- June 9, 2012 at 9:58 am #56867
The Bailout Farce:
Ireland, Greece, Portugal already