Sovereign debt bubble thread

[Sheilbh]

My uni offers German classes, but they are not required to graduate. Anyway, quite a few engineers do end up there. Though the people I know have mostly gone to The Netherlands where AFAIK taxes are significantly lower at least for a few years and it's easy to get by just with English.

The Dutch have a really generous amount of tax allowances for expats.  It's horrible if you're a national though

[MadImmortalMan]

Mark Grant making Spain look less good than we thought:

Fighting With Spanish Windmills

When I first attempted to find a more realistic debt to GDP ratio for Spain, Belgium, Italy et al I did it on a stand-alone basis; no inclusion of their European liabilities. When I approached Germany, given their size and importance in the EU, I focused upon their liabilities to the European Union. Several institutions have since asked me to consider the total liabilities for each country as every nation in the European Union has national debts as well as debts for their percentage of ownership for the EU and the European Central Bank. Using the combination of national liabilities and any nation's percentage of EU/ECB liabilities one then could ascertain a final and complete picture of a real debt to GDP number that, unlike the Eurostat data, would be inclusive of sovereign guarantees, contingent liabilities and their responsibilities to the EU and the ECB. This schematic then would tell each of us what a given country actually owed so the total reality could be assessed for judgment.  Given that Spain is currently in focus and that nowhere that I have ever seen has there been an accurate national debt coupled with Spain's European debt schematic; I have decided to provide you one.


The Data

Spain's GDP                                                $1.295 trillion

SPAIN'S NATIONAL DEBT

Admitted Sovereign Debt                                 $732 billion
Admitted Regional Debt                                   $183 billion
Admitted Bank Guaranteed Debt                     $103 billion
Admitted Other Sovereign Gtd. Debt               $ 72 billion
Total National Debt                                         $1.090 trillion

SPAIN'S EUROPEAN DEBT

Spain's Liabilities at the ECB                           $332 billion
Spain's Cost for the EU budget                       $ 20 billion
Spain's Liabilities for the Stabilization Funds   $125 billion
Spain's Liabilities for the Macro Fin. Ass. Fund $ 99 billion
Spain's Guarantee of the EIB debt                  $ 67 billion
Spain's Total European Debt                           $643 billion

--------------------------------------------------------------------------------------------------

Spain's National and European Debt                $1.733 trillion

Spain's OFFICAL debt to GDP Ratio                     68.5%

Spain's ACTUAL Debt to GDP Ratio                  133.8%

[citizen k]

http://www.scribd.com/doc/88388379/Investment-Focus-The-Pain-in-Spain

[citizen k]

http://www.scribd.com/doc/87800486/Spanish-Banks-Will-Need-Bailout

[DontSayBanana]

The pain in Spain throws investors before trains.

[Sheilbh]

Focus looks to be turning back to Spain (and maybe Italy):

European stock markets rocked by panic selling as debt crisis reignites
Investors demanding high premiums for holding Italian and Spanish bonds as fears of double-dip recession grow
Heather Stewart, Larry Elliott and Giles Tremlett in Madrid
guardian.co.uk, Tuesday 10 April 2012 20.13 BST

Europe's sovereign debt crisis exploded back into life on Tuesday, with markets across the continent rocked by a wave of panic selling amid renewed fears about the impact of savage austerity measures in Spain and Italy.

The mood of uneasy calm seen across Europe since the Greek bailout in February was shattered as financial markets took fright at evidence of a double-dip recession and growing popular opposition to welfare cuts and tax increases.

Italy and Spain, the eurozone's third and fourth biggest economies, were at the centre of the market turmoil, with investors demanding an increasingly high premium for holding their bonds.

"Spain is right in the centre of a European storm," admitted finance minister Luis de Guindos, who declined to rule out an eventual bailout but insisted it could be avoided.

In Italy, Mario Monti's coalition government is facing growing hostility to reforms of its labour market, while the sheer size of the country's public debt made it an obvious target for nervous traders. The prospect of Greek voters rejecting austerity and the French electorate denying Nicolas Sarkozy a second term as president was also weighing on the markets.

The Greek government said it would hold a general election on 6 May, with opinion polls showing support for the mainstream pro-austerity parties is too weak to allow them to form a government.

"Spain is a big focus right now and even Greece will be coming back into the picture as it looks for another tranche of aid, so this eurozone debt tragedy is not going away, but seems to be getting worse," said Daniel Hwang, senior currency strategist at Forex.com in New York.

Interest rates on 10-year Spanish bonds hit 6% for the first time since January, when Europe's leaders were battling to agree a bailout deal for Greece and secure the future of the eurozone. Shares in Madrid dropped by almost 3% to hit their lowest level since March 2009.

In Italy, share prices slumped by 5% on rumours that the government was preparing to downgrade its growth forecasts, and trading in the shares of several of its banks was suspended after they fell sharply.

Shares were also much lower on Wall Street, where the fallout from Europe exacerbated fears that the US recovery is petering out. Disappointment at last week's unemployment figures had already been weighing heavily on investor confidence.

By lunchtime in New York, Wall Street appeared to be heading for a fifth successive day of decline, with the Dow Jones having lost 170 points, or 1.33%. In London, the FTSE 100 closed down 128 points, at 5,595.55. Oil prices also fell sharply amid concerns about the prospects for growth on both sides of the Atlantic and in Asia, with the price of a barrel of crude falling by more than $2.

In contrast, safe haven assets such as gold, the US dollar and bonds in the US, Germany and Britain were all in demand. "The market went up on a wave of liquidity-induced euphoria, and as usual overshot. Now the clever boys have decided to get out," said Charles Dumas of Lombard Street Research.

Europe's politicians had hoped that Greece's second bailout, and a battery of emergency measures unleashed by the European Central Bank, including its long-term "repo" operation, which offered cheap money to troubled banks, would draw a line under months of economic chaos. But Erik Britton, of City consultancy Fathom, said: "The LTRO [long term refinancing operation] and all those things, all it's done is bought a bit of time, but it hasn't addressed the structural problems, even slightly, even for Greece."

He predicted that the ECB could be forced to take fresh rescue measures in the next few weeks to prevent strains in Europe's banking sector from turning into a credit crunch, while in the longer term several more countries – including Spain and Italy – would eventually be forced to write off a proportion of their debts before the crisis is over.

The euro came under pressure on the foreign exchange markets as the mood darkened on Tuesday, losing 0.2% against the dollar, to $1.3080, and more than 1% against the yen. David Song, Currency Analyst at DailyFX, said: "The single currency is likely to face additional headwinds over the near term as the region continues to face a risk for a prolonged recession."

Spanish prime minister, Mariano Rajoy, speaking in the country's senate, warned that his government must stick with its austerity plans, saying: "There's no doubt that much of Spain's future is at stake and also economic growth and the creation of jobs over the coming years."

But the central bank governor, Miguel Angel Fernández Ordóñez, added to the mood of anxiety by warning that unless the economy improves, the country's struggling banks will need a new government bailout. Successive waves of austerity measures have already driven Spanish unemployment to 23%. Some 50% of young people are out of work.

Jane Foley, currency strategist at Rabobank, said: "The Spanish government appears to be losing the battle to restore budgetary credibility while each additional austerity measure serves to feed the recessionary backdrop."

In London, Barclays shares fell by 6% to 206p and were the second-biggest faller in the FTSE100 amid fears about its troubled Spanish operation. In February Barclays borrowed €6bn from the ECB's cheap loans scheme to pour into its Spanish operations.

The fresh bout of turbulence comes as the world's finance ministers and central bank governors prepare to fly to Washington next week for the half-yearly meeting of the International Monetary Fund. Following the measures taken by the ECB, the fund had been hopeful that the talks would be less fraught than those last autumn, when Europe's leaders were told to get to grips with their problems.

Christine Lagarde, the IMF's managing director, will almost certainly use the renewed crisis in the single currency zone to seek support for an increase in the fund's resources. But several countries, including the UK, have signalled that they would be reluctant to contribute significant new funds to the IMF unless they can be convinced eurozone leaders have done everything possible to tackle sovereign debt.

No doubt the best response will be to fulminate against Anglo-Saxon speculators and impose more austerity measures.

[Admiral Yi]

Your irony is lost on me Shelf.  Generally it's one or the other.

[Sheilbh]

Your irony is lost on me Shelf.  Generally it's one or the other.

Germany tends to go for both.  The impression I've got is that the German elite broadly think they've settled the Eurozone's problems or are on their way to, only sulking Brits or speculators would bet against the Eurozone.

[The Larch]

No doubt the best response will be to fulminate against Anglo-Saxon speculators and impose more austerity measures.

Nah, we have moved on from blaming Anglo Saxon speculators to solely blaming German politicians.

[The Minsky Moment]

Focus looks to be turning back to Spain (and maybe Italy):

Which is odd b/c what facts do we suddenly know now about Spain that we didn't know last month or the month before?

[Razgovory]

I guess that news that Greece would default in on the 20th of March turned out to be untrue.  Who posted that, originally?

[Sheilbh]

Which is odd b/c what facts do we suddenly know now about Spain that we didn't know last month or the month before?

True enough.

Is it clearer that Spanish banks may need a bailout?  I ask because the Commission said they don't think Spanish banks will need recapitalising from the Eurozone.

I guess that news that Greece would default in on the 20th of March turned out to be untrue.

That's because they got a bailout and restructured their debt.

[DGuller]

Focus looks to be turning back to Spain (and maybe Italy):

Which is odd b/c what facts do we suddenly know now about Spain that we didn't know last month or the month before?

We now know that the focus is on Spain.

[Iormlund]

No doubt the best response will be to fulminate against Anglo-Saxon speculators and impose more austerity measures.

Nah, we have moved on from blaming Anglo Saxon speculators to solely blaming German politicians.

As much sa I like teasing Zanza that's not really true.

Focus looks to be turning back to Spain (and maybe Italy):

Which is odd b/c what facts do we suddenly know now about Spain that we didn't know last month or the month before?

I don't know who 'we' is, but in that time Spaniards have lost any confidence or even hope in Rajoy and his goverment. Their gross incompetence in most areas has already reached Zapatero-like magnitude. There will be no Monti Effect in Spain.

Which is odd b/c what facts do we suddenly know now about Spain that we didn't know last month or the month before?

True enough.

Is it clearer that Spanish banks may need a bailout?  I ask because the Commission said they don't think Spanish banks will need recapitalising from the Eurozone.

A couple have already been bailed out. More will undoubtedly follow. Most banks have been hiding their toxic loans by allowing borrowers to defer payments. Problem is time is running out and unemployment not only has not improved in the last couple years: it is getting worse fast. So when the time comes those who couldn't meet mortgage payments before are not likely to do so now either.

[Neil]

Focus looks to be turning back to Spain (and maybe Italy):

Which is odd b/c what facts do we suddenly know now about Spain that we didn't know last month or the month before?

What makes you think that facts and reason have anything to do with a panic-based economic system?