EU says it is helping Spain recapitalize its banks but Spain does not need a bailout

poeticseraphim

http://www.brecorder.com/market-data/stocks-a-bonds/0/1246077/

Read the article and now consider the the Irish situation and the Speech Stephen Donnelly gave today.

Spanish private banks are being directly recapitalized....and no bailout...but things are no better in Spain on the streets..but thy kept sovriegnty etc and it is a recapitalization of private banks...So they are better off ? Or am i wrong?


The ESM was launched.

I would like to know....if the ESM had been allowed to directly recapitalized banks instead of a bailout ( as the current regulator says would have correctly diagnosed the issued and given the banks better incentive) would this have been suitable for Ireland?

Would it hav been the ECB that would have preferred the bailout/garantee or the then Govt ( who knows what their motives were)?


Ar they not in the situation we were on but simply with more power to leverage or am i wrong?

And yes i am aware Spain may seek a bailout in time...but so far they have not...and their banks get the monies:mad:

Ya see where I am going with this???


Sorry if i am making it simplistic.

Scofflaw

poeticseraphim wrote: »

Ya see where I am going with this???


Sorry if i am making it simplistic.

The problem is more that you're making it incomprehensible. Where are you going with this? And indeed your current rash of other rather garbled OPs?

moderately,
Scofflaw

poeticseraphim

Scofflaw wrote: »

The problem is more that you're making it incomprehensible. Where are you going with this? And indeed your current rash of other rather garbled OPs?

moderately,
Scofflaw

There is seems to be a double standard in the treatment of the banking crisis in Spain compared to Ireland by the EU.

That is were I am going.

antoobrien

poeticseraphim wrote: »

There is seems to be a double standard in the treatment of the banking crisis in Spain compared to Ireland by the EU.

Not really, we needed a bailout because we had massive deficits before we put a penny into the banks.

Here's a table showing net deficit and money borrowed for the banks*

Year|Surplus/Defecit|Running total|Banks (exchequer)|Running total
2007| -1,618,596,000|-1,618,596,000|0| 0
2008|-12,713,821,000|-14,332,417,000|0| 0
2009|-24,640,971,000|-38,973,388,000| 4,000,000,000|4,000,000,000
2010|-18,744,208,000|-57,717,596,000| 725,000,000|4,725,000,000
2011|-24,917,176,000|-82,634,772,000|10,903,147,000|15,628,147,000
2012|-11,134,029,000|-93,768,801,000| 1,325,000,000|16,953,147,000


As you can see here, the deficits in spending vastly outweigh the spending on the banks in that time.

* Figures taken from the exchequer returns, ignoring money from the NPRF (not borrowed) and any promissory notes that have not been reported on the exchequer returns (it hasn't been borrowed yet).

poeticseraphim

antoobrien wrote: »

Not really, we needed a bailout because we had massive deficits before we put a penny into the banks.

Here's a table showing net deficit and money borrowed for the banks*

Year|Surplus/Defecit|Running total|Banks (exchequer)|Running total
2007| -1,618,596,000|-1,618,596,000|0| 0
2008|-12,713,821,000|-14,332,417,000|0| 0
2009|-24,640,971,000|-38,973,388,000| 4,000,000,000|4,000,000,000
2010|-18,744,208,000|-57,717,596,000| 725,000,000|4,725,000,000
2011|-24,917,176,000|-82,634,772,000|10,903,147,000|15,628,147,000
2012|-11,134,029,000|-93,768,801,000| 1,325,000,000|16,953,147,000


As you can see here, the deficits in spending vastly outweigh the spending on the banks in that time.

* Figures taken from the exchequer returns, ignoring money from the NPRF (not borrowed) and any promissory notes that have not been reported on the exchequer returns (it hasn't been borrowed yet).

This actually does answer my question thank you. Before the 2008 crisis we ran a surplus though and 2008 was when the Bank garantee occured.

We sought th bailout in 2010 when in September the government support for the six guaranteed banks had risen markedly to 32% of GDP, and this started to raise the yields of government bonds. Fatally, later that month the government decided to renew the annual guarantee covering the six main banks. By October yields were above 7%, causing concern that the deficit was now unsustainable.

