Spain
Just Gave Us a Glimpse Into the True State of the EU
Banking System
Posted by:
Phoenix Capital... Post date:
05/31/2012
This is the state of
affairs in
http://albertpeia.com/truestateofeubankingsystem.htm
‘The
following is an excerpt from my (Summer’s) most recent client letter.
In
case you missed it,
I am
of course referring to the Bankia nationalization, the largest bank nationalization in
Bankia was formed in 2010 when the Spanish
Government merged seven insolvent cajas So it’s no surprise that Bankia
was a trainwreck waiting to happen… at least to
anyone with a working brain.
However,
both the bank and the Spanish Government decided to maintain the charade that
the bank was in great form right up until it collapsed (only one month ago Bankia was talking about paying
its dividend).
On
May 9th the Spanish Government stepped in to nationalize the bank.
Its first step was to convert its (the Spanish Government’s) €4.5 billion worth
of preferred shares to common shares, thereby taking a 45% stake in the bank.
Then Bankia announces €17 billion of new write-downs as well as €7
billion of mark-downs on investments, thereby rendering the bank insolvent. It
also revised its 2011 results from a €309 million profit to a €3 billion LOSS.
The
end result… Bankia just received a €19 billion Euro
bailout, the largest in
…so where is the €23.5bn for the Bankia
rescue going to come from? The state's
Fund for Orderly Bank Restructuring (FROB) is down to €5.3bn, and there are
many other candidates for that soup kitchen.
The Centre
for European Policy Studies in
As I wrote in my column this morning, the Spanish
economy is spiralling into debt-deflation. Monetary
and fiscal policy are both excruciatingly tight for a
country in this condition. The plan to slash the budget deficit from 8.9pc to
5.3pc this year in the middle of an accelerating contraction borders on lunacy.
You cannot do this to a society where unemployment is
already running at 24.4pc. Either Europe puts a stop to this very quickly by mobilising the ECB to take all risk of a Spanish (or
Italian) sovereign default off the table – and this requires fiscal union to
back it up – or it must expect Spanish patriots to take matters into their own
hands and start to restore national self-control outside EMU.
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100017477/spain-runs-out-of-money/
In
addition to this,
Spain's wealthiest autonomous region, Catalonia, needs financing help
from the central government because it is running out of options for
refinancing debt this year, Catalan President Artur Mas said today.
"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," Mas told a
group of reporters from foreign media.
A spokesman for the Catalan
government later emphasised that Mas
was referring to payments that must be met routinely each month and not a specific
deadline this month.
The debt burden of Spain's 17
highly devolved regions, and rising bad loans at the country's banks, are both
at the heart of the euro zone debt crisis because investors are concerned they
could strain finances so much that Spain, the currency bloc's fourth biggest
economy, will need an international bailout.
Catalonia, which represents one fifth of the Spanish
economy, has more than 13 billion euros in debt to
refinance this year, as well as its deficit.
All of the regions together have 36 billion euros
($45 billion) to refinance this year, as well as an authorised
deficit of 15 billion euros.
Last year many of the regions financed debt by falling months or even
years behind in payments to providers such as street cleaners and hospital
equipment suppliers.
http://www.buenosairesherald.com/article/101796/spains-catalonia-seeks-government-help-to-pay-debt
Thus,
To recap…
Oh,
and the Spanish banking system needs to write off another €270 billion…
if Spain cannot cobble together €19 billion, where on earth will it get
the money needed to support its collapsing banking system which is on the verge
of having to write down hundreds of billions of Euros?
This
is the state of affairs in
What
could go wrong?
On
that note,
I
recently published a report showing investors how to prepare for this. It’s
called How to
Play the Collapse of the European Banking System and it explains
exactly how the coming Crisis will unfold as well as which investment (both
direct and backdoor) you can make to profit from it. This report is 100% FREE.
You can pick up a copy today at: http://www.gainspainscapital.com
Good Investing! Graham Summers PS. We also feature numerous other
reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis.
Whether it’s a