), but also that of Christine Lagarde who just doubled down on Soros' three month estimate as well.
and.....
http://www.telegraph.co.uk/finance/debt-crisis-live/9323444/Debt-crisis-as-it-happened-June-11-2012.html
19.17 Spain will not face more belt tightening in return for its €100bn bail-out, according to Olli Rehn, the EU's economic affairs commissioner. Speaking in the European Parliament, he said:
Policy conditionality will focus on the financial and banking sector [...] There will be no new conditions on fiscal policy and structural reforms because these issues are dealt with under the reinforced economic governance and there, the normal policy conditionality applies.
18.11 Spain has issued a statement saying that it has sought a €100bn bailout. No news there, obviously, but there's an interesting line towards the end which shows its intention to keep selling (or attempting to sell) bonds:
The details on this financial assistance package will be established in coordination with our European partners and duly communicated to the market. In this context, the Spanish Treasury reaffirms its commitment to capital markets, and will therefore continue to execute its funding programme through its regular auction calendar.
17.12 Reuters reports that eurozone finance ministers have discussed imposing capital controls in a "worst-case plan" for a Grexit. This would also involve temporary stringent border controls and a limit for cash machine withdrawals. But sources were keen to stress that it was contingency planning, not planning for an expected event...
16.47 European markets breathed a sigh of relief as it appeared that Spain would be saved by a bailout, sending stocks soaring this morning. At one point the FTSE 100 hit a high of 5,536 and Spanish 10-year yields came back under 6pc. But it wasn't to last: reality set in after lunch and shares first gave up their gains, then slipped into the red. Spain's yield climbed all the way to 6.465pc and Italy's rose to 6.004pc.
The FTSE 100 lost 0.05pc, the CAC dipped 0.29pc and Spain'sIBEX slipped 0.54pc. Italy's FTSE MIB tumbled 2.79pc. Only theDAX escaped the gloom, gaining a modest 0.17pc on the day.
16.31 Fitch downgraded Spain this month, and now it's moved in to take a swipe at two of its struggling banks: BBVA and Santander. Both have been cut from A to BBB+, with a negative outlook into the bargain to suggest that it could be taken even further.
15.07 Reuters is reporting (from an unnamed source, so far from concrete) that the Spanish bailout is likely to come from the existingEFSF, rather than the ESM which comes into being in a few weeks. They're similar bailout pots, but there are some subtle differences...
An ESM bailout could potentially raise Spain's borrowing costs in the long run, as the loan would take precedence over private investors for repayment in the event of a default. But an EFSF loan would involve troika inspectors and demand the approval of other eurozone nations.
13.40 A domino effect seems to be in action - Cyprus has hinted today it may need to aply for a bailout before the end of June, for both its banks and its government funds.
Finance Minister Vassos Shiarly said:
The issue is urgent. We know the recapitalisation of the (island's) banks must be completed by June 30, and there are a few days left.
One of the country's biggest lenders, Cyprus Popular Bank, has been very hard hit by its exposure to the already bailed-out Greece, and Cyprus has been under pressure to apply for aid to prop up the bank.
Cyrpus is due to take on the rotating EU presidency for six months on July 1, which could lead to embarrassment if the issue is not resolved.
13.15 Here's more detail of what will be in the terms of Spain's bank bailout - this time on the interest rates likely to be charged.
European Commission spokesman Amadeu Altafaj said it would be "reasonable" to charge a rate of 3-4pc on a rescue loan for Spain's banks.
He told public television station TVE:
It is premature to talk about interest rates, you cannot talk about a definite rate since it will depend on market conditions. But, yes, percentages of 3pc or 4pc are reasonable for these operations.
13.00 Here is what has happened to Spanish 10-year bond yields over the last week - this morning's delight was short-lived...
12.10 The other detail on the Spanish bailout now coming through is on which EU fund will stump up the money.
A German government spokesman said the permanent ESM fund, which comes into effect on July 1, is mos likely to be the source. Martin Kotthaus said:
The ESM is a more likely option than the EFSF... The ESM is in almost every regard more effective than the EFSF.
It will depend when Spain submits its formal application for financial aid whether the ESM is used, Mr Kotthaus said.
http://www.telegraph.co.uk/finance/financialcrisis/9325808/Debt-crisis-Jose-Manuel-Barroso-urges-EU-to-back-plans-for-a-banking-union.html
11:31PM BST 11 Jun 2012
6 Comments
Jose Manuel Barroso urged the EU to take “a very big step” towards deeper integration to avoid a repeat of the European debt crisis.
“I think now we have conditions to go further that, frankly, we did not have before [...] There is now a much clearer awareness among European member states about the need to go further in terms of integration, especially in the euro area. This is one of the lessons of the crisis,” he said.
The plans would include an EU-wide deposit guarantee scheme, which has already been proposed by European leaders including Italian prime minister Mario Monti, together with a bail-out fund paid for by levies on financial institutions.
Mr Barroso told the Financial Times that the union could be created without treaty changes. However, such a union would likely be challenged in Germany, which has insisted that such measures can only be implemented with treaty changes.
UK Prime Minister David Cameron has vowed to protect Britain from a eurozone superstate with common banking and political systems. Speaking last week in Berlin, he said that the UK would not participate in a banking union because it is not part of the euro.
"I wouldn't ask British taxpayers to stand behind the Greek or Spanish deposits. It is not our currency, so that would be inappropriate to do," he said.
Mr Barroso said Britain would be allowed to opt out of a union. “If Britain cannot, because they are not in the euro area, go for more integration, we should find a way where this is possible to accommodate these different concerns.”
