Tuesday, June 5, 2012

Germany tells Spain to face the music - get the bailout from the bailout kitty but accept and understand that comes with strict conditions . Spain finally comes clean - admits it needs a bailout ! Meanwhile , are the folks are in europe going Jumping Joe Biden ( losing their mind and just saying crazy nonsensical things )

http://www.zerohedge.com/news/steve-liesmans-modest-proposal-america-must-bail-out-europe

( LIESman clues everyone in on the fact that Europe and especially Germany aren't moving toward the solutions the PIIGS and banksters want . )


Steve Liesman's Modest Proposal: America Must Bail Out Europe

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Submitted by Tyler Durden on 06/05/2012 13:52 -0400




Yesterday, the progressive "think-tankers" from the CEPR first voiced the idea that it is time for America to finally come to the aid of Europe, because you see, the liberals, ever so generous with other peoples' money, have had enough of a sinking financial system brought to its knees by the intersection of a financial system perpetually bailed out at the taxpayers' expense, and a insolvent global welfare state, and just wish it was all back to where it was a decade ago, where everyone lived in perpetual bliss and stupidity. We truly hope Messrs Baker and Weisbrot lead by example and dispose of all their net worth, by dispatching it in Europe's direction, post haste: after all, anything less would be just seem so very hypocritical. Today, to nobody's shock at all, the "think tank" is joined by everyone's favorite TV hobby economist: Steve Liesman, who in an op-ed on CNBC writes: "  It’s time to change the narrative and for the United States to step up and abandon its policies of praising Europe’s incremental progress, gently prompting it to action and insisting that it be a Euro only solution... The US should lead the world in creating a large pot of money available to the Europeans to recapitalize their banks. A $2 or $3 trillion fund should get the market’s attention." It should Steve. And just like in the case of CEPR, we hope you can lead the US by creating a large pot of all your money that you would send to Spain and Greece first. Then everyone promises to follow in your so very generous footsteps.

From CNBC:
Europe's Mess: Time for the US to Clean It Up

When it comes to Europe, incremental and mealy mouthed haven’t worked. It’s time for big and bold.

Waiting for Europe to get its act together to solve its financial problems has become an even more insufferable drama than "Waiting for Godot." They keep talking but a financial solution never comes. Former deputy Treasury Secretary Roger Altman, writing in today’ Washington Post, warned of a Euro-led global economic slump and said: “The reason markets are battering the euro zone is that its hesitant leaders have not developed the tools for countering such pressures.”

It’s time to change the narrative and for the United States to step up and abandon its policies of praising Europe’s incremental progress, gently prompting it to action and insisting that it be a Euro only solution. Here, for example, is what a US Treasury official said yesterday: “We’re hoping to see accelerated European action over the next several weeks…” Be still my beating heart.

It's time for the US to express its dismay at the lack of progress and to begin corralling world resources to incentivize Europe to solve its problems

Several facts have led me to this conclusion:
  • Since the turn of the last century, Europe has never shown an ability to solve its problems without the United States.
    • Germany is economically the size of California, Texas and North Carolina. It cannot bail out Europe just as surely as those three states could not (and would not) bail out the United States.
    • The lack of trust in Germany among European countries means even if it could bail out Europe, it could never get political agreement for the necessary concessions.
    • Much needs to be done in Europe, but the focus for now needs to be on stability and the world should take a page out of the US response: Massive funds made available that never need to be used.
    • The US, despite its deficit problems, remains the only global power with the ability to rally the world toward a solution.
    • Collective action in times of panic is what governments are supposed to do. Be it response to a natural disaster like an earthquake or a financial crisis, governments should step up when the market or the individual can’t act. Two years of sclerotic responses by Europe, culminating in the latest panic, should be enough evidence that Europe doesn’t have the political means to solve its problems, even while it does have the financial means. As the TARP program showed (only when it comes to the banks) if you make enough money available quickly enough, you can stem the tide and it won’t cost you a penny.

