Spain.. A moment of clarity on my part

MacMickster

Graham_Devon wrote: »

Spaish bailout talks are to take place this weekend.

This comes just one day after the IMF denying spain is about to seek a bailout, a day after the Greek finance minister denied spain would be asking for a bailout and a day after spanish economic minister denied "insistently" spain would need a bailout.

The Troika want Spain to take a bailout. Spain, on the other hand, insist that they don't want or need a bailout - but their banks do. If it is only the banks that are bailed out then Germany will be unable to dictate economic policy to the Spanish.

There is no structure in place currently to bailout the banks. It is regarded as the responsibility of each member state. If that is changed then it is a major step towards Germany going down the road that they don't want.

The Troika don't want this dragging on beyond the Greek elections, as this further uncertainty would cause havoc with the markets.

What we are therefore seeing is a game of brinkmanship between the Spanish and German governments.

Who will blink first? It is anyone's guess.

Thrugelmir

MacMickster wrote: »

The Troika want Spain to take a bailout. Spain, on the other hand, insist that they don't want or need a bailout - but their banks do. If it is only the banks that are bailed out then Germany will be unable to dictate economic policy to the Spanish.

Unlike the UK did in 2007-09. Spain is unable to provide financial backing to underwrite its banks potential exposure to bad loans. Property in particular which amount to some £180 billion euros alone. That's the real issue.

Recapitalising the banks doesn't solve the issue. Merely keeps them trading.

MacMickster

Thrugelmir wrote: »

Unlike the UK did in 2007-09. Spain is unable to provide financial backing to underwrite its banks potential exposure to bad loans. Property in particular which amount to some £180 billion euros alone. That's the real issue.

Recapitalising the banks doesn't solve the issue. Merely keeps them trading.

Agreed.

This is why the Spanish are effectively threatening to let their banks go under, with shareholders and other banks throughout Europe taking the hit, unless Europe (Germany) bails the banks out directly.

Why should they take a bailout as a country, requiring them to surrender any control over their own economy, for what is effectively another round of can kicking?

Unlike Greece, their troubles can be put almost solely down to the banks irresponsible lending fuelling a property bubble, and then membership of the Euro denying them any chance to effectively deal with this crisis.

hartcjhart

Zorz wrote: »

Something interesting from inside Spain:
http://elpais.com/elpais/2012/06/05/inenglish/1338898871_396646.html

In my opinion, it resonates a lot with what happens in Greece as well....

yes and although 'they' say they dont know why it has got so bad here is another example

http://www.bbc.co.uk/news/business-18277681

Thrugelmir

MacMickster wrote: »

This is why the Spanish are effectively threatening to let their banks go under, with shareholders and other banks throughout Europe taking the hit, unle Europe (Germany) bails the banks out directly.

Not all Spanish banks are effected. Its the regional banks that are in trouble. The likes of Santander can withstand the buffeting.

Spanish property prices will go the same way as those in Eire. Seems as if a major revaluation of residential property as an asset class is on the cards across Europe.

hartcjhart

Thrugelmir wrote: »

Not all Spanish banks are effected. Its the regional banks that are in trouble. The likes of Santander can withstand the buffeting.

Spanish property prices will go the same way as those in Eire. Seems as if a major revaluation of residential property as an asset class is on the cards across Europe.

you could hardly call 'Bankia' a regional bank,

and yes property prices have plumetted and if you are thinking of buying now is the time especially with the banks offering 100% mortgages and at interest only for a few years

MacMickster

hartcjhart wrote: »

you could hardly call 'Bankia' a regional bank,

and yes property prices have plumetted and if you are thinking of buying now is the time especially with the banks offering 100% mortgages and at interest only for a few years

No, I don't think that it is the moment to buy in Spain.

House prices certainly have much further to fall so I certainly wouldn't want a 100% mortgage on an interest only basis.

This is a just a case of the banks trying to get otherwise unsellable repossessed properties off their books.

homelessskilledworker

Zorz wrote: »

Something interesting from inside Spain:
http://elpais.com/elpais/2012/06/05/inenglish/1338898871_396646.html

In my opinion, it resonates a lot with what happens in Greece as well....

I was listening to the radio this morning on the way to work and it had the usual Euro crisis stuff, this morning the main topic Spain.

Even though I like to think I understand something as to what is going on here and rightly or wrongly have a few opinions as to what to do, it occurred to me are we being taken for a huge ride.
Are the main politicians and Bankers in this together in someway. We have been constantly being told that WE MUST bail these bankers out at any cost, they are too big to collapse, that life just will not go on without them.
We all seem to be on our backs belly side up allowing £100's Billions to go to failed banks with hardly any questioning.

This all stinks!!

MacMickster

I think that the problem is that no-one (economists, bankers or politicians) can accurately predict what the world would look like if the "too big to fail" banks were actually allowed to fail.

Financial transactions between the banks have become so complex that it is difficult to work out where the domino effect of the banks collapsing would actually stop.

The shareholders would take huge losses, and as many of the banks' shares are held by pension providers as a "safe" investment, people would not receive the pensions that they expect, so there would be more call on governments to finance retirement.

Also, how would governments be able to reimburse savers who lose their money held in the banks that fail?

How would we function in the future as a society if we no longer trust banks?

How would financial transactions be conducted in the future?

Could fiat currencies continue in the future?

Nobody wants to be the one that pushes that first domino, so instead just print money to pump into those banks.

Thrugelmir

hartcjhart wrote: »

you could hardly call 'Bankia' a regional bank,

It was created in 2010 by the merger of 7 regional Spanish banks.

So although 4th largest in Spain. Is domestically based. Not an international player.