“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.
The Slog 