      So here’s a plan:

      The US should lead the world in creating a large pot of money available to the Europeans to recapitalize their banks. A $2 or $3 trillion fund should get the market’s attention. Whatever the number, about one-third of this should come from the IMF. Two-thirds should come from Europe. European money should be in the first loss position, that is, the IMF, as is always the case, should not suffer a dime of losses until all the European money is wiped out. This money could be used as a sovereign rescue fund, to bail out sovereign institutions and for deposit insurance—all the programs that stanched the US panic. Whatever the use, it would not be available without a 2/3rd Europe portion and would be conditional—the way all IMF programs are—on European progress towards financial consolidation and fiscal union.

      You can argue—and you would be correct—that this is Europe’s problem and they should pay for it. The place we are in now, however, is that we are all paying for it and waiting for European progress has proven a losing strategy. Even when they take action, like the European Central Banks’ Long-Term Repo Operations—they bungle it by saying “there won’t be a third” convincing the shorts that there’s profit in betting against the central bank. The key to collective action is to dare the shorts to come at you and ensure that it’s at least two-way trade, if not a loser for the challenger. Fed Chief Ben Bernanke and then Treasury Secretary Hank Paulson fundamentally understood this.

      While Altman said the world needs European leaders to step up, my point is that the world needs its leaders to step up. The US remains the global financial leader and the international community will not step up without US leadership. That would mean US diplomacy to rally China and other emerging market countries to contribute (so far, we have been sort of indifferent). And that could mean commitment of additional US resources. I don’t think that commitment needs to be massive. There needs to be some symbolic amounts (we are already the largest fund contributor). But I believe it could be cost effective. It would assert US global leadership, and it could start a real process of solving Europe’s problems.

      As for the domestic politics and a certain isolationist outcry, at this point, what’s the difference for President Obama? Europe, together with the anemic US recovery, already seems to be guaranteeing a one-term presidency. Asserting US economic leadership and financial commitment toward a European solution couldn’t make the financial situation much worse, and it just might make it better.
      What is most ironic is that all these paragons of humanistic generosity (with other people's money of course) forget that this is precisely what the Fed has done each and every time Europe entered the toxic vortex of unsustainable debt: or otherwise we may have misunderstood what those hundreds of billions in Fed FX swaps to the rescue world's central banks (most recently here), or those trillions in secret Fed loans to each and every global bank by the Fed, actually represent...


and...... 


http://www.zerohedge.com/news/germany-ruling-cdu-rejects-direct-spanish-bank-aid


Germany Ruling CDU Rejects Direct Spanish Bank Aid

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Submitted by Tyler Durden on 06/05/2012 14:20 -0400




Just when Spain thought that by admitting it is broke, Germany would finally turn a blind eye and let it have whatever money it requested directly at the bank level, instead of boosting its sovereign leverage even more, thus putting it at risk of long, long overdue Moody's and Fitch downgrades, here comes the Germany, adding insult to humiliation. From the FT: "The parliamentary leadership of Germany’s ruling Christian Democrats – the majority party in Angela Merkel’s centre-right coalition government – has flatly rejected the use of eurozone rescue funds to recapitalise Spanish banks directly. Instead they called on the Spanish government on Tuesday to decide urgently whether it will seek money from the €440bn European Financial Stability Facility according to the fund’s normal rules, requiring agreement on a proper rescue programme negotiated with its European partners." In other words Germany has laid out the choice: bail out your banks with our help, and be downgraded, pushing Spanish sovereign yields into the 7%+ range, or do nothing, and prepare to hand out an infinite amount of Spiderman beach towels.

And for those hoping that Germany is acting counterproductively to its own interests, which for those confused, are to have Europe at the edge of chaos, keeping the EUR low, and its Debtor In Possession targets amenable to any terms, three words: nein, nein, nein.
There was no sign in Berlin, however, of more urgent emergency measures being contemplated to prevent contagion in the current crisis spreading from Greece to Spain and beyond. Instead, the timescale for Germany’s proposed reforms would stretch until the spring of 2013.

