100 Billion Euros Could Be Less Than a Third of What Spain Really Needs

A $JPM analyst surmised that Spain could need up to 350 billion euros to be out of the woods on their debt problems. But the real question is how will Spain shoulder this massive sovereign debt balloon?

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Where the wealthy live and play…

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Too much to read in this article to get out all the ideas presented in a quick note; so get to reading about the cluster fuck that is Europe.

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“Well that didn’t take long. The ink on the #Spailout is not dry yet (well technically there is no ink, because none of the actual details of the Spanish banking system rescue are even remotely known, and likely won’t be because when it comes to answering where the money comes from there simply is no answer) and we already have an answer to one of our questions. Recall that mere hours ago we asked: “We also wonder how will Ireland feel knowing that it has to suffer under backbreaking austerity in exchange for Troika generosity, while Spain gets away scott free.” We now know. From the AFP: “Ireland wants to renegotiate its rescue plan to benefit from the same treatment as Spain, which looks set to win a bailout for its banks without any broader economic reforms in return, European sources said on Saturday.”

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The Spaniards do not believe the money will be enough as they took to the streets to protest against the bailout. Essentially, they feel the banks could still fail and they would be left holding the bag o’ debt.

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With Western pressure growing on Bashar Assad over the latest massacres of defenseless women and children in Syria, Iranian officials again are warning the world against any action against the Middle East dictator.

The pro-Assad “resistance” has its finger on the trigger and the aggressors will not survive the conflict, a senior commander of the Revolutionary Guards, Brig. Gen. Massoud Jazaeri, told Mashregh, a media outlet run by the Guards. Iranian officials often refer to Iran, Syria and Hezbollah in Lebanon as the resistance front.

Mashregh reported in March that Iran’s armed forces had formed a joint war room that included officers from Syria, Iran and Hezbollah for a coordinated military response to an attack on Syria.

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With Detroit teetering over a monetary abyss, Mayor Dave Bing and the city’s new chief financial officer issued a clarion call Friday, warning bluntly that the city will run out of cash next week if a lawsuit challenging the financial agreement the city made with the state to avoid insolvency isn’t dropped.

Calling his frustration level “off the charts” and saying the lawsuit is creating an even worse financial situation than the city was already in, Bing said he has urged Detroit’s top lawyer, Krystal Crittendon, to drop the suit so the city can avoid losing a portion of $80 million the state is threatening to withhold if the lawsuit doesn’t go away.

But, Bing said, by law he cannot force Crittendon to drop the suit.

“I didn’t want to get into a lawsuit — it makes no sense to me, and nobody wins, as far as I’m concerned,” Bing said at a news media briefing Friday. “We’ve spent way too much time on this issue that keeps us from doing the things that we need to do to fix the city.”

The urgency of the financial situation and growing impatience in Lansing resulted in Bing’s push to get together with the council for a closed-door meeting Monday to try to come to some type of consensus.

“If our city runs out of money, there is no bigger crisis that we would have,” Bing said.

But City Council President Charles Pugh said he and many of his colleagues want Crittendon to stand her ground on her challenge of the consent deal. Pugh insisted Friday that it’s not out of brinkmanship, but concern that the city’s consent agreement with the state must be reviewed in court to determine whether it violates Detroit’s own laws governing the conduct of elected city officials.

Pugh said of CFO Jack Martin’s warning that the city will be broke by Friday: “We feel like that may be a bit of an exaggeration.”

Peter Letzmann, a former city lawyer for Detroit, Pontiac and Troy who teaches public administration law at Grand Valley State University, said he doubts Crittendon has the legal standing to pursue the case, which he predicted a judge will toss out.

“I’ve never seen this kind of chutzpah by a city attorney acting without the authority of the mayor or City Council,” Letzmann said.

“They’re turning out the streetlights in Detroit, but we’re spending city dollars chasing what is pretty clearly a frivolous lawsuit,” he said. “They’ve got to stop politicking here. They’re just pushing the city to bankruptcy.”

The battle ultimately could lead to an emergency manager if state officials deem the city to be in violation of the consent agreement. The deal gives the state significant control over Detroit’s finances but prevents, for now, the appointment of an emergency manager who could strip virtually all authority from Bing and the council.

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New York, June 08, 2012 — Recent developments in Spain and Greece could lead to rating reviews and actions on many of the euro area countries, says Moody’s Investors Service in the report “Rating Euro Area Governments Through Extraordinary Times — Implications of Spain’s bank recapitalisation needs and the rising risk of a Greek Exit”.

As Spain moves closer to the need for direct external support from its European partners, the increased risk to the country’s creditors may prompt further rating actions. The official estimates of recapitalising Spain’s banking system have risen significantly and the country’s indirect reliance on European Central Bank (ECB) funding via its banks has been growing. Moody’s is assessing the implications of these increased pressures and will take any rating actions necessary to reflect the risk to Spanish government creditors. Moody’s rating on Spain is currently A3 with a negative outlook.

However, Spain’s banking problem is largely specific to the country and is not likely to be a major source of contagion to other euro area countries, except for Italy, which likewise has a growing funding reliance on the ECB through its banks.

In contrast, Moody’s says that if the risk of a Greek exit from the euro were to rise further, it could lead to additional rating pressures throughout the region. Greece’s exit from the euro would lead to substantial losses for investors in Greek securities, both directly as a result of the redenomination and indirectly as a result of the severe macroeconomic dislocation that would likely follow. It could also pose a threat to the euro’s continued existence.

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BERLIN (Reuters) – German news magazine Der Spiegel reported on Saturday that leaders of European institutions are working on a comprehensive plan to rescue the euro that would include the issuance of joint euro bonds – a move Germany has repeatedly rejected.