Before the Garantee we were in a similar position to spain.

antoobrien

poeticseraphim wrote: »

This actually does answer my question thank you. Before the 2008 crisis we ran a surplus though

Before 2007 we ran a surplus, and any surpluses were small (less than 3 billion).

poeticseraphim wrote: »

and 2008 was when the Bank garantee occured.

Please tell me that you don't believe that the bank guarantee (in sept) caused the budget deficit in 2008 - at the time of the gaurantee we'd already racked up deficits of 9.4bn.

poeticseraphim wrote: »

We sought th bailout in 2010 when in September the government support for the six guaranteed banks had risen markedly to 32% of GDP, and this started to raise the yields of government bonds.

The initial guarantee was for about 400bn. GDP in 2008 was about 180bn. The initial guarantee was for well over 225% of GDP.

poeticseraphim wrote: »

Fatally, later that month the government decided to renew the annual guarantee covering the six main banks. By October yields were above 7%, causing concern that the deficit was now unsustainable.

Bear in mind that we were still trying to put a number on things at that stage. Anglo alone had gone from 2 ->4 -> 10 -> 30. The first round of stress test were widely regarded as weak and we still hadn't put in place any kind of long term strategy for dealing with the deficit. AIB eventually came out at somewhere about 20 bn.

In short the yields went up because nobody believed what was coming out and Greece (after already getting a deal on funding) and Portugal were also going down the creek without paddles.

It's interesting to note that despite the uncertainty of the past few weeks with the prospects of a debt deal, bond the 9 year bond is hovering in/around 5%, so the markets don't seem to think that what we're doing now is unsustainable (with the usual provisos).

poeticseraphim wrote: »

Before the Garantee we were in a similar position to spain.

Spains current GDP is approx €1,100 bn (almost 7 times ours). They're looking for/being offered 100bn 9% GDP for their banks (and only the banks). In 2010 a package of 35bn was for negotiated the banks (including NPRF money) as part of the bailout - 22% GDP and another 50bn for government spending over 3 years (approx 11% per year for 3 years at 2010 GDP).

Still think we were in a asimilar position (either 2008/10) as Spain are now?

poeticseraphim

antoobrien wrote: »

Before 2007 we ran a surplus, and any surpluses were small (less than 3 billion).



Please tell me that you don't believe that the bank guarantee (in sept) caused the budget deficit in 2008 - at the time of the gaurantee we'd already racked up deficits of 9.4bn.



The initial guarantee was for about 400bn. GDP in 2008 was about 180bn. The initial guarantee was for well over 225% of GDP.



Bear in mind that we were still trying to put a number on things at that stage. Anglo alone had gone from 2 ->4 -> 10 -> 30. The first round of stress test were widely regarded as weak and we still hadn't put in place any kind of long term strategy for dealing with the deficit. AIB eventually came out at somewhere about 20 bn.

In short the yields went up because nobody believed what was coming out and Greece (after already getting a deal on funding) and Portugal were also going down the creek without paddles.

It's interesting to note that despite the uncertainty of the past few weeks with the prospects of a debt deal, bond the 9 year bond is hovering in/around 5%, so the markets don't seem to think that what we're doing now is unsustainable (with the usual provisos).




Spains current GDP is approx €1,100 bn (almost 7 times ours). They're looking for/being offered 100bn 9% GDP for their banks (and only the banks). In 2010 a package of 35bn was for negotiated the banks (including NPRF money) as part of the bailout - 22% GDP and another 50bn for government spending over 3 years (approx 11% per year for 3 years at 2010 GDP).

Still think we were in a asimilar position (either 2008/10) as Spain are now?

No I do not believe the garantee caused the deficit..you are missing a vital point If national debt is unsustainable the IMF seeks a writedown of that debt...oour national debt was sustainable despite the deficit. Our banking debt was not. The IMF proposed that bondholders in Irish bank suffer a writedown this was opposed by Europe and the Americans.

The IMF thought our national debt was sustainable...but crucially thought the banking debt was not.

The markets i would think are acting in assumption of a deal as our debt is not sustainable without one.

The idea of a banking union and perhaps a possibilty of separating our national and banking debt has influenced the markets.

poeticseraphim

Also it is really only in comparison to basket case economies in Europe that the markets ae treating us as sustainable.

antoobrien

poeticseraphim wrote: »

If national debt is unsustainable the IMF seeks a writedown of that debt...oour national debt was sustainable despite the deficit. Our banking debt was not. The IMF proposed that bondholders in Irish bank suffer a writedown this was opposed by Europe and the Americans.