Wolfgang Schäuble, German finance minister, held out the prospect on Tuesday of medium-term reforms, such as a “banking union” to provide deposit insurance for cross-border financial institutions, and even jointly guaranteed eurozone bonds – but only once a fully fledged “fiscal union” had been agreed for the whole eurozone.

In an interview with Handelsblatt, a business newspaper, he said that it was important to distinguish between immediate measures to resolve the present crisis and longer-term reforms to prevent its recurrence.

Both Greece and Spain, he said, must put their own economies in order.

It was up to Greek voters to decide for themselves whether they would remain members of the eurozone, he said. But he admitted that uncertainty over the outcome of the forthcoming Greek election had caused contagion to spread to Spain.

“The Spanish are doing everything right, and yet they are still facing pressure in the markets because of contagion from Greece. We must deal with that.”

At the end of the day, what will make Germany amenable to any plan, is if the PIIGS pledge their thousands of tons of gold to a German "pawn shop" as explained last week.
Oddly enough we have yet to see them lining up with, and presenting the ultimate collateral.

and....


http://www.zerohedge.com/news/here-come-todays-rumors


Here Come Today's Rumors

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Submitted by Tyler Durden on 06/05/2012 12:36 -0400




What would a day be without recycling of tired and expired rumors out of Europe. Sure enough:
  • EFSF PROVISIONAL CREDIT LINE COMPROMISE BETWEEN MADRID AND  BERLIN
  • EFSF is to prepare a credit line for Spain in the case of need - Dow Jones
  • EFSF provisional credit line for Spain is one option according to a German newspaper
Ah, the good old EFSF, which was last summer's magical bailout mechanism which with 3-4 turns of leverage, would bring the total to €1 trillion... until the realization that there is nothing to lever, as nobody (except for Japan occasionally) wanted to put any money in it. Oh well: the rumor is good to get stocks into the green for at least a few minutes.

But at least we now know that Spain will be paying to bail out itself. Just wait until it is Italy's turn next.
Source: EFSF
Finally, here, ONCE AGAIN FOR THE CHEAP EUROCRAT SEATS, is the real math:


So €200 billion in EFSF funding capacity, and...
If a Spanish EU/IMF bailout package covered the government’s gross funding needs through the end of 2014, and included €75bn for bank recapitalisation, then it would amount to around €350bn.
At least according to JP Morgan. Last we checked €350 > €200


and.....

http://hat4uk.wordpress.com/2012/06/05/euroblown-spain-facing-disaster-but-the-troika-goes-la-la-la-la-lagarde/


EUROBLOWN: Spain facing disaster, but the Troika goes la-la-la-la-Lagarde

Chrissie Lagarde goes gagagagaga
The Spanish Government is now openly admitting that doors into the credit markets are closing by the hour. But Finance Ministers of the G7 major economies have yet to take any action. Spanish Treasury Minister Cristobal Montoro sent out a dramatic SOS this afternoon pointing out that the spread between the country’s 10-year bond and German/US debt was now in excess of 550 basis points. But all that happened was that his comments on Spain’s issues sent the euro down still further.
The U.S. Treasury said in a statement that the G7 discussed ‘progress towards a financial and fiscal union in Europe’, but made no joint statement and took no immediate action.
This is all turning into some kind of sick joke. Brussels is asleep, Berlin is split several ways, and the G7 is on the verge of becoming catatonic. A Brussels source tells me the EFSF is preparing a line of credit for Spain, but the EFSF is a busted flush in terms of money attraction…and the Spaniards are down for one euro in eight of the fund’s capital.
“I’m not a great fan of those target headlines that keep being missed anyway,” Lagarde told Reuters in an impenetrable interview full of dickheaded bromides, adding “We need to agree on a comprehensive set of principles to enforce over time. The master plan that everybody signs up to will be important because it will set a vision, it will set a collective determination.”
Yes yes yes Chrissie Lalalande, but what about Spain right now??
It takes alot to make me sympathise with Hedge Funds, but this profoundly stupid woman is more than up to it.




