EXCLUSIVE: Spain broke eurozone rules to cut bond debt costs today

FIX!

Although Madrid sources told The Slog this morning that next week’s formal Spain bailout will include “unlimited bond buying by the ECB”, market sources are suggesting this evening (5.00pm BST) that the Spanish government drove a coach and six through eurozone bond rules to artificially depress bond prices earlier today.

“The explanation is that Spanish banks have significantly increased their borrowing from the ECB, not LTRO funds, and are using the proceeds to buy Spanish debt at the auction, thereby causing yields to drop,” asserted one UK opinion leader, “Then the newly purchased bonds are used as collateral for additional ECB borrowing by the Spanish banks.  You can see that the drop in yields is far greater than the adjustment to the new OMT program.  This is a stealth Eurobond mechanism, and Germany is on the hook for 22% of the ECB liability.”

It’s not the first time the Peter-to-Pay-Paul-Ponzi scheme nonsense has reared its head in Clubmed, and it won’t be the last. But the scale and brazen nature of it makes Draghi’s subordination of the Greek bondholders look like philanthropy.

“All bets are off now,” agreed The Slog’s trusted Madrid informant and explicator, “they’re making it up as they go along, and the rules left the building long ago. A year ago it was a case of knowing smiles about the horsesh*t. Now it’s a case of watching every move like a hawk. They’ll kill the market before they’ve finished…it was bad enough destroying the credibility so much over Greece, but now the crooks have moved in, well….it can’t work, and it won’t work”.

The issue he describes is far from being restricted to Spain. An EU-IMF report into whether Greece’s debt is manageable looks set to be delayed until mid November because policymakers ‘want to avoid any more shocks to the eurozone economy’ . Bollocks: O’Drama wants a quiet life until he’s safely back in the Oval Office chair. I doubted the reality of this until last week, but despite the Mittgaffes that follow the GOP candidate wherever he goes, the Black Dude is clearly paranoid about rapid contagion screwing up his triumphal re-election. All of which might suggest that he either thinks (or more likely, is being advised) that when it comes, the Big Wave will be moving faster than a Hydron molecule.

Spain is, many of my friends out there believe, on the verge of break-up. Greece is showing signs of splintering as Left and Right battle to replace the ancien régime. Portuguese Prime Minister Pedro Passos Coelho told the Lisbon parliament that his government “was not deaf” to the fury unleashed after it announced plans to hike social security payments levied on workers.

Mario Monti was not playing host to three other leaders today as Prime Minister of Italy: he was doing so as fellow Goldman Sachs eminence grise behind Mario Draghi in the game of Rollerball now getting into its stride between the control freaks in Berlin and the sociopaths in ClubMed. Trying to work out the Venn diagram of their respective and individual motives in all this is rapidly becoming a mugs’ game. Gold is cruising upwards again, and glitz-bricks continue to sky-rocket. It really is batten down the hatches time.

Earlier today at The Slog: Why the OfCom James Murdoch verdict is about as independent as the Warren Commission

18 thoughts on “EXCLUSIVE: Spain broke eurozone rules to cut bond debt costs today

  1. Cheating in Spain is not seen in as negative a light as it is (was?) in the UK. In fact, great kudos attaches to a successful evasion of the rules. Culture is just a set of local customs…

    Next week looks to be an interesting one.

    • Swansea manager Michael Laudrup talks about the ´suitcase´, an end of season tradition that sees the most remarkable results in Spain.
      The Segunda seems especially prone to some amazing end of season musical chairs down the bottom end of the division. Worth keeping an eye on for those looking for a late summer bargain

  2. My view.Corporate sector is prudently borrowed,or cash positive.Private sector WAS grossly overborrowed,but has paid down a lot since 2008.Government was grossly overborrowed,still is,and is enjoying declining tax revenues on stagnant GDP.Democratic governments in Europe and elsewhere just cannot face imposing MAJOR cuts in public sector freebies and jobs,counterbalanced by tax cuts to maintain aggregate demand,because therein lies electoral death,they think. Australia and Canada have got it right,not least because they are not part of the EU/Euro scam,or the madness of Shalom Bernanke,MarK,Greenspan et al. who have given us inflation.So where do we go from here?For all you gold bugs ,there may be a bit left(but watch out for a falling oil price).Houses,joke.I recommend cash in the two outposts of Norway and Singapore,until the market forces reality upon the monkeys called ‘politicians’.Why does the Slog not have Sloggers from Russia,I wonder?

  3. Amazing! If anything the futurologists I follow aren’t pessimistic enough.

    They forecast that Europe will eventually work its way through its problems and start recovering in about a year.

    America will go over the falls.

    Britain? Well the IMF has enough to bail the Country out – with austerity.

