How long to a full bailout

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This topic contains 51 replies, has 15 voices, and was last updated by Profile photo of DBMarcos99 DBMarcos99 3 years, 11 months ago.

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  • #56939
    Profile photo of katy
    katy
    Spectator

    Spanish borrowing costs have shot up to 7.22%…surely the writing is on the wall πŸ˜•

  • #111026
    Profile photo of logan
    logan
    Participant

    I agree. I have consistently written by the autumn Spain will probably run out of money. Their bond auction yesterday failed to attract much interest from the bond markets.

    The country is in dire shape.

  • #111027
    Profile photo of Anonymous
    Anonymous
    Participant

    Logan, if I may, how long do you estimate before the situation bottoms out.

  • #111028
    Profile photo of logan
    logan
    Participant

    It depends on your meaning of ‘bottom out’.
    If you mean when property prices stabilise then that’s anyone’s guess. What complicates that in Spain is the law which forces mortgage holders to repay the entire debt plus costs even though a property might have been repossessed.

    What happens in practice is the debtor sits tight pays interest only to the bank and hopes to sell it for what they owe to get out of trouble. So asking prices don’t drop, the property doesn’t sell and the market is struck. Low offers if there are any get rejected.

    This log jam is usually broken when the debtor can’t even manage the interest only payment and is foreclosed. That takes time.

    If you mean the Spanish economy bottoming out and starting to recover my best estimate is without any substantial EU/IMF stimulus anything up to 5 years or even longer. The performance of the global economy is crucial to that and all educated predictions are that in 2013 it will substantially worsen.

  • #111029
    Profile photo of Anonymous
    Anonymous
    Participant

    Thanks, yes I mean for property. I’m looking to pounce on a cheap holiday villa.

  • #111030
    Profile photo of logan
    logan
    Participant

    Cheap is not cheap in this market, don’t be deceived. Property in Spain has at least 20% to fall yet before values are corrected to reflect the situation in the wider economy.

  • #111031
    Profile photo of Anonymous
    Anonymous
    Participant

    I see, it is however hard to see just which properties have dropped and which havent and if they need to drop further or what. Prices seem to fluctuate wildly.

    Here is one example: http://www.fotocasa.es/Building/Building_Detail.aspx?ai=127310392&opi=105&tti=1

    Now would you say something like that, at that price is already priced to sell or needs to drop 30%?? further?

    Obviously its hard to say looking at an online add, but there are many like this, same size, same condition, same location.

    Its difficult to know what the true price is when these similar properties range from 40-100k

    Thanks.

  • #111032
    Profile photo of angie
    angie
    Spectator

    I think that new interest rate of 7.22% is the highest it’s reached then, supposed unsustainable territory so full bailout will come if it stays above 7% πŸ™„

    Unemployment rate highest in Eurozone and may go higher after Summer tourist season.

    Property market predicted to fall further, even another 20%+

    Spanish interest repayments above 7%

    Does this mean if Spain reverts to Peseta one day/devalues to 2nd tier Euro, that Rioja, Boquerones and Serrano prices will fall, I love those things so some good news maybe, and the sun will still shine? πŸ˜›

  • #111033
    Profile photo of Fuengi (Andrew)
    Fuengi (Andrew)
    Participant

    since it seems to be on rural land, and quite a small plot at that, I would say 30.000€ (if that! based on area).
    Warning: its a 100m2 bungalow (casa de campo) with 2500m2 of land. That is quite a large houses for the size of plot (legal build sizes). Also make sure about the pool area (licenses, etc…).

  • #111034
    Profile photo of Anonymous
    Anonymous
    Participant

    Sorry, i am now hijacking this thread, apologies katy.

    I thought as much from what i can tell 50-60% needs to come of most prices.

    Would these sellers even entertain those discounts for a cash buyer? I can wait if not.

