Dummies Guide To Europe’s Ever-Increasing Jumble Of Acronyms

Dummies Guide To Europe’s Ever-Increasing Jumble Of Acronyms (ZeroHedge, July 12, 2012):

It seems every week there are new acronyms or catchy-phrases for Europe’s Rescue and Fiscal Progress decisions. Goldman Sachs provides a quick primer on everything from ELA to EFSM and from Two-Pack (not Tupac) to the Four Presidents’ Report.

Rescue Programs

EFSF
European Financial Stability Facility. A temporary special purpose vehicle financed by members of the euro area to address the European sovereign debt crisis by providing financial assistance to euro area states in economic difficulty. The ESFS can issue bonds or other debt instruments in the market to raise funds needed to provide loans to euro area countries under financial stress, recapitalize banks (through loans to governments) or buy sovereign debt; these bonds are guaranteed by the Euro area member states. Euro area member states’ capital guarantees total €780 billion and the facility has a lending capacity of €440 billion. Since it began operations in August 2010, money has been lent to Ireland, Portugal, and Greece and is in the process of being lent to Spain and Cyprus.

EFSM
European Financial Stabilization Mechanism. An emergency funding program for EU member states in economic difficulty, which is reliant on funds raised in the financial markets and guaranteed by the European Commission (EC) using the budget of the European Union as collateral. The fund has the authority to raise up to €60 billion and has made loans to Ireland and Portugal (in conjunction with the European Financial Stability Facility (EFSF) since its May 2010 inception.

Read moreDummies Guide To Europe’s Ever-Increasing Jumble Of Acronyms

Spain’s Not Getting a Bailout… Neither is Italy… It’s the END GAME Folks

Spain’s Not Getting a Bailout… Neither is Italy… It’s the END GAME Folks (ZeroHedge, July 7, 2012):

Spain got a “bailout” or so the media claimed. Because I cannot find any entity in Europe with the funds to actually bailout Spain (the EUFN is tapped out, the ESM has major political issues, and Germany is risking a credit downgrade and insolvency based on its backdoor EU props).

As one would expect in this situation, things are rapidly going into hyper-drive in Spain. The weekend before last the country implemented capital controls including

  • A minimum fine of  €10,000 for taxpayers who do not report their foreign accounts.
  • Secondary fines of  €5,000 for each additional account
  • No cash transactions greater than €2,500
  • Cash transaction restrictions apply to individuals and businesses

Does this sound like the actions of an economy with a sound banking system?

On a related note, Italy is once again back on the brink: in the last 2 weeks Italy’s Prime Minister Mario Monti has said that the country is “flirting with economic disaster… [and] in a crisis.” He, like Spain’s PM Rajoy, has pushed for the ESM to buy sovereign bonds. He’s also asked the ECB to implement a mechanism through which it would buy Italian sovereign bonds whenever the spread between them and German bunds grows too large (a type of bailout).

Indeed, things are so desperate that he invited German Chancellor Angela Merkel, French President Francois Hollande, and Spanish Prime Minister Mariano Rajoy to an emergency meeting in Rome over the weekend. His goal was to convince EU leaders to allow Italy to receive funding directly from the EFSF and ESM.

The ECB and Germany have already rebuked this idea:

Read moreSpain’s Not Getting a Bailout… Neither is Italy… It’s the END GAME Folks

You Can’t Make This Up: MERKEL SAYS BOND PURCHASING BY BAILOUT FUND A POSSIBILITY

And Now We Ramp On This Latest Non-News (ZeroHedge, June 20, 2012):

This is just getting ridiculous:

  • MERKEL SAYS BOND PURCHASING BY BAILOUT FUND A POSSIBILITY

Uhm… that whole point of the bailout fund (ESM/EFSF) is to BUY BONDS. Basically Merkel just confirmed that the whole point of the ESM, which by the way still does not exist, and whose sole purpose is to buy bonds… is to buy bonds. You can’t make this up. Yes they will subordinate existing bondholders in the case of ESM, and in the case of EFSF Finland and soon Germany will demand collateral via negative pledges (as in the case of Spain – or did the market forget all about that already), but apparently that is now merely an irrelevant detail. And the EURUSD ramps on this, once again proving that nobody has any idea what is going on in the market but flashing red healines = usually good.