http://www.zerohedge.com/news/reign-spain-over


The Reign In Spain Is Over

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Submitted by Tyler Durden on 06/05/2012 08:04 -0400




From Mark Grant, author of Out of the Box

Spain Capitulates
Spain has now officially asked the European Union for aid for its banks. The markets seem to be responding as if the bank issue is isolated. It is not isolated. We are following the same schematic as we did with Ireland; first it was the banks and then it was the country and then the “Men in Black” showed up to take over. Spain says it is a 50 billion Euro problem and the reality is probably more like a 400 billion Euro problem. There is all kinds of cross lending between the banks in Spain and while Spain’s largest two banks have tried everything they could to isolate themselves; I predict there will be no escape for anyone. Now that Spain has asked for a bailout of their banks the European auditors will show up and I would bet large money that the values of many loans and the value of Real Estate and the securitizations tied to it will be found to have been vastly overstated. Then it will be the regional governments and their debts and the house of cards will implode. The Spanish Finance Minister kicked off the first domino this morning and we can all just stand by now and watch the rest fall.

Bear in mind that the current Stabilization Fund in Europe, not the one that is not even yet in existence, has nowhere near the capital to shore up the Spanish banks much less the country. The G-7 is having an emergency meeting about Spain this morning and while there is a lull presently; it will not last. The periphery nations, led by Spain, are pushing on Germany and the funding nations to step-in but the cost will be very high and a huge loss of sovereignty. I doubt if many in Europe understand the price that will be extracted which will be the EU taking over Spain’s financial system, taxes and social services so that Brussels/Berlin will control the country. Spain arrived at the precipice, as I have predicted many times and this morning; they have fallen over the edge.

So long and thanks for all the sardines!

Sancho is no longer fighting with windmills this morning. Notions of some charming book or a small foray into the countryside have been replaced by a much more serious confrontation where Germany will demand vengeance for the irresponsible behavior of Spain. Make no mistake here, don’t get fooled again; Spain is going to come under the heel the jackboot and applying what motives you may to Germany will make little difference in the end. The current government of Spain will no longer be in control. First it will be the banks and then the regional debt and, recognizing the inevitable yet or not; the end-game began this morning. Spain is done!


I'll be seeing you
In all the old familiar places
That this heart of mine embraces
All day through

In that small cafe
The park across the way
The children's carousel
The chestnut tree
The wishing well 

                           -I’ll be Seeing You


and......

http://www.guardian.co.uk/business/2012/jun/05/eurozone-crisis-live-g7-emergency-talks


12.49pm: French foreign minister Laurent Fabius has weighed in over the Spanish banking crisis today, telling a conference in Paris that banking union could help address the crisis.
Fabius argued that a solution must be found that does not add to Spain's own debts, at a time when its bond yields are already dangerously high.
Fabius said:
We have to find mechanisms, methods to bring the necessary funds to allow the system to continue to function properly without adding to Spain's budget deficit, otherwise we won't get anywhere....If, to save the bank, you have to increase the deficit and this increase leads to higher interest rates, then it's the snake eating its tail.
He added that France would "favour" a solution based around a banking union.
Of course, Fabius isn't completely impartial here. French banks hold a lot of Spanish debt, and would also benefit from closer banking ties across the eurozone.
So, where are we with Spain? After weeks of deadlock, it does feel as if its banking crisis is close to some kind of resolution. 
The key sticking point remains Spain's extreme resistance to taking any form of official bailout. As reported at 12.08pm, that is irking some members of the G7, with Reuters reporting this lunchtime that Madrid's "fatal hubris" is causing some alarm.
The Spanish government does appear to be giving some ground. Treasury minister Cristobal Montoro admitted this morning (see 9.17am) that European institutions need to "open up" and help the country recapitalise its banks.
The hitch, though, is that Europe's bailout funds cannot, as currently defined, pump money into a national banking system directly.

http://www.guardian.co.uk/business/2012/jun/05/eurozone-crisis-live-g7-emergency-talks



