Advertise On EU-Digest

Annual Advertising Rates

4/19/12

Spain Is The Land Of Financial Magical Realism - by Raul Ilargi Mendoz

"These days when I read about Spain I'm wondering more and more how and why it is that the country has any access at all left to international finance markets. The bond auction this week was even sort of bearable, even as yields rose. I'm guessing that either investors have a hard time reading the news or they're going double or nothing in a risk-on bet that Germany and the IMF (China?!) will come to the rescue."

Oh lordy. The Spanish sovereign is being propped up by its own defunct banks. Which get the money to do the propping up from the ECB (re: Germany). That’ll go over well in Berlin once it's fully understood.

Not all of the €316.3 billion the banks borrowed as of March goes to the state and its bankrupt bank bailout fund, however. Quite a bit also is used to buy Spanish government bonds. Which is a sort of official goal of the LTRO, so Berlin can't say much about it."

The formula is as follows: Bank saves sovereign saves bank saves sovereign. Bank saves sovereign with ECB money, and sovereigns rescue their lenders with funds borrowed from the European Union. The Spanish zombie stalks the Madrid and Barcelona midnight streets bleeding German euro's. Magical realism at its best.

No comments: