SPAIN, THE GOOD NEWS: More haircuts….

THE BAD NEWS….It’s the ordinary Spaniard being scalped

Another satisfied c-c-c-caja c-c-c-customer

The Department of EU Commissioner Joaquín Almunia is obviously peopled by lateral thinkers: ‘Look, Iceland told the lenders to go stuff it and gave all of them a baldy haircut….let’s do that in Spain’. Boldly going where none had gone before, Almunia’s staff ordered a crewcut on investors….small savers of minimal means who purchased savings products linked to preference shares in in the lenders known as cajas, which specialise in the homebuying sector.

Kop this for Gauleiter sensitivity: the order that went out said that these savers losing their shirts “is a logical step if Spain’s banking system is to be saved”.

Startling logic: bankers overlend, con ordinary savers into buying risky stock, then shave them bald to save themselves.

This isn’t some piddling amount: most estimates put the sum between €25bn and €40bn.

Spanish bankers thus hoped that preference share holders would be forced to take an immediate haircut of between 50 and 70% – result!

But the actual result (almost absent from the Western MSM outside Spain) was a storm of protest from the citizenry. So now the Rajoy government is negotiating with Brussels to allow a compromise whereby these savers will suffer a haircut today, and then be ignored when the Cajas go bust be repaid over an as yet unspecified time period by their bank.

The talks with Almunia’s department (and higher officials in Brussels) are said to be “proceeding”. Says The Slog’s Brussels contact:

“I think [Brussels] will cave. They don’t need any more trouble at the moment.”

They may not need any chum, but somehow they attract it like flies to a turd.

Connected: Don’t mention the Icelandic recovery

 

26 thoughts on “SPAIN, THE GOOD NEWS: More haircuts….

  1. Oh how the little man has been fooled…..
    Having read the Dan Hannan piece previously linked from KFC (thanks) we are surely going to hell in a hand cart! I have always thought it odd that any country can ‘guarantee’ a persons savings up to £85k or whatever, when it is quite clear that said country is going to also be bankrupt.
    But if said country is actually allowing banks to mis-appropriate savers’ small amounts then I say bring on the disaster and lets get shot of the lying thieving (fill in your own expletive here) and start again.
    I quite like the term Apocaloptimist- it’s gonna happen, but I feel sure we will survive it in the long run………..

  2. JW,

    Slightly off topic but are you not as curious as I am as to how Spain who apparently had an unemployment rate of c. 8% in 2007, and had non startling GDP growth then, now has a whopping c23% unemployment and only GDP contracted by 0.4% in the last quarter?

    To me it does not compute.

    My conclusion is that no figures out of Spain can be trusted.

    It is good to see you highlighting the ghastly prospect of the ‘innocent’ Spanish savers being proposed to be thrown to the wolves.

    • Altergoman. I agree with you, but would extend it beyond Spain.

      Right now we need to give a hearty dose of scepticism to any economic data flowing from any of the governments. They are hell-bent on not admitting the blindingly obvious, so are heavily into creative statistics to maintain the smoke & mirrors. Although the Eurozone may be the guiltiest parties, we should also include the UK and USA, as much of their current data has ‘flaky’ written all through it.

    • @Altergoman
      One possibility is that Spaniards are shifting from the formal sector to the informal sector. This would explain some of the recorded increase in unemployment in the formal sector. Regarding the output numbers, I have always wondered how the output of the informal sector is accounted for in National Income statistics (but never enough to answer my own question). The other possibility is that the numbers are not accurate. I suspect the answer is some combination of both possibilities.

    • Spreading false rumors and news , which may lead to anxiety or panic and inciting public fear and unrest ,is punishable by law.Even more so if the news or rumors shake the public confidence to the government , army , currency et al .What about spreading wrong optimistic news , misleading the public into unrealistic expectations and illusions that all is fine when is not , what about if on purpose you spread euphoria , re assurance , confidence and you promote optimism when the truth is by far the opposite .Shouldn’t be laws against this short of thing? Shouldn’t politicians be in jail for this short of practice ?

  3. I must be missing something again here ! Either these small Spanish Investors were mis sold shares in the Spanish Banks through outright lies or thumbscrews or both…in which case it is the fault of the Spanish Banks for mis-selling and they should be liable (and not EU taxpayers) and if they cannot pay, they should go broke….with anyone above counter clerk jailed.

    ……. or Miguel got greedy and saw investing in his local bank as a great way to improve his lot…and has lost his shirt….in which case again, I cannot see why EU taxpayers should be liable.

    If I invested £500 in “Pipers Dream” in the 3.30 race and it ran in last, I would have made a bad investment with the bookies despite hoping it would better my finances…On this basis do you think I would have a precident to apply to the EU because I would have lost my investment ?

    • “these small Spanish Investors” are actually mostly pensioners, with no economic education at all. Some of them were blatantly fooled by bank offices personnel, others just signed a paper without reading it, because it was the “best” product they were offered (in terms of interest rates).

      What is this all about? Well, at some point some cajas were needing real cash, and they couldn’t obtain it from markets because nobody was lending to them. So they had to come up with a way of finding money until better financial mechanisms were put in place at higher levels of decision (AKA BCE and Brussels). So as a temporary solution, with the gov consent, and with the knowledge of Spanish Central Bank, they just took it from the most vulnerable people.
      Only when elderly groups started storming bank offices and the scam reached MSM they decided to change the preferent shares by regular shares (which nowadays are useful as toilet paper).

      • Ok, well in that case it is my scenario A …we already have compensation for fraud for mis selling of income protection system here in the UK. But this still does not explain to me why on earth European Taxpayers should be bailing out Spanish Rip Off Banks?

        In the UK we have a £85,000 government (supposed) compensation scheme if a bank goes down ….(although I pray to God that never gets tested as its very probably as big a fib as any) …..So I’d not be against a scheme where the Central EU compensates DEFRAUDED Spanish investors if their GOVERNMENT is too broke to do so…..

        But this would requre a willingness for Spain to admit the unpleasent truth that they are stunningly and utterly BROKE and would need the EU to start compensating individuals in Spain, Greece, Ireland, Portugal…wherever BANK or GOVT defraud has been proved. I’m all for any system that compensates individuals via the EU but that is probably ‘in my dreams’

        ……Sending Spanish Banks another 100 billion EUR is stark raving bonkers ……apart from paying another few months of inflated Bankia exec saleries and bonuses, is there any delusional souls out there who think this massive amount of money……( even if it ever turns up..) ….will improve the lot of those defrauded Spansh Bank customers or any average Spanish company, pensioner or taxpayer. Ask any Greek if they ever saw so much of cent of any bale out money……

  4. Thin end of the wedge.

    Having some spare Euros (a rarity these days) I decided to invest them. I was offerred by a VERY big bank a 3.25% deposit or a 5% return on a fund “safely” invested in EU government debt….

    My parents have been sold a derivative product rather than a deposit account – linked to the stock market.

    There are millions of people being fleeced and who have no idea of the risks they are running.

    Seems that the politicians think it is OK to destro the savings of voters?

    Weimar springs to mind.

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