From the ECB itself:

esm

Fitch Downgrades Credit Rating Of 18 Spanish Banks, Financial Contagion Spreads To Italy

See also:

Spain Loses Final A Rating With Moodys Downgrade To Baa3, May Downgrade Further (Full Text)

Nigel Farage: ‘Once Greece Leaves The ECB Is Bust’ – ‘The Euro Titanic Has Now Hit The Iceberg And Sadly There Simply Aren’t Enough Lifeboats’ (Video)


Spanish bond yields at record high as Fitch downgrades 18 banks and financial contagion spreads to Italy (Independent, June 12, 2012):

Spain’s borrowing costs soared to their highest levels since the introduction of the single currency in 1999 today, as any confidence investors might have taken from Madrid’s weekend pledge to seek a bailout for its toxic banking sector drained away.

Yields on the country’s 10 year bonds shot up to 6.8 per cent this afternoon as investors frantically dumped their holdings of Spanish debt, before falling back to 6.72 per cent.

The credit rating agency Fitch added fuel to the flames of alarm by downgrading 18 Spanish banks, following its downgrade of Madrid’s sovereign debt to BBB last month. Among the Spanish lenders cut were Bankia, CaixaBank, and Banco Popular Espanol, with Fitch blaming the weakening Spanish economy, which is forecast to contract by 1.7 per cent this year and to remain in recession well into next year.

Read moreFitch Downgrades Credit Rating Of 18 Spanish Banks, Financial Contagion Spreads To Italy

Spain Loses Final A Rating With Moodys Downgrade To Baa3, May Downgrade Further (Full Text)

Don’t miss:

Nigel Farage: ‘Once Greece Leaves The ECB Is Bust’ – ‘The Euro Titanic Has Now Hit The Iceberg And Sadly There Simply Aren’t Enough Lifeboats’ (Video):


Spain Loses Final A Rating With Moodys Downgrade To Baa3, May Downgrade Further – Full Text (ZeroHedge, June 13, 2012):

And so the final Spanish A rating tumbles. Why is this kinda, sorta a big deal? Because as we explained in the end of April, “If all agencies downgrade Spain to BBB+ or below, the ECB could increase haircuts by 5% on SPGBs. The key aspect in terms of the Spanish downgrade(s) is the ECB’s LTRO. If all three rating agencies move Spain to BBB+ or below then under the ECB’s current framework it moves into the Step 3 collateral bucket which requires an additional 5% haircut across the maturities. In classifying its risk management buckets, the ECB uses the highest of the ratings to determine an asset’s position (unlike the sovereign benchmark indices which use the lowest rating, in general). Fitch and Moodys currently rate Spain at A and A3 respectively, with both having a negative outlook in place leaving only a small downgrade margin before Spain migrates to the lower ECB bucket.”

And now the collateral squeeze is on, unless of course the ECB changes the reules one more time.

Read moreSpain Loses Final A Rating With Moodys Downgrade To Baa3, May Downgrade Further (Full Text)

Spain’s $125 Billion Euro Bailout Will Not Be Enough

Spain’s Euro Bailout Might Boost Markets Tomorrow But Don’t be Fooled (Forbes, June 10, 2012):

Will Spain’s bailout boost the markets on Monday? As Abram Brown points out the markets are eager for good news. But there are serious question marks over the bail out. Not least that the Spanish can’t seem to agree on what they have agreed to. And Euro zone members don’t actually know how they are going to pull off this refinancing.

What they believe they have done is create a plan that will ward off contagion if the Greek election goes against the pro-austerity parties Monday week. That might be unraveling already, as Spaniards take to the streets to protest against the deal. Add in to the mix, skepticism about the size of the rescue – $125 billion is just not enough some analysts are saying. The real figure is at least double that.

Read moreSpain’s $125 Billion Euro Bailout Will Not Be Enough

Spain IS Greece After All: Here Are The Main Outstanding Items Following The Spanish Bailout

Spain IS Greece After All: Here Are The Main Outstanding Items Following The Spanish Bailout (ZeroHedge, June 9, 2012):

After two years of denials, we finally have the right answer: Spain IS Greece. Only much bigger (it is also the US, although while the US TARP was $700 billion or 5% of then GDP, the just announced Spanish tarp is 10% of Spanish GDP, so technically Spain is 2x the US). So now that the European bailout has moved from Greece, Ireland and Portugal on to the big one, Spain, here are the key outstanding questions.

1. Where will the money come from?

De Guindos, Schauble and the Eurogroup, all announced that the sole source of cash would be the ESM and/or the EFSF. The problem with this is that the ESM has yet to be ratified by Germany, whose parliament said previously it is sternly against allowing the ESM to fund a direct bank bailout, something which just happened. Thus, the successful German ESM ratification vote, whenever it comes, and which previously was taken for granted, now appears to be far more questionable.

Which leaves the EFSF. The problem with the EFSF is that there is about €200 billion in dry powder. And this includes the Spanish quota of €93 billion, which we can only assume is now officially scrapped.

