Could Spain Breaks Into Separate Countries?
Submitted by Phoenix
Capital Research on 10/06/2012 08:31 -0400
Spain was already experiencing a banking crisis as well as a sovereign crisis. It’s now on the verge of a constitutional crisis (as well as its ongoing sovereign and banking crises).
To whit, as the above article notes, Germany, Holland, and Finland have decided to pull back on the promise of a €100 billion Spanish bank bailout first established in June. These countries are now stating that this bailout should be included as part of the ESM mega-bailout fund’s banking program that could take years to implement.
Spain doesn’t have time for this. As I’ve noted before, Spain is facing a full-scale bank run (Spaniards pulled another €17 billion from Spanish banks in August, bringing the year to date bank run to over 18% of total Spanish bank deposits).
Now add multiple regional bailout requests, as well as 25% total unemployment to the mix and Spain is an absolute disaster. The Spanish Ibex knows it too…
Congratulations Mario Draghi, you promised unlimited bond buying and you bought less than one month’s worth of gains for Spain. If you want proof positive that Central Banks are losing their grip on things, the Ibex is it. The moment we take out that trendline again, it’s GAME OVER (what more can the ECB promise?)
“So what?” many investors will ask, “Spain is nothing in the grand scheme of things.”
Wrong.
Spain’s sovereign bond market is $2.1 trillion in size. And Spanish bonds are used to backstop hundreds of trillions of Euros worth of derivative and credit trades.
So when Spain defaults (and it will eventually) all of these assets become worthless. And all of those trades blow up. Imagine Lehman times ten.
On that note, smart investors are taking advantage of the time before this happens to prepare. At Phoenix Capital Research, we’re taking steps to insure our clients are among the winners from this debacle. We have a host of FREE Special Reports devoted to helping readers prepare for the coming Debt Implosions in Europe.
All of this is available 100% FREE at www.gainspainscapital.com
Best Regards,
Phoenix Capital Research
Spain was already experiencing a banking crisis as well as a sovereign crisis. It’s now on the verge of a constitutional crisis (as well as its ongoing sovereign and banking crises).
Secession crisis heaps pain on
Spain
Spain lurched further towards a full-?blown
constitutional crisis as Catalonia announced a snap election potentially
opening the way for the country’s most economically important region to declare
independence from Madrid.
As police in the Spanish capital barricaded the
Spanish parliament against anti-?austerity protestors, the government of
Mariano Rajoy vowed to stand firm against a drive by Catalonia for secession as
the Spanish leader faces the most critical period of his premiership.
“The hour has come to exercise our right to self
rule,” said Artur Mas, Catalonia’s president. He called the vote, which is
likely to be cast as a proxy referendum on Catalan independence, after Mr Rajoy
last week rejected his demands for greater fiscal autonomy, triggering a wave of
nationalist sentiment in the northern region.
The political turmoil within Spain came amid signs
that a German-?led group of eurozone countries were attempting to roll back an
agreement reached in June that would free Spain of tens of billions of euros in
bank bailout debt.
Under the June deal, Spain’s €100bn bank
bailout would be shouldered by the new €500bn eurozone rescue fund, the European
Stability Mechanism, rather than the Spanish government.
On paper the ESM will not be given legal powers to
take over the bank bailouts entirely until the eurozone politicians have agreed
to a federal banking supervision system. But according to senior officials Spain
has promised that its bailout will be covered even though it is scheduled to
begin in November well before a final agreement.
However, after a meeting between the
German, Dutch and Finnish finance ministers on Tuesday, the three said the ESM
would not be allowed to take over “legacy assets” recapitalised before the
banking supervision system was in place. This calls into question the
markets’ assumption that Spain’s bailout and any assets put in the
soon-?to-?be-?created Spanish “bad bank” will be covered by the deal.
http://www.ft.com/intl/cms/s/0/901894a6-?0722-?11e2-?b148-?
00144feabdc0.html#axzz27n7hfRTE
As I noted in previous articles, Spain has three
options:- 1) Spain goes the “Greek route” of agreeing to austerity measures in exchange for bailouts (which will implode the economy).
- 2) Prime Minister Rajoy refuses to impose austerity measures and is removed/ replaced by an EU technocrat who is pro-?austerity measures (like Italy experienced last year)
- 3) Spain defaults/ leaves the EU.
To whit, as the above article notes, Germany, Holland, and Finland have decided to pull back on the promise of a €100 billion Spanish bank bailout first established in June. These countries are now stating that this bailout should be included as part of the ESM mega-bailout fund’s banking program that could take years to implement.
Spain doesn’t have time for this. As I’ve noted before, Spain is facing a full-scale bank run (Spaniards pulled another €17 billion from Spanish banks in August, bringing the year to date bank run to over 18% of total Spanish bank deposits).
Now add multiple regional bailout requests, as well as 25% total unemployment to the mix and Spain is an absolute disaster. The Spanish Ibex knows it too…
Congratulations Mario Draghi, you promised unlimited bond buying and you bought less than one month’s worth of gains for Spain. If you want proof positive that Central Banks are losing their grip on things, the Ibex is it. The moment we take out that trendline again, it’s GAME OVER (what more can the ECB promise?)
“So what?” many investors will ask, “Spain is nothing in the grand scheme of things.”
Wrong.
Spain’s sovereign bond market is $2.1 trillion in size. And Spanish bonds are used to backstop hundreds of trillions of Euros worth of derivative and credit trades.
So when Spain defaults (and it will eventually) all of these assets become worthless. And all of those trades blow up. Imagine Lehman times ten.
On that note, smart investors are taking advantage of the time before this happens to prepare. At Phoenix Capital Research, we’re taking steps to insure our clients are among the winners from this debacle. We have a host of FREE Special Reports devoted to helping readers prepare for the coming Debt Implosions in Europe.
All of this is available 100% FREE at www.gainspainscapital.com
Best Regards,
Phoenix Capital Research
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