The news magazine said European Union Commission President Jose Manuel Barroso, European Council President Herman Van Rompuy, Euro group head Jean-Claude Juncker and European Central Bank President Mario Draghi are working on plans for a “genuine fiscal union” in which individual member states would no longer be able to independently take on new borrowing.

Governments would only be able to decide how to spend money that is covered through their revenues, Der Spiegel reported. Any country that needs more money than it takes in would have to report that need to the group of euro finance ministers.

The magazine quoted four high-ranking EU planners saying this group of finance ministers would then decide which financial desires at which levels were justified and would then issue joint euro bonds to finance these new borrowing needs.

“The exclusive group of ministers would be led by a full-time chair, who could ultimately rise to the position of European finance minister,” the magazine wrote.

The weekly added that this “powerful group of finance ministers” would be controlled by a new European body in which representatives of national parliaments would have seats.

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ZURICH (Reuters) – U.S. officials seem to want an end to a dispute over wealthy Americans with hidden Swiss offshore bank accounts before the U.S. presidential election in November, the Swiss finance minister said in a newspaper interview on Saturday.

“My impression at the moment is that the U.S. wants a solution by the elections. Both sides endeavour to find a solution in the foreseeable future,” Switzerland’s finance minister Eveline Widmer-Schlumpf told Basler Zeitung.

Eleven Swiss banks – including Credit Suisse (CSGN.VX) and Julius Baer (BAER.VX) – are under investigation by the United States for aiding U.S. citizens suspected of dodging taxes with the help of offshore bank accounts.

Switzerland wants the investigations dropped, in exchange for payment of fines and the transfer of names of thousands of U.S. bank clients. At the same time, Switzerland is seeking a deal to shield the remainder of its 300 or so banks from U.S. prosecution.

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I never thought of this but there are definite parallels.

It was a currency union of 15 states in 1992. Two years later, as budget deficits spiraled out of control, hyperinflation reigned and economies shriveled, just two members of the Soviet Union’s ruble zone were left.

As Greek politicians threaten to break terms of the country’s bailout with international lenders, Spain calls for financial help, and northern European nations balk at funding the south, historians are asking whether the euro region is about to face a similar Exodus. They take a longer view of the European Union’s crisis than economists, and it’s much bleaker.

The Soviet experience tells us “an exit like this is messy and leads to loss of income and inflation, and people are right to be scared of it,” said Harold James, a professor of history atPrinceton University whose books include “The End of Globalization: Lessons From the Great Depression.” “It isn’t an attractive analogy at all because the Soviet Union states all had serious troubles for the whole of the 1990s.”

While differences between the Soviet Union and the EU are greater than their similarities, there are parallels that may prove helpful in assessing the debt crisis, historians say. Both were postwar constructs set up in response to a collective trauma; in both cases, the founding generation was dying out as crisis hit and disintegration loomed.

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Spain asked euro region governments for a bailout worth as much as 100 billion euros ($125 billion) to rescue its banking system as the country became the biggest euro economy so far to seek international aid.

“The Spanish government declares its intention of seeking European financing for the recapitalization of the Spanish banks that need it,” Spanish Economy Minister Luis de Guindos told reporters in Madrid today. A statement by euro region finance ministers said the loan amount will “cover estimated capital requirements with an additional safety margin.”

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Here is the latest statement out…

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“Just out from Bloomberg:

• SPAIN AGREES TO SEEK BANK BAILOUT, EL PAIS REPORTS
• IMF WILL SUPERVISE SPAIN BANK RESCUE PLAN, EL PAIS SAYS

And the funniest:

• SPAIN RESCUE DOESN’T CARRY ECONOMIC POLICY CONDITIONS: MUNDO

So Spain has shockingly agreed to a bank bailout without conditions. Has Germany? The chips will commence falling, where they may, shortly. In the meantime, we are days from finding out just what Germany thinks when it has to ratify (that’s right, the ESM has still not been ratified by the one country which will fund the Spanish bailout) a Spanish bank bailout. Without conditions.

From El Pais: ”

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The last 6 weeks of trade has been tumultuous to say the least. To make sense of it all peer into the minds of Wall Streets brightest minds.

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“SANTA MARGHERITA LIGURE/VENICE, Italy (Reuters) – Italy must push on with reforms to resolve its economic crisis, the industry minister said on Saturday, expressing disappointment at the euro zone’s efforts to resolve the wider sovereign debt troubles plaguing the bloc.

Speaking at two conferences in northern Italy, Industry Minister Corrado Passera and Bank of Italy governor Ignazio Visco said the crisis in Italy was not over.

“The situation is not like it was at the end of last year, when there was an emergency, but remains very critical,” Passera told a conference of young entrepreneurs on the Italian riviera.

“Europe was more disappointing than we expected, it was less capable of tackling a relatively minor problem such as Greece,” the former banker said.”

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Have you not already created enough trouble ? I’m talking to you old man. That’s right no respect, no love for you…your public life should take a dirt nap.

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“The way the Internet operates as we know it could all soon change. A recently leaked document reveals that a European-based lobby group has asked the United Nations to tax American websites that provide services abroad.

In December, the leak reveals, the European Telecommunications Network Operators Association (ETNO) approached the United Nations with a proposal that would outline a restructuring of the Internet’s business model when taking into account Web entities with an international presence. If approved, the legislation would tax American-based content providers — such as Apple, Google and Netflix — for offering services to customers overseas. Should they get their wish, the ETNO might soon usher in some serious revisions for the International Telecommunications Regulations (ITR), a legislation that deals with cross-border communications traffic that has remained untouched since its last revision in 1988.”

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If you believe the world will be saved this weekend, or at least soon, then you may want to consider some short squeeze plays to bank some serious coin.

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