1.47pm: Spain's hopes that the eurozone might directly recapitalise its stricken banks without the Rajoy government actually requesting a bailout have been setback on both sides of the political divide in Germany, our Europe editor Ian Traynor flags up from Brussels.
It appears that German politicians remain sticklers for the rules that say only a government can access the bailout kitty, invariably with draconian strings attached.
Ian reports:
The parliamentary leaders of Angela Merkel's Christian Democrats and the opposition Social Democrats are both in Brussels today. They have both urged Mariano Rajoy to hurry up and ask for help while stressing that the rules can't be bent.
Volker Kauder, the CDU's parliamentary leader in Berlin, said there was no point in discussing any other kind of help for Spain.
"Discussions over a new type of aid don't seem very productive in the current situation....The help must be requested by the state concerned, as the rules prescribe. If there is now a debate about the need to recapitalise Spanish banks, the government in Madrid should promptly decide whether it wants access to the EFSF [current temporary eurozone bailout fund]."

Frank-Walter Steinmeier, former German foreign minister and current SPD parliamentary leader, was even stronger in pressing Rajoy to ask for help. "I see a risk that Spain will be too late in deciding to seek protection from the euro rescue umbrella," he said. He was sure that Rajoy would need to request a bailout.
"Spain is in a difficult situation and it's up to Europe to act. The action will be needed very soon....One should try to stabilise the banks conventionally, that is with conditions, via aid to the state."
Referring to Spanish pleas for a direct recapitalisation, supported by France and the European Commission, Steinmeier said: "I am more cautious perhaps than many of the others in this public debate."

12.08pm: A source at a G7 country has told Reuters that today's G7 conference call is likely to turn into a "Germany bashing session".
That suggests the US, the UK, France, Italy, Japan and Canada may be taking a united position that Germany needs to change its approach to the crisis.
Reuters' G7 source also says that Germany is "pushing Spain' to take help from the European bailout fund to recapitalise its banks, but that Madrid is currently resisting.
From the terminal:
"They don't want to. They are too proud. It's fatal hubris," the source said of the government in Madrid.
That fits with reports that Spain has been privately pushing for help for its banks without the Spanish state having to take an aid deal. Under the current rules, of course, the European Stability Mechanism cannot directly recapitalise European banks (although many players, including the IMF, think it should able to).
Officially, Germany has been arguing that Spain has been 'everything right'.
11.52am: German finance minister Wolfgang Schäuble has given an interview to Handelsblatt, in which he reiterates Berlin's position that "a real fiscal union" must be created before more contentious issues such as eurobonds can be considered.
Schäuble told the business daily that closer fiscal ties remain the first step, and even that is a 'medium-term' objective. Banking union could come later, but Schäuble didn't indicate it could happen quickly, saying:


We should take one step after another
There's some more detail here and here.
Schäuble should be on the G7 conference call, starting soon...

11.35am: The European Union has said that the G7 conference call (due to start in 25mins) will allow the EU to update its partners on the region's response to the ongoing crisis.

At the regular midday briefing, an EU spokesman also explained that the G7 call is part of a "regular exchanges of views", so we shouldn't panic just because finance ministers are talking.

It's not clear, though, which EU officials will be on the call:


http://www.zerohedge.com/news/spain-caves-admits-it-needs-european-bailout


Spain Caves, Admits It Needs European Bailout

Tyler Durden's picture
Submitted by Tyler Durden on 06/05/2012 07:32 -0400




And so those lining up at the bailout trough are now 4: remember all those lies Spain spoon-fed the gullible press that it didn't need a European bailout as recently as yesterday? You can now forget them. From Reuters: "Spain said on Tuesday that credit markets were closing to the euro zone's fourth biggest economy as finance chiefs of the Group of Seven major economies were to hold emergency talks on the currency bloc's worsening debt crisis. Treasury Minister Cristobal Montoro sent out the dramatic distress signal in a radio interview about the impact of his country's banking crisis on government borrowing, saying that at current rates, financial markets were effectively shut to Spain. Montoro said Spanish banks should be recapitalised through European mechanisms, departing from the previous government line that Spain could raise the money on its own and and prompting the Madrid stock market to rise. But his comments on Spain's borrowing sent the euro down after the 17-nation European currency earlier hit a one-week high against the dollar on expectations that a conference call of G7 finance ministers and central bankers may hasten bold action." Well, Germany got its wish: it got Spain to admit it is broke. Just as it wanted - because remember: all Germany is, is a true lender of last resort unlike the ECB: after all theyare the decision makers. And Germany knows very well that it needs Europe desperate when it is forced to accept any conditions to the German DIP loan that Schrodinger Schauble proposes. Which means forget anything positive will come out of the G7, and certainly forget anything actionable will come out of the ECB's June 7 meeting. If anything, things will first get much worse, before things get better. And finally, don't forget just who benefits the most from EURUSD at parity or lower... That's right: Germany.

Speaking of June 7, this may well be the D-Day for Europe, but not because of the ECB. Recall, that "Spain will test the market on Thursday by issuing between 1 billion euros ($1.24 billion) and 2 billion euros in medium- and long-term bonds at auction." Yep - Spain issuing 10 year bonds in 48 hours. Best of luck gentlemen - and this just as the country formally announced it is insolvent. Zero Hedge suggests that Spain promptly cancel the Thursday auction before it is too late.

More from Reuters:

Emilio Botin, chairman of the nation's biggest bank, Banco Santander told Reuters Spanish banks needed about 40 billion euros in additional capital, adding that "there is no financial crisis in Spain". Montoro said the figures were "perfectly accessible".

But his dramatisation of the debt situation set a stark backdrop for the conference call of the United States, Canada, Japan, Germany, France, Italy and Britain, plus European Union officials, which two G7 sources said would start at 1100 GMT.

Montoro's comments appeared aimed at pressuring the ECB and EU paymaster Germany to find ways of intervening. But the central bank has so far shunned calls to resume purchases of Spanish government bonds, and Berlin has said it is up to Madrid to decided whether to apply for assistance if it needs help.

Speaking of the G7, and confirming that Europe is nothing but a total basket case, Reuters informs us again, that instead of broke Europe appeasing its only source of funds, they are.... bashing it.

Germany is likely to come under severe pressure to do more to stimulate growth and help the euro zone on a conference call between finance ministers of the world's major economies on Tuesday, a senior G7 source told Reuters.

"It will become a Germany bashing sesssion," the source said, requesting anonymity due to the confidential nature of the call.

The source added that ministers would discuss the situation in Spain on the call and confirmed that Germany was pushing Spain to accept an EU rescue to help it recapitalise its stricken banks.

"They don't want to. They are too proud. It's fatal hubris," the source said of the government in Madrid.

They just did.

Finally, regarding the latest myth that there is enough actual funding in various emergency funding mechanisms to support Spain and Italy, we got back to yesterday and bust this particular mth, courtesy of Bridgewater.



http://www.zerohedge.com/news/sampling-mornings-eurosis-schizophrenia



A Sampling Of This Morning's Eurosis Schizophrenia



Tyler Durden's picture
Submitted by Tyler Durden on 06/05/2012 07:13 -0400






While the world patiently awaits, not even sure why because it is now absolutely guaranteed that it will be a huge disappointment, the G7 headlines which now appears to be merely an update session, and not one where any decisionswill be taken, here is a sampling of this morning's schizophrenia out of Europe:
  • FINNISH FOREIGN MINISTER URGES ORDERLY GREEK DEFAULT: ZEIT
  • FINNISH FOREIGN MINISTER SAYS GREECE NEEDS 2ND DEBT DEAL: ZEIT
Yet...
    • FINLAND'S TUOMIOJA SAYS NOBODY WANTS TO OUST GREECE FROM EURO
    But... he just said... Sigh. And the US trading day has not even started.
    Hint: when unsure what is going on check: if XO < 1000 bps, then nothing. If XO > 1000 bps, then something will happen. Repeat until results.

    and why rush......

    http://ransquawk.com/headlines/226940


    EU will propose delaying bail-in for failing banks until 2018


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