    Re the plot i agree i see a lot of houses above the 2% rules, if it were new i would outright say it is illegal but as some seem to be 30+ years old were there not lesser rules back then?

    If not then i guess they would have to be illegal too no?

    Regardless i would do my homework before buying re paperwork (like that can be trusted :lol:).

    Cheers!

  • #111035
    Profile photo of logan
    logan
    Participant

    Fuengi is right. I personally would not touch a property such as that at any price but 30k might be OK if it’s totally legal and you like the idea of living there.
    Get a good lawyer with proven honesty. Hard to find I know.

  • #111040
    Profile photo of Anonymous
    Anonymous
    Participant

    I don’t think that is a proper swimming pool it looks like an irrigation pool they are common in the area i remember seeing it on a program about rural farm houses etc in the valancia area

  • #111041
    Profile photo of Anonymous
    Anonymous
    Participant

    Yeah they are common, a way around the law it would seem. Someone once said to me make sure whatever you buy is legal. Ha ha ha. Im now realising why so many bought illegal property’s. Because there is no choice, they are all illegal in some way, back then it was the done thing they said… how would one think any different. πŸ™„

  • #111099
    Profile photo of logan
    logan
    Participant

    Spain’s woes escalate. Borrowing costs hit 7.53% before falling back slightly today. Murcia and six other regions are reported to be bankrupt and heading to Madrid for help. Last quarter GDP -0.4%. Ibex down an additional 3% on Fridays close of 5.75%
    Full blown bailout can only be weeks away now, then what?

    The economy is a basket case. Spanish property toast. http://www.bbc.co.uk/news/business-18950896

    I had a call today from a contact offering me some property at -80% of it’s peak value. Desperation indeed. 😯

  • #111102
    Profile photo of Anonymous
    Anonymous
    Participant

    A picture paints a thousand words (make that a graph):

  • #111104
    Profile photo of katy
    katy
    Spectator
  • #111108
    Profile photo of logan
    logan
    Participant

    I do think there is a large dose of financial market hysterics going on over Spain at the moment.

    Since Rajoy took over he has made amazing efforts to deal with the debt issues left behind by the now discredited and disgraceful Zapatero government.

    The markets are not prepared it seems to give these austerity measures a chance to work. The Spanish regions were always a nasty accident destined to happen. The markets have always known that, yet here we now see them crying ‘havoc’.

    I don’t buy it.

  • #111217
    Profile photo of angie
    angie
    Spectator

    Monday 10.30 am UK, BBC News has just announced that Spain’s bailout is imminent, apparently has been agreed, at the same time that their economic recession has deepened. So far no figures for bailout have been announced. πŸ™„

  • #111218
    Profile photo of katy
    katy
    Spectator

    Not a bailout according to Spains media πŸ˜‰ Just a tiny! bit of bond buying πŸ˜† πŸ˜†

  • #111219
    Profile photo of angie
    angie
    Spectator

    Bailout or Bond buying? πŸ™„ Hammering out a 300 billion bailout according to this article just in, that will buy a lot of Bonds methinks πŸ™„

    http://www.ibtimes.co.uk/articles/368128/20120 … -banks.htm

  • #111220
    Profile photo of logan
    logan
    Participant

    @katy wrote:

    Not a bailout according to Spains media πŸ˜‰ Just a tiny! bit of bond buying πŸ˜† πŸ˜†

    Yes Katy I read an interview with the head of Murcia’s regional government head who said they had not requested a bailout they were simply applying for a loan from central government at a more advantagous rate than the markets. πŸ˜†

    Saving face in Spain is everything. Nobody buys it for a minute but it makes them feel better.

  • #111221
    Profile photo of katy
    katy
    Spectator

    I read yesterday that Spain’s debt is too big to bailout. Estimates given were that 534 billion was needed and there isn’t enough in the pot. Also rumblings from countries outside Europe as to the extent the IMF is helping Europe…quite right too that is not what it was set-up for!

