sovereign default

German Banks Need $175 Billion

Mark Noonan1 Comment

From Reuters:

Germany’s 10 biggest banks need 127 billion euros ($175 billion) of additional capital, German newspaper Frankfurt Allgemeine Sonntagszeitung reported, citing a study by economic research institute DIW.

The paper on Sunday cited Dorothea Schaefer, research director for financial markets at DIW, as saying the ratio of banks’ equity capital to balance sheet total needs to rise to at least 5 percent.

A source said this month that the International Monetary Fund has estimated European banks overall could face a capital shortfall of 200 billion euros…

And from what I’ve heard, German banks are the healthy ones…you get to France and Spain and you start to find banks with really bad finances.

Bail outs and free money and borrowing and printing…all to keep Greece from defaulting and thus spinning the Eurozone down to destruction.  And what has it all accomplished?  Greece is still going to default (in a real sense, Greece already has…but the official announcement hasn’t been made by the Ruling Class, therefor the MSM doesn’t admit it, either) and once-stable economies – like Germany’s – are also being ruined.  All they did was throw good money after bad…it would have been better if Greece had defaulted two years ago.  Just as it would have been better if back in 2008 no one had stepped in to “save” the global financial system.  Sure, it stopped a Great Depression…but only for a little while.  We’re still going to get one.

It would be the irony of ironies if Germany’s financial plight proved the final trigger for the collapse.  The Germans – with long memories of pre-WWII financial troubles – kept their financial house in order.  To be sure, Germany’s welfare State is just as unsustainable as any in Europe, but at least the German’s had a handle on it…and Germans remain highly productive workers so they are at least generating wealth to pay their bills.  Not so in the rest of Europe…elsewhere, you do have the welfare State (often more generous than Germany’s) but without anyone willing to do any hard work, at all.  Now Germany threw her weight behind the irresponsible European Union members and will pay a price for being generous rather than realistic. The really bad news is that if Europe does fall apart, I bet dollars to donuts that the lazy parts of Europe will blame Germany…welfare bums don’t like it when the spigot is cut off and they tend to blame those who hold down a job.

HAT TIP:  Mish’s

Watching the Euro Crisis

Mark Noonan6 Comments

Mish notes that Greek 1 year bonds have hit 108% – meanwhile, over in Italy (from Bloomberg):

Italian bond yields surged at an auction today and Greek Prime Minister George Papandreou failed to reassure investors that his country can avert default as the euro region’s debt crisis worsened.

Italy sold 12-month bills today to yield 4.153 percent, up from 2.959 percent a month ago as demand fell…

I seem to remember Greek 1 year bonds being something like 4 or 5% a year ago…this is an economic model starting to unravel.  And it is kind of hard to keep a lid on it when you read stories from Europe of plans for an “orderly default” for Greece.

Could be a very wild, financial ride this week…

UPDATE:  Greek 1 year bonds reach 139%.

Meanwhile, Over in Europe

Mark Noonan6 Comments

From Ekathimerini:

The government is facing the possibility of not being able to pay wages and salaries in October if its international creditors do not approve the pending 8-billion-euro sixth installment immediately.

The country’s foreign lenders have made disbursement conditional on the government’s adoption of new measures that will target the collection of at least 1.7 billion euros. Without the sixth tranche, the public purse will be 1.5 billion euros short on October 17.

The prospect of a freeze in payments appeared even more serious on Thursday, after Greek commercial banks failed to cover the sum of 300 million euros of supplementary, noncompetitive bids for Tuesday’s auction of T-bills, providing only 155 million. The shortfall is interpreted as a clear message by banks to the government that they are unwilling to fund future issues of T-bills…

Greek one year bonds are approaching 100% as the financial world fully expects a Greek default some time in the next 12 months – which means that Money is figuring there is nothing the European Union can do to avoid default.  Money is right – there isn’t anything.  Oh, they could maybe put it off for a while, but they can’t stop it.  Greece owes too much money and no elective government of Greece would ever have popular support for bankrupting the people of Greece so that banksters can be bailed out (a dictatorship could do it…and one does wonder if the Euroweenies are considering that?).

And once Greece does default, look out!  The financial world will be in for a crash like no one has ever seen before.

HAT TIP:  Mish’s

UPDATE:  More on the Eurocalypse.

IMF Official Expects Greek Default

Mark Noonan5 Comments

Over at Noonan for Nevada I note that Greek one year bonds have rocketed to an amazing 72%, now comes this Zero Hedge:

While the US was panicking over a double zero jobs report, things in Europe just fell off a cliff. As both the WSJ and Reuters report, it seems that the second Greek bailout, following repeated and consistent disappointments by Greece which has resolutely refused to comply with the terms of its fiscal austerity program, has just collapsed.And with the US closed on Monday: long a counterbalance to European risk pessimism, this week (especially with the news fro the latest FHFA onslaught against global banks) may just be the one that “it” all comes to a head. But back to Europe, and more specifically Greece, which it now appears is doomed. “I expect a hard default definitely before March, maybe this year, and it could come with this program review,” said a senior IMF economist who is keeping close tabs on the situation. “The chances for a second program are slim.” …

And remember, Italy and Spain are also on the financial chopping block – it has just been the belief of the Eurozone leaders that if they can save Greece, they can save the entire Eurozone.  Maybe that was true, but what has become clear by now is that Greece cannot be saved…the financial requirements to be placed upon the people of Greece are not politically possible for an elected Greek government to impose (additionally, in my view, even if the Greek people willingly embraced the austerity measures it would not be enough…Greece – like Spain, Italy and so many other nations – owes more than it can ever repay).  So, default.

Some rumors have had it that all the Eurozone leaders were ever trying to do was find a safe place to crash land the Greek economy…knowing all along that default was necessary, they just wanted it to happen in the least damaging manner possible.  I don’t hold to that view – Greek default being inevitable, the sooner it happens, the better.  The longer you keep trying to bail out Greece the more debt is involved and thus the bigger the hit when the default happens.  I think the Ruling Class of Europe really thought they could manage this…the Masters of the Universe never imagined that there wasn’t some way to borrow, print and steal their way out of the jam, as they have done so many times in the past.

But now they are rather stuck…no one in Europe wants to get further on the hook for Greece.  Default must happen, and keeping things afloat even for another full year won’t make it any better for those who continue to extend Greece credit.  Maybe there are one or two more rabbits for the European Central Bank to pull out of the hat, but I don’t think so.  Get ready for an interesting financial time.