SPANISH BANKIA RUSE: Draghi bats the stinky ball back to Madrid

“But eeth oonly leetle beet of thyeet, Mario…”

I’m amazed it’s taken this long to be honest, but Mario Draghi’s ECB yesterday told the chaps at Bankia thanks but no thanks in relation to their planned sh*t-for euros exchange via the ‘recapitalised’ Spanish bank. As I posted earlier this week, he had no choice: otherwise every bank from Arnhem to Zaragossa would’ve been at it.

There is of course the slight problem that what he’s done breaks the ECB Support pledge, but that’s never held the Italian back before. Meanwhile, the much bigger problem is what the Band of Hope and Rajoy do now. To which the answer is probaby eat a lot of words such as “We do not need an EU bailout”.

The markets have reacted quickly, with almost every bourse down: now that the Bankia wheeze has been shot down by the European Central Bank, Spain’s borrowing difficulties must become even more intractable. 10-year Spanish bond yields are up 9 basis points to 6.53%, now something of a Bailout benchmark in the light of Ireland, Portugal and Greece’s fate. Draghi’s ECB immediately bought zillions of euros, as a result of which obvious manipulation the Pound weakened slightly against the currency. I can’t believe that rally will last, and I can’t believe Mario has unlimited amounts of money without starting to print bigtime. This is what Zero Hedge was expecting him to do last night, as what the site now calls ‘Eurocalypse’ had Tyler Hurden  chewing the Xanax once more.
The markets were also disappointed that Beijing didn’t pile in with any money after all. Well, you read it here first: The Slog never expected them to. Why put dead money into a scam fund when in six months time you’ll be able to buy every port in the Med for a dime? Anyway, the Spanish Government, Madrid sources claim, will have to inject another €100 billion into its banks because (as we’ve all known for months) Bankia’s problem is merely the uber-cloud peak of an Everest of porkies.  Although Bankia is Spain’s second biggest bank by deposits and fourth biggest by loans, it now has nowhere else to go….and the Rajoy Government simply doesn’t have a hundred billion lying around looking for a usage occasion.
One can’t help wondering how much longer it’ll be before Berlin makes its euromove. I am on the case – but as yet, getting nowhere.

48 thoughts on “SPANISH BANKIA RUSE: Draghi bats the stinky ball back to Madrid

  1. So, what happened to the “Eurobonds Lite”?
    Still can’t help thinking that Germany will pay in the end, it can’t afford not to, in more ways than one.


  2. There will be no eurobonds, and the plan currently being floated to use members gold reserves as collateral was stillborn from the start.

    There is no way in hell that Italy or Spain will let Germany/Brussels/ECB anywhere near their considerable gold reserves.

    If they did it would indicate total surrender and the markets would react accordingly.

    They want to create a European Gold Vault that they can then use to anchor the Euro and as a precursor to political union, the Americans did the same thing with Fort Knox.


  3. Just pulled this off the DT (Discus) thought it was interesting.
    “I did some research regarding the size and timescale of the UK exit from the ERM, plotting the fall of the pound against the euro and lengthening the timescale in proportion to size.
    I scaled it up to the size and time line of Europe and guess what.
    The fit on a chart is an R^2 of 0.924
    Using the a perfect R^2 of 1.0 from today it predicts the final collapse around mid July.
    Which seems to fit exactly and perfectly with the massive short positions built up in Asia by the wall street banks using mostly Asian currencies and all seemingly timed for mid July too.”


  4. Methinks the Eurobonds-lite idea is still alive in Germany but wouldn’t be operative – if at all – until 2014. Will there be any banks left by then?


  5. Fascinating. July seems like a good time. In August, the political elites all go away for a month.


  6. Pingback: John Ward – Spanish Bankia Ruse : Draghi Bats The Stinky Ball Back To Madrid – 30 May 2012 | Lucas 2012 Infos

  7. One factor not included in that prognosis,
    the US election.Chalky will do anything to prevent
    the euro immolation before Novemner.
    Whether he can,is the question.


  8. A little o/t, but I´d like to point out that the german “Free Voters Initiative” announced today that it plans to run in the 2013 elections on a “Euroexit” platform. They so far have only been represented in the bavarian state parliament, but have enough support nationwide to run for the upper house.
    Mutti will have to move big time if she doesn´t want her ass handed to her come next year (not that I believe we would make it until then).


  9. Spexit is the new term now…
    The Spanish people wished to have their own houses and created a bubble? Off with their heads!
    What? The Greek people where lured by cheap loans and lived above the standards? Off with their heads!
    (Alice in Euroland)


  10. As always, the BBC neatly sidestepped the real prime reason for QE: to reduce the cost of government borrowing and funding it. Lower UK bond yields are the only known effect of the BoE’s QE programme and it is what ~96% of QE money has been used for.
    The downside of this is that with bond yields now being so low, the Cameron Govt has a hugely reduced incentive to apply genuine austerity and as a consequence their annual deficits are still well over £100 billion for the foreseeable future and the national debt is rising.


  11. How many euphuisms are we going to get?

    Grexit, spexit, poxit, irexit, frexit and Gexit.