  • #111435
    Profile photo of angie
    angie
    Spectator

    On BBC Ceefax Business page 200, one of the former architects of the Euro Otmar Issing, has now said that ‘some members of the Eurozone may have to leave it soon’, I think the first admission from that crowd that it’s a cock-up all round and maybe the ‘writing is on the wall’! πŸ™„

  • #112215
    Profile photo of angie
    angie
    Spectator

    Just read this in The Olive Press:

    http://www.theolivepress.es/spain-news/2012/09/14/spanish-public-debt-hits-record-high/

    The whole Spanish financial and property mess seems like a blooming farce now, it goes on and on, how can any long term stability to it’s markets whether financial or property be assured all the time this mayhem and inaction continue?

    People must have cojones of steel to invest in Spain while this continues. πŸ™„

  • #112222
    Profile photo of katy
    katy
    Spectator

    Interesting article here on the new new new bond buying πŸ˜†

    http://synonblog.dailymail.co.uk/

  • #112230
    Profile photo of katy
    katy
    Spectator

    Spains borrowing costs back to over 6%…didn’t last long did it πŸ™„ One newspaper calls Spain the spanner in the works!

  • #112231
    Profile photo of logan
    logan
    Participant

    It’s reported there is a dispute between Rajoy and his finance minister regarding the necessity for the bailout. However with almost €40bn of debt to repay in a matter of weeks it’s inevitable.

    That’s why the bond yield rose today. The market is licking it’s lips.
    Why? Because The ECB cannot step in and buy Spanish debt until the country requests help. Once that happens the IBEX market will rise.

    Rajoy is playing hard ball and will be forced into an embarrassing climb down. He is a very clumsy politician.

  • #112232
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    @logan wrote:

    It’s reported there is a dispute between Rajoy and his finance minister regarding the necessity for the bailout. However with almost €40bn of debt to repay in a matter of weeks it’s inevitable.

    That’s why the bond yield rose today. The market is licking it’s lips.
    Why? Because The ECB cannot step in and buy Spanish debt until the country requests help. Once that happens the IBEX market will rise.

    Rajoy is playing hard ball and will be forced into an embarrassing climb down. He is a very clumsy politician.

    It’s certainly the case that de Guindos wants to request the loan (or bond-buying) and Rajoy as always is giving an air of arrogance…
    I’m not so sure the Ibex can rise much further at this point – it was slumping towards 6000 only a few weeks ago now it’s around 8000. It’s said that companies are starting to make more money now, but that could easily stop if consumer panic sets in.
    I’m still not 100% convinced as to Rajoy’s game. People have been saying that he’s trying to delay the bail-out past the Galician elections. But we’ve been here before, and the electorate are surely not going to be convinced by yet another “this won’t happen under my watch” statement. But another reason makes sense. His government have imposed a lot of cuts, tax rises and unpopular changes already. Rajoy knows he can’t do much else without inciting serious rebellion. So he’s provoking the markets to stop lending at market rates, so he is “forced” to ask for the bailout and thus further cuts can be blamed on the “men in black”. Unless he really is so stupid as to make things worse in order to win some local votes in Galicia…

  • #112236
    Profile photo of logan
    logan
    Participant

    mmmm you may be right Marcos but almost all commenters believe Spain cannot continue without a bailout. So we can only surmise Rajoy has his own agenda. Blaming the markets is an old game which won’t wash. Galician elections? Who on this planet gives a monkeys?
    Oh yes, certain provincial politicians who used to represent the region and is now in charge of the country. You couldn’t make it up. πŸ‘Ώ

  • #112292
    Profile photo of angie
    angie
    Spectator

    Spanish Banks’ bad debts at new record high, naughty Sabadell etc πŸ™„ however there was an oversubscribed successful auction of Spanish Bonds today making it look more likely of a full Spanish Sovereign Bailout to come πŸ˜•

    http://www.bbc.co.uk/news/business-19633964

    πŸ™„

  • #112325
    Profile photo of Anonymous
    Anonymous
    Participant

    I’m interested to see what conditions the ECB sets when it does negotiate a bailout with Spain. Serious reprocussions for the banks and their bloated property portfolios if the Germans get their way.

  • #112329
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    @angie wrote:

    Spanish Banks’ bad debts at new record high, naughty Sabadell etc πŸ™„ however there was an oversubscribed successful auction of Spanish Bonds today making it look more likely of a full Spanish Sovereign Bailout to come πŸ˜•

    Isn’t it the other way around? Rajoy is trying to avoid asking for the bail-out (as it will need further harsh measures) and getting a successful auction of Spanish bonds at a lower rate allows him to do this.
    It’s being reported that behind the scenes various leaders are trying to force Rajoy into asking for the bail-out, but none of us here really know how true those stories are.

  • #112332
    Profile photo of angie
    angie
    Spectator

    Yes, it looks like Rajoy is either trying to avoid asking for a bailout or maybe paying lip-service to that effect, however there’s growing pressure on him and Spain to ask for one. I expect they will ask for one but not sure when πŸ™„

  • #112334
    Profile photo of Anonymous
    Anonymous
    Participant

    I’ll ask on his behalf…..it’s not difficult…. ‘Europe, ie: Merkel, we need trillions of Euros to keep afloat. Cash would be best. Gracias’.

    There we go. Easy.

  • #112343
    Profile photo of Chopera
    Chopera
    Participant

    I’m afraid it’s the part where Merkel says “before we give you any cash, we’d like to take a look at your books and set appropriate taxes on your behalf so we can make sure we get our money back” that Rajoy has problems with.

  • #112356
    Profile photo of angie
    angie
    Spectator

    Thursday is the day when Spain imposes more tough austerity measures on it’s populus, another 60 Billion Euros worth of cuts due to the collapse of the Spanish Property market πŸ™„

    More riots to come on the streets no doubt, it’s been said that taxes will rise further, pensions will be frozen etc πŸ™

  • #112379
    Profile photo of angie
    angie
    Spectator

    Even before the new austerity measures have been announced but due tomorrow, more anti-austerity riots have broken out today in Madrid πŸ™„

  • #112493
    Profile photo of Anonymous
    Anonymous
    Participant

    Who knows who long to a full bailout (sooner the better), but here are the results of the bank stress test and capital requirements.

  • #112494
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Mark, could you explain what it means… ie: our hateful bank BMN, does it have minus 368 million euros of debt? or minus 2 trillion??

    What does it mean for those who have to bank with these banks?

    Thanks!

    ps, I’ve just read a Spanish article which says that Spain is going to have to ask the EU for funding to help with the disaster areas after the floods.

    It’s so sad but I really hope that the EU blasts Spain for it’s slack planning laws for allowing building on flood plains!! Makes my blood boil!

  • #112496
    Profile photo of Anonymous
    Anonymous
    Participant

    Two scenarios, itsme, standard assumptions and “worst case”. Not sure why the two strong banks do better on the worst case assumptions than on the standard basis. If the banks are bailed out, retail deposits are safe.

  • #112498
    Profile photo of Anonymous
    Anonymous
    Participant

    Deposits are safe but on the other hand it will eventually be paid for by all the other tax payers.

  • #112503
    Profile photo of Anonymous
    Anonymous
    Participant

    and mortgages?

  • #112514
    Profile photo of Anonymous
    Anonymous
    Participant

    @itsme wrote:

    and mortgages?

    In most countries can be called in over the night. Not sure how it works in Spain.