    Just to demonstrate it isn’t schadenfreude, Australia isn’t looking so flash these days either. Regular news of job cuts in both the public and private sectors and of course nobody is spending.

    The Australian treasurer lost his cool yesterday and referred to “crazy republicans” in the US who risk sending that country into recession again (still?). The government talks about lowering interest rates, but the big banks have already said they can’t cut theirs because their cost of funds is already too high.

  4. “An EU-IMF report into whether Greece’s debt is manageable looks set to be delayed until mid November because policymakers ‘want to avoid any more shocks to the eurozone economy’.

    Extracts as reported on ‘Deutsche Wirtschafts Nachrichten’ – but not as yet, as far as I can make out, in the German MSM. Na klar, their mesmerisation with the Black Dude reminds one of rabbts and headlights:

    “Crash risk: Greece-Troika report kept secret until after the U.S. election

    The report on the progress of the Greek austerity programme will not be published until further notice. Officially, the troika inspectors are not yet agreed, but there are also instructions from the United States to not publish the report before the elections there in November.

    (…) The U.S. government apparently fears that the report could lead to massive turbulences in the world economy: “Before the 6th of November the Obama administration does not want anything at the macroeconomic level that could shake the global economy,” an EU official told Reuters.

    German officials have also confirmed to Reuters that the USA has expressed a desire to keep the report on the situation in Greece under wraps until after the election. (…) Transitional loans are to be used to ensure that Greece remains solvent.

    But in the meantime there are already ever more obvious signs of insolvency: because the coffers are completely empty, the city of Acharnes resolved on Thursday to suspend all of its assignments. It is therefore the first Greek city to go bust (more here).

    Even the government agency for health care services (EOPYY) announced its bankruptcy this week. EOPYY had run up massive arrears over quite some time. Representative of the organisation have complained that they no longer received money from the state. Because medical sevices were no longer being paid by the state, doctors have been giving treatments only for cash payment (more here).”

    http://deutsche-wirtschafts-nachrichten.de/2012/09/21/crashgefahr-troika-haelt-griechenland-bericht-bis-zur-us-wahl-geheim/

    Hmm; around 6 weeks after the election we have 21.12 – didn’t the Maya have something to say about that date?

    • I agree with VJ that we are certainly highly likely to ‘Live in Interesting Times’ between the Nov 6th US Election and Christmas 2012…..Mayans Calendar’s Influence or Not…

      It still seems a very odd idea to me to be apparently making an appointment in the diary for Greece to Default, another for Israel to attack Iran, mebbe another for a US backed Japan to have a navel battle with China over a few lumps of disputed rock etc…….but that seems to be the way that it could be heading…….

      I suppose the concept first came to my notice when the US Media insisted that their army only launched its attack on Iraq’s defences in Kuwait, during US Prime Time TV …..but it still seems a very strange and cold blooded approach. Any or all of those I have listed above would be likely to lead to a considerable loss of human life. ……A modern version of the Roman Coliseum entertainments perhaps?….Next Show: Friday 16th Nov at 8pm US Eastern time, Roll Up, Roll Up!

  5. Pingback: John Ward – Exclusive : Spain Broke Eurozone Rules To Cut Bond Debt Costs Today (21th Sept.) – 22 September 2012 | Lucas 2012 Infos

  6. “Hmm; around 6 weeks after the election we have 21.12 – didn’t the Maya have something to say about that date?”

    …….and Israel busting a gut to attack Iran. A nice big false flag event like an attack on USS Enterprise (which is ready for scrapping) blamed on Iran and the Black Dude will have the excuse to join them. Another step on the road to Armageddon!

    • Obama most likely isn’t looking for (nor will he fabricate) an excuse for joining an attack on Iran, since he very much doesn’t want another costly US war on his hands – especially not a very big war like this one would be.

      However, if an Iran/Israel war starts before November 6, then Obama will have no choice but to join, since not doing so would cost him his reelection. If it starts after that, when he’s already safely in the driver’s seat for the next four years, then he can, and most likely would, try to keep the US out of it.

      Conclusion: Israel will make very sure that the war starts before November 6. Unless Romney looks likely to win, of course, in which case they can count on US support regardless of timing. But Romney has probably blown his chances, and thus coincidentally also blown any chance of a postponement to the war.

      Suggestion: Cancel any vacation trips you’ve booked from mid-October onwards, and make sure to fill up your car on October 14. October 15 is the dark of the moon over the Middle East…

  7. “Crash risk: Greece-Troika report kept secret until after the U.S. election”
    How can this be a secret? We all already know what state Greece is in, does it need to be confirmed by the Troika before anybody believes it?

  8. Pingback: GREEK DEBT: under-reported in 2007, over-reported in 2009, and indeterminate in 2012. | A diary of deception and distortion

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