Which brings us to a bigger question: now that Spain is officially to be bailed out, what happens next. And by that we mean of course the big one: Italy. Recall that as we posted in Brussels… We Have A Problem, once the contagion spreads again to Italy, and that country also needs a bailout, it is game over. From the world’s biggest hedge fund Bridgewater:

Read moreSpain IS Greece After All: Here Are The Main Outstanding Items Following The Spanish Bailout

EU: EFSF & ESM … A Whole Lot Of Nothing!

EU – EFSF & ESM – A Whole Lot Of Nothing (ZeroHedge, Mar 28, 2012):

A quick look at the headlines:

€200 billion already committed. So the EFSF has already committed €200 billion.  So far I only see €63 billion of debt issued by the EFSF, so they have at least another €137 billion to fund.  The bulk of their issuance so far is back to back with a they made to Greece, hardly the best collateral.  For now I’m going to assume that there is no overcollateralization requirement and just €200 billion has been committed, but if the 165% overcollateralization is in place, then that would really be €300 billion of “guarantees” used up.

Read moreEU: EFSF & ESM … A Whole Lot Of Nothing!

OECD Chief Angel Gurria: Eurozone Finance Ministers Must Raise ONE TRILLION Euro Bailout For The ‘Mother Of All Firewalls’

– Eurozone finance ministers must raise ONE TRILLION euro bailout for the ‘mother of all firewalls’ says OECD chief (Daily Mail, Mar 27, 2012):

The eurozone bailout fund should be increased to 1 trillion euros to provide ‘the mother of all firewalls’, the head of a leading international development body said today.

Angel Gurria, the secretary general of the Organization for Economic Co-operation and Development (OECD), said eurozone finance ministers need to impress finance markets with the size of their rescue fund for indebted countries when they meet later this week.

Read moreOECD Chief Angel Gurria: Eurozone Finance Ministers Must Raise ONE TRILLION Euro Bailout For The ‘Mother Of All Firewalls’

The Cost Of The Combined Greek Bailout Just Rose To €320 Billion In Secured Debt, Or 136% Of Greek GDP

The Cost Of The Combined Greek Bailout Just Rose To €320 Billion In Secured Debt, Or 136% Of Greek GDP (ZeroHedge, Feb. 2, 2012):

Some of our German readers may be laboring under the impression that following the €110 billion first Greek bailout agreed upon and executed in May 2010, the second Greek bailout would cost a “mere” €130 billion. Alas we have news for you – as of this morning, the formal cost of rescuing Greece for the adjusted adjusted adjusted second time has just risen to €145 billion, €175 billion, a whopping €210 billion, bringing the total explicit cost of all Greek bailout funds to date (and many more in store) to €320 billion. Which incidentally is a little more than Greek GDP (which however is declining rapidly) at 310 billion, only in dollars. So as of today, merely the ratio of the Greek DIP loan (Debtor In Possession, because Greece is after all broke) has reached a whopping ratio of 136% Debt to GDP. This excludes any standing debt which is for all intents and purposes worthless. This is secured debt, which means that if every dollar in assets generating one dollar in GDP were to be liquidated and Greece sold off entirely in part or whole to Goldman Sachs et al, there would still be a 36% shortfall to the Troika, EFSF, ECB and whoever else funds the DIP loan (i.e., European and US taxpayers)! Another way of putting this disturbing fact is that global bankers now have a priming lien on 136% of Greek GDP – the entire country and then some now officially belongs to the world banking syndicate. Consider that when evaluating Greek promises of reducing total debt to GDP to 120% in 2020, as it would mean wiping all existing “pre-petition debt” and paying off some of the DIP. Also keep in mind that Greece has roughly €240 billion in existing pre-petition debt, of which much will remain untouched as it is not held in Private hands (this is the debt which will see a major “haircut” – or not: all depends on the holdout lawsuits, the local vs non-local bonds and various other nuances discussed here). If you said this is beyond idiotic, you are right. It is not the impairment on the Greek “pre-petition’ debt that the market should be worried about – that clearly is 100% wiped out. It is how much the Troika DIP will have to charge off when the Greek 363 asset sale finally comes. This is also what Angela Merkel will say tomorrow when Greece shows up on its doorstep with the latest “revised” agreement from its parliament to take Europe’s money ahead of the March 20 D-Day. Because finally, after months (and to think we did the math for Die Frau back in July) Germany has done the math, and has reached the conclusion that letting Greece go is now the cheaper option.

So how do we get to the €210 billion number? Well, there is the €130 billion already “agreed” upon.

Read moreThe Cost Of The Combined Greek Bailout Just Rose To €320 Billion In Secured Debt, Or 136% Of Greek GDP