  • #112516
    Profile photo of Anonymous
    Anonymous
    Participant

    That could be slightly tricky……

  • #112527
    Profile photo of logan
    logan
    Participant

    Moody’s claim Spanish banks require more capital than stress tests showed. No surprise there. I have not read or heard one analyst who believes in them as a true or accurate picture.

    http://www.bloomberg.com/news/2012-10-01/spanish-banks-need-more-capital-than-tests-find-moody-s-says.html

  • #112529
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    @logan wrote:

    Moody’s claim Spanish banks require more capital than stress tests showed. No surprise there. I have not read or heard one analyst who believes in them as a true or accurate picture.

    http://www.bloomberg.com/news/2012-10-01/spanish-banks-need-more-capital-than-tests-find-moody-s-says.html

    Why do people quote the ratings agencies as a source of authority? They were hopelessly wrong in the Northern Rock scenario. And earlier this summer a poster here told me Telefonica was about to get down-rated by the ratings agencies – their shares have been rising since!

  • #112530
    Profile photo of logan
    logan
    Participant

    Wiki on credit agency uses:-

    Credit ratings are used by investors, issuers, investment banks, broker-dealers, and governments. For investors, credit rating agencies increase the range of investment alternatives and provide independent, easy-to-use measurements of relative credit risk; this generally increases the efficiency of the market, lowering costs for both borrowers and lenders. This in turn increases the total supply of risk capital in the economy, leading to stronger growth. It also opens the capital markets to categories of borrower who might otherwise be shut out altogether: small governments, startup companies, hospitals, and universities.

    They don’t always get it right Marcos just as any large institution makes mistakes from time to time. However that in no way reduces their use because what else would take their place, Chinese whispers?

  • #112541
    Profile photo of peterhun
    peterhun
    Participant

    It not just Moody’s who say they will need a lot more. 150billion is the figure mooted.

  • #112568
    Profile photo of Igurisu
    Igurisu
    Participant

    According to Sr de Guindos, Spain does not need a bailout, all breath a big sigh of relief πŸ™‚

    http://www.bbc.co.uk/news/business-19837739

  • #112569
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    @igurisu wrote:

    According to Sr de Guindos, Spain does not need a bailout, all breath a big sigh of relief πŸ™‚

    http://www.bbc.co.uk/news/business-19837739

    Yes, that report is similar to this one
    http://www.bloomberg.com/news/2012-10-04/spain-says-it-s-meeting-rescue-rules-already-as-guindos-heckled.html

    de Guindos tried to put across the message that Spain is actually rising to difficult challenges in the corporate area, particularly in exports “Spanish exports have increased by 70% since 2001…the same as Germany”. But of course this message gets ignored and isn’t reported when he makes the claim that no bail out is needed.
    In a very small sense he’s right, in that Spain is already 90% pre-funded for this year, and could stagger on its reserves for a couple of months if absolutely necessary. But everyone knows that if the cost of borrowing shoots up again, then they will be ultimately reliant on ECB credit.

  • #112570
    Profile photo of angie
    angie
    Spectator

    I think it normally works like this, that when any senior Politician the World over says something definite then a week or so later the opposite happens. πŸ˜•

    De Guindos and Rajoy have been in denial for some time now but the bailout is still expected soon πŸ™„

    There was an interesting report too from Catalonia on Newsnight showing the growing discontent with Spain there and wanting their independence, they don’t feel they are Spanish πŸ™„

    Since Mark is based in Barcelona, will that mean his website will become ‘Catalonia Property Insight’ ? πŸ˜†

  • #114051
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    The truth has come out – seems it wasn’t Rajoy failing to ask for the bailout after all, but the Germans telling him they wouldn’t be in a position to approve the funds

    http://elpais.com/elpais/2012/12/16/inenglish/1355688022_411876.html

    Prime Minister Mariano Rajoy told union leaders earlier this month that Germany had dissuaded Spain from asking the European Union for a full bailout because Chancellor Angela Merkel believed that it would be difficult to reach a consensus for approval.

    Given that, Rajoy has played a blinder for once. he convinced the markets that Spain was just about to ask for the bailout – which resulted in lower borrowing costs compared with the 7% of summer.

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