I'm not sure what point you're getting at here (are the if and is in the wrong places?).

I have a good idea of the the reason for the opposing of writedowns by Europe and America. The Irish banking system was (mostly still is) in life support from the EU. If there was a burning it could have triggered all Anglo's Credit Default Swaps (CDS) at once. That would have thrown up to a €60bn (approx $100m at the time) CDS charge at the market. AIG largely owned the CDS market, they got bailed out to the tune of $85bn two weeks before the 2008 Irish guarantee (the AIG bailout rose to over $152 bn).

Starting from September 7th 2008 in the US Fanny Mae, Freddy Mac, Lehman Brothers, Washington Mutual and Wachovia (sold to Citibank) all failed. In Europe Fortis (Belgian), Bradford & Bingley (English), Hypo Real Estate (German), Glitner (Iceland) failed. Then the news that there is now much money at risk in Ireland - are there too many zeros there? Looking back at it, it's no wonder the world was spooked.

poeticseraphim wrote: »

The IMF thought our national debt was sustainable...but crucially thought the banking debt was not.

That's something that always bugged me - why did they (supposedly) think that? Given the fact that everybody had been linking the banking debt and national debt, it just doesn't make sense.

I think they said it knowing that it was never going to make a difference to the policy makers for the current crisis, however it would influence future crises of this nature. It's also likely that, since banks don't fall under their purview, they just don't give a rats what happens to the bank debt.

poeticseraphim wrote: »

The markets i would think are acting in assumption of a deal as our debt is not sustainable without one.

The idea of a banking union and perhaps a possibilty of separating our national and banking debt has influenced the markets.

The bond yields were on their way down long before the concept of the banking regulator was seriously floated. The yields have remained low despite the uncertainty surrounding the regulator, potential deals, functioning of the ESM etc. Why? Well we've been hitting our targets. We've said we'll do something so the markets are giving us some room to breath.

We have more or less refinanced the bonds that are due in January 2014 - the first bonds that fall due after the bailout.

If our debts were considered unsustainable in 2010 why stop the troika funding program before this payment of (at the time) 12 bn?

If the markets believed that our debt was not sustainable earlier this year why were the yields for the bonds offered not higher?

The sustainability of our debt is not in question and has not been in question for a while, the two rhetorical questions above show that. Ultimately I think the markets have gotten a dose of cop op and decided that the best way of getting their money back is to help keep the debt sustainable. We're bouncing along near the boundary of sustainability and as long as everyone does what's in the best interest of the group it'll be okay.

If we see any more solo runs like the Greeks or the Finance ministers, then it'll be another story.

Scofflaw

poeticseraphim wrote: »

No I do not believe the garantee caused the deficit..you are missing a vital point If national debt is unsustainable the IMF seeks a writedown of that debt...oour national debt was sustainable despite the deficit. Our banking debt was not. The IMF proposed that bondholders in Irish bank suffer a writedown this was opposed by Europe and the Americans.

The IMF thought our national debt was sustainable...but crucially thought the banking debt was not.

I'm not sure they thought that - they more probably though that we'd obviously be better off without as much bank debt, and were themselves under pressure, as they still are, to extricate themselves from EU countries as fast as possible.

It's also relevant that the Irish government agreed with the ECB and Geithner rather than the IMF in that discussion. Again, that seems, on the face of it, bizarre.

poeticseraphim wrote: »

The markets i would think are acting in assumption of a deal as our debt is not sustainable without one.

The idea of a banking union and perhaps a possibilty of separating our national and banking debt has influenced the markets.

I'm not sure the markets are acting in assumption of a deal - or, if they are, they don't see the recent Helsinki announcement by Germany, Finland and Holland as preventing such a deal, since our sovereign bond rates didn't rise significantly after the announcement.

As to you OP point about Spain and Ireland being "treated differently", I don't think you're making much of a case for the claim so far - the two countries are in quite different situations, but as far as money being loaned to them goes, the money has been loaned to Spain for the banks, just as it was loaned to Ireland for the banks.

cordially,
Scofflaw