    How about a one term fits all policy:



  12. Too American for European tastes Chris ;-)

    But ‘Gertcha’ popped into my head, which led me to searching youtube for a Chas n Dave singalong, spotting their appropriately titled ‘Bollocks Song’ on the righthand side bar resulting in me watching a 1971 edition of TOTP with the ‘Middle of the Road’ blonde bombshell kitted out in hot pants, belting out ‘Chirpy Chirpy Cheep Cheep’

    I just love the internet…..

    Despite the shite thats going on around us!


  13. O/T But I’m a little suspicious of this story making the rounds at the moment about the “Flame” virus, are they using this as excuse for shutting down the internet for a while? Maybe all the banking networks closed down? Something is a foot I feel…


  14. It’s a nasty Trojan but any decent anti-virus program can now handle it. It’s real nastiness is in how it can suck up and trawl information, even from devices close to the infected pc (or so Sophos security says).


  15. “Why put dead money into a scam fund when in six months time you’ll be able to buy every port in the Med for a dime?”

    Indeed. There is really nothing new in the EU antics. The game is to stick somebody with the debt so socialist governments can continue to spend and spend and spend and keep getting elected by transferring tax monies and debs into entitlements.

    As long as the aggregate debt rises faster than the real growth in the EU the final outcome is bankruptcy.

    Abandon hope and get your money out of these banks and into gold, Yen, dollars or something else.



  16. Got a point here R_D. What i had in mind was the Queens and Kings of (no) Heart – not the ordinary people.
    The leaders, banksters et al, plus the tabloid media, should not cry for blood like maniacs. first because they are all responsible for getting their people in this….second because they should act calmly and try to solve this (if there’s any unpainful solution which i doubt).


  17. The Spaniards were building holiday homes for Northern European dupes, not homes for themselves. Their property sector was absolutely a bubble. Lots of those lovely holiday flats and houses belong to fools who took out mortgages they couldn’t afford for houses they didn’t need to rent to a market that doesn’t exist in a currency that makes Spain too expensive to go to on holiday.

    You can’t buck the laws of supply and demand. They get you in the end.


  18. Spain is next…. Cyprus soon thereafter….

    So…5 down…12 more to go…and the Domino is in full swing…

    You bets on the next target, Italy ? Belgium ? France ?

    When do you call the whole project (and even more than handling of the crisis) a FAILURE ?


  19. @El Sid. Thanks for posting this. This has never happened in my local NatWest bank. They don’t do sexy there.
    More flash mobs, please.


  20. Well with the debt mountain gradually deflating in Spain and Greece the Spanish and Greeks, along with the rest of the PIIGS, are going to find themselves with no money at all. This will lead to universal unemployment. They will have no choice but to make full use of the Schengen laws and move to the places that will still have money – those in Northern Europe.

    I wonder how much mass immigration we will get in the UK before people decide that they really have had enough and that Brits don’t really give a flying fig for the futures of other Europeans when the chips are down?


  21. @ BT
    If the Reuters article is true, and this does not force the politicos to organise a Referendum. Then nothing will.

    We might just as well give up, scrap Westminster, go for Regional Assemblies, join the Euro. Just act like the nodding dog and just say yes, whatever you want just take it.


  22. Last time I was there (2 weeks ago), Seville was still in Spain, so they were speaking Spanish, not Portuguese!


  23. @ J s

    “I wonder how much mass immigration we will get in the UK before people decide that they really have had enough and that Brits don’t really give a flying fig for the futures of other Europeans when the chips are down?”

    That’s interesting, you say that as if you really believe it matter one jot what ‘the people’ think, one or another. I think you are wide of the mark.


  24. @Lupulco: I agree if the new draft law is intended to apply to the whole EU 27 and our own govt fail to get approval from the electorate. But it could be modified so as only to apply to EZ members, especially if Britain vetos it. We’ll have to wait and see and hope our politicos and MSM don’t hide it from us.


  25. Yes, and may I also add that there are 1m+ NEW houses that have been built or part built but are not sold – and are still being built. That is the main cause of the Spanish problem, the banks lent recklessly to construction companies that built flats and houses all over the place that now cannot be sold even at cost (let alone the previous 150% mark up). Serious is far to mild a word. Catastrophic is more like it. The longer this persists, the more the unsold houses deteriorate and the worse the ultimate write off. What do you bet that Madrid is cooking up a monster demolition fund for unwanted housing, usable of course only when the banks have taken the hit, and financed by the EU?

    So to summarise, houses have fallen 50% in value and are still falling, there are over 1m of them unsold, the country can’t afford to fix the problem that gets worse over time, and the banks have yet to recognise the full size of the upcoming write-off. A decade to solve this, and zero confidence in Spain as an investment location for quite a lot longer. Oh, dear. Isn’t real estate a pain?


  26. @Carys: If Spain pulled out f the EZ and went back to the Peseta, there’d be a rise in demand for some of cheap villas at those prices. Surely the Spanish Govt have done some numbers on this?


  27. According to that nice Mr Clegg, we’ll not be doing anything to stop any EU citizens availing themsleves of the UK’s hospitality, whatever their reason for coming here.

    I wonder if that same nice Mr Clegg will be out on the streets, taking it from the put-upon and finally exploding Brits when all the uncontrolled immigration shit really hits the fan ? Somehow I doubt it. He’ll already be back at his adopted Spanish family’s hacienda, counting his substantial EU pension fund.


  28. Pingback: Under Starter’s Orders | A diary of deception and distortion

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