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The Fund in Spain?


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June 6, 2012 4:35 pm by Alan Beattie

Could the IMF help bail out Spain?

Tricky one. As goes the EU, so goes the IMF, only more so.

Spain wants a direct bailout of its banks, rather than lending to the government to recapitalise them, on the reasonable grounds that the latter will further increase its sovereign debt and quite possibly drive private bondholders away. (Official rescue loans mean more senior claims ahead of the privately-held bonds if there is a restructuring.)

The EU generally likes having the IMF involved in bailouts as it adds technical skill and, it hopes, credibility. However, if EU officials think their bailout funds, the EFSF and ESM, can’t recapitalise banks directly, the IMF definitely can’t: it’s a credit union of sovereigns that lends to sovereigns within the club, and that’s that.

Given the extreme jitters around eurozone sovereign debt, a full-blown EU-IMF programme might have to assume that Spain won’t be able to access the bond markets for a while. Given that its financing needs until the end of 2014 are more than €400bn, including the estimated costs of bank recapitalisation (Exhibit 14 here), this is going to involve a gigantic exposure for the ESM and IMF.

It’s possible Spain could get a shorter IMF programme like the flexible credit line, but it’s taking a risk to assume that isn’t going to morph into a bigger and longer one. One of the reasons Italy was so desperate to avoid an EU-IMF bailout was that if it stopped borrowing from the bond markets, it might be very hard to get back in.

Not for the first time, the crisis resolution tools we have aren’t necessarily the ones we want.

http://blogs.ft.com/the-world/2012/06/the-fund-in-spain/#axzz1x6qnwtpx

Edited by umbertino
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June 6, 2012 4:35 pm by Alan Beattie

Could the IMF help bail out Spain?

Tricky one. As goes the EU, so goes the IMF, only more so.

Spain wants a direct bailout of its banks, rather than lending to the government to recapitalise them, on the reasonable grounds that the latter will further increase its sovereign debt and quite possibly drive private bondholders away. (Official rescue loans mean more senior claims ahead of the privately-held bonds if there is a restructuring.)

The EU generally likes having the IMF involved in bailouts as it adds technical skill and, it hopes, credibility. However, if EU officials think their bailout funds, the EFSF and ESM, can’t recapitalise banks directly, the IMF definitely can’t: it’s a credit union of sovereigns that lends to sovereigns within the club, and that’s that.

Given the extreme jitters around eurozone sovereign debt, a full-blown EU-IMF programme might have to assume that Spain won’t be able to access the bond markets for a while. Given that its financing needs until the end of 2014 are more than €400bn, including the estimated costs of bank recapitalisation (Exhibit 14 here), this is going to involve a gigantic exposure for the ESM and IMF.

It’s possible Spain could get a shorter IMF programme like the flexible credit line, but it’s taking a risk to assume that isn’t going to morph into a bigger and longer one. One of the reasons Italy was so desperate to avoid an EU-IMF bailout was that if it stopped borrowing from the bond markets, it might be very hard to get back in.

Not for the first time, the crisis resolution tools we have aren’t necessarily the ones we want.

http://blogs.ft.com/the-world/2012/06/the-fund-in-spain/#axzz1x6qnwtpx

The Euro is finished and EU is going down the tube.

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Thanks for the encouraging words... Smile... We're scared sxxtless on this part of the world.

Don't be...it's what these bankers want you to be, they use fear mongering... Iceland told the bankers to go screw themselves and didn't pay them a dime, and they've recovered and are doing quite well... all the people need to do is stop being fearful and start getting angry.

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Don't be...it's what these bankers want you to be, they use fear mongering... Iceland told the bankers to go screw themselves and didn't pay them a dime, and they've recovered and are doing quite well... all the people need to do is stop being fearful and start getting angry.

Yes.. I saw a great report on the Iceland situation... My hat off to the Icelanders. Talk about ice nuts.

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Don't be...it's what these bankers want you to be, they use fear mongering... Iceland told the bankers to go screw themselves and didn't pay them a dime, and they've recovered and are doing quite well... all the people need to do is stop being fearful and start getting angry.

Right On HughJeffin Byrd! smile.gif

I believe Iceland will become a great example of what we all should do.

Umbertino, my heart goes out to you and all of Europe.

There is a lot of fear here too, because we are right behind you.

I hope people will stop going along with the bankers and their pawns (Governments)...

it's time to say "Enough"!!!

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The bankers are scared sh*tless that people won't fear the fear mongering.

Agreed... For one, our current Prime Minister Mario Monti will never go against Banks...

He's a Bank emanation himself as he used to be a Goldman Sachs Advisor... Just saying..... Same as one of the last Greek Prime Ministers Mr. Papademos.. A GS Advisor himself.

Quote

Umbertino, my heart goes out to you and all of Europe.

End Quote

Thank you my dear Friend... That's appreciated.

Edited by umbertino
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Thanks for the encouraging words... Smile... We're scared sxxtless on this part of the world.

Just trying to be honest my friend. The Euro has been living on borrowed time every since Greece decided not to reign in spending and just bank on the EU to bail them out. I am sorry i was not encouraging and please forgive me for being inconsiderate. I am just hoping with some measure to be put in place like placing a spending freeze on the countries that are struggling. They may have to look at vacation time and hours worked in a work week. Some measure will cause some painful changes but for the good of Europe it has to be done my friend. Now everyone knows that many countries in the EU are having problems and pumping money into them is not solving the problem. Again forgive me umbertino.

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Just trying to be honest my friend. The Euro has been living on borrowed time every since Greece decided not to reign in spending and just bank on the EU to bail them out. I am sorry i was not encouraging and please forgive me for being inconsiderate. I am just hoping with some measure to be put in place like placing a spending freeze on the countries that are struggling. They may have to look at vacation time and hours worked in a work week. Some measure will cause some painful changes but for the good of Europe it has to be done my friend. Now everyone knows that many countries in the EU are having problems and pumping money into them is not solving the problem. Again forgive me umbertino.

I was obviously joking when I said " thanks for the encouraging words".... The situation is indeed dramatic here...

Our current un-elected technocratic Gov't led by Mr. Monti was only able to tax the sxxt out of us ( unfairly I'd say cos it only taxedt he low-medium class and refused to apply a substantial tax on big assets)....No growth so far and infact people are spending less and less on everything including groceries.....Gas price is at its highest ( now with the justification f the recent earthquake they raised the price of another 2 cents per liter so now it's about 1.90 euros per liter)

Your assessment is absolutely correct... Unfortunately..... .. Nothing to forgive, my Friend.....

Edited by umbertino
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