What happens if/when Spain looks for a bailout ?

PatsytheNazi

Maybe this is the wrong forum but anayway, as predicted the markets turned on Portugal and will turn on Spain next and then probaly Italy. So what I'm wondering is -

a) What happens when Spain has to look for a bailout from the ECB. Will the EU start to recognise that bond holders will have to acept burden sharing ?

b) Or will it have to spread to Italy before those protecting the bond holders etc change their course ?

c) If it spreads to Spain and the EU decide the bond holders must take their share of hard medicine, how will it effect Ireland. Are we too far into teh process of bailing out the bond holders for to effect fundametal change in our handling of the crisis ?

RichardAnd

Spain are probably the next country in line after portugal to join the bail out club. However, the spanish economy is a beast compared to our own so they cost of bailing out Spain will be much higher, probably even more so for Italy.

I think that Spain calling for a bail out could be the final phase in the end of the Euro.

ilovesleep

RichardAnd wrote: »

Spain are probably the next country in line after portugal to join the bail out club. However, the spanish economy is a beast compared to our own so they cost of bailing out Spain will be much higher, probably even more so for Italy.

I think that Spain calling for a bail out could be the final phase in the end of the Euro.

Greece received a bailout in may 2010
ireland nov 2010
portugal march 2010
I give it until september for spain to go down and the sooner the better.

hatz7

ilovesleep wrote: »

I give it until september for spain to go down and the sooner the better.

Do you really think that Spain could be looking for a bailout by sept? I'm not great at understanding international economics,

ilovesleep

hatz7 wrote: »

Do you really think that Spain could be looking for a bailout by sept? I'm not great at understanding international economics,

I haven't a clue about economics either. So far there is a pattern of 5 to 6 months between countries looking for a bailout.

later12

ilovesleep wrote: »

I give it until september for spain to go down and the sooner the better.

Leaving aside that 'sooner the better' comment, I'm curious to know why you have chosen September as the month of deliverance, specifically? What happens in August?

Personally I am pessimistic about Spanish chances of avoiding a crisis. I don't necessarily think this will result in a bailout exactly, largely for reasons to do with the inadequate structure and size of the EFSF.

In any event , lets have a quick look at this graphic to compare the size of Spanish banking assets to the rest of the Eurozone



Now I'll bet the first thing that entered your head when you read that graphic is how huge the Irish assets were and how small the Spanish were. This for two countries whose banking systems are often compared in the media.

In fact, the Spanish can recapitalise their banks much more easily than we did as a percentage of their GDP.

The Irish bailout came to approximately 45% of our GDP. Huge, no doubt. However, the most pessimistic estimate of the Spanish recapitalisation requirement is 120bn USD
http://www.businessweek.com/news/2010-12-15/spanish-lenders-may-need-120-billion-moody-s-says.html

Interestingly, this amounts to only 8% or 9% of Spanish GDP compared to our 45%. So on the face of it, we seem to be looking at apples and oranges.

Some major qualifiers: there is more at stake here than the Spanish banks, Spanish banks have not always been completely upfront with domestic and European authorities and the Portuguese bailout could realistically have said to have magnified Spain's problems to some extent - particularly in terms of competition and its aggravating effect on the banks.

Personally, I'm pessimistic, but a little amused at how this thread has already decided the case is open and shut, and will be done and dusted in September!:)

Voltex

I wouldnt even want to think about Spain going to the EFSF.
But as pointed out the Spanish banks are in a different situation to the irish banks.
the only thing I see weighing on the bond markets reagrding Spain would be the sluggish real economy with growth barely hitting .2% and unemployment hitting nearly 20%.

the one question I have is that if the dogs on the street know that there is a mess hidden away in German, French and Belgian banks that the ECB and National central banks are trying to keep hidden, surely the markets know that too and the price is built into the current market prices

later12

I agree with the above post, any Spanish bailout is going to be about the public sector budget (incl unemployment) and growth. That is why I think Portugal have magnified the Spanish problem outside of any geographical, Iberian inspiration (which exists, and is bizarre), because Portugal (moreso than Ireland) have made this crisis not just about banks, but about competitive economies vs non-competitive economies. I
think that is what shall send Spain into crisis if it does reach crisis.

By the way, 90 billion euro of Spanish debt falling due this year with 15.5 billion of that at the end of this month. Also a bond auction next week, should be interesting to gauge market sentiment. The question will Monsieur Trichet be there casting bids with a European flag and distorting the whole thing into disarray!

Sometimes i think this is the financial equivalent of WrestleMania and we are all the saddos who love it!

PatsytheNazi

But folks, if the Spainish banks have to be bailed out, how will it effect Ireland ? Will it strength our hand in renegoiating the burden sharing along with the other countries ?

later12

PatsytheNazi wrote: »

But folks, if the Spainish banks have to be bailed out, how will it effect Ireland ? Will it strength our hand in renegoiating the burden sharing along with the other countries ?

The battle as regards 'burning the [Irish] bondholders' is over for now. The government will not do a U-turn and less bonds are falling due. It will not be a realistic issue again until 2013 in my opinion, when burden sharing will again be something we can realistically contemplate.

jdooley28

the eu then starts printing money until they run out of paper