Tom McDonnell: The Spanish Memorandum of understanding is here. EL Pais has distilled it down to 32 key points here. Eurointelligence helpfully translates these points here. The average maturity of loans will be 12.5 years.
Spain is required to introduce legislation to apportion losses to several classes of shareholders and subordinated bondholders by late August 2012 and to legislate for a bad bank before the end of Autumn.
Bad news for Ireland as it looks like all the risks will remain with the Spanish sovereign. Spanish 10 year bonds were at the unsustainable rate of 6.91% as of this morning.
Showing posts with label Spain. Show all posts
Showing posts with label Spain. Show all posts
Wednesday, 11 July 2012
Tuesday, 10 July 2012
Can the Eurozone be saved?
Tom McDonnell: Spanish 10-year bonds are now over 7.1%. It looks like there will be a Spanish National Asset Management Agency (SNAMA) set up as a bad bank to deal with the bank losses. Those who dont learn from history...
Meanwhile Henning Mayer has a sobering but well worth reading post on the future of the Eurozone here.
Meanwhile Henning Mayer has a sobering but well worth reading post on the future of the Eurozone here.
Thursday, 10 May 2012
The Spanish crisis, thirteen defaults to date
Tom McDonnell: As well as being World and European football champions Spain also currently holds the distinction of having the world record for number of sovereign defaults. Spain defaulted six times on its external debts in the period between 1557 and 1647 and a further seven times between 1809 and 1882. Thirteen in all.
Spain will clearly be the key battleground of the debt crisis. Already things do not look good and the bank recapitalisation process is now set to begin in earnest. The Spanish Government nationalised Bankia yesterday. This may well prove the first of a number of nationalisations. Veteran observers of the Irish bank bailout will watch with great trepidation as this story unfolds and the full scale of the losses in the Spanish banking sector become clear.
According to the European Commission Spain is unlikely to meet its deficit targets this year or the next while yields for Spanish 10 year bonds were 6.171% as of this morning, a level that is unsustainable over the long term. Arguably Spain is now insolvent and it could easily totter into a bad equilibrium whereby it is de facto locked out of private markets and requires rescuing by a bailout fund. Over at the FT Nouriel Roubini and Megan Greene are pessimistic. They argue that:
"The only way for there to be a happy ending in Spain is if action is taken swiftly in Brussels, Frankfurt and other European capitals. But that is not likely to happen. The eurozone periphery and Spanish crisis look like a slow-motion train wreck."
The bailout packages (EFSF, ESM) as designed are inherently fragile in nature and certainly not suitable for a country of Spain's size. Worsening figures in Spain and the threat of a fourteenth external default could be the catalyst for the ESM to get a banking licence. That would completely change the dynamic of the debt crisis.
Spain will clearly be the key battleground of the debt crisis. Already things do not look good and the bank recapitalisation process is now set to begin in earnest. The Spanish Government nationalised Bankia yesterday. This may well prove the first of a number of nationalisations. Veteran observers of the Irish bank bailout will watch with great trepidation as this story unfolds and the full scale of the losses in the Spanish banking sector become clear.
According to the European Commission Spain is unlikely to meet its deficit targets this year or the next while yields for Spanish 10 year bonds were 6.171% as of this morning, a level that is unsustainable over the long term. Arguably Spain is now insolvent and it could easily totter into a bad equilibrium whereby it is de facto locked out of private markets and requires rescuing by a bailout fund. Over at the FT Nouriel Roubini and Megan Greene are pessimistic. They argue that:
"The only way for there to be a happy ending in Spain is if action is taken swiftly in Brussels, Frankfurt and other European capitals. But that is not likely to happen. The eurozone periphery and Spanish crisis look like a slow-motion train wreck."
The bailout packages (EFSF, ESM) as designed are inherently fragile in nature and certainly not suitable for a country of Spain's size. Worsening figures in Spain and the threat of a fourteenth external default could be the catalyst for the ESM to get a banking licence. That would completely change the dynamic of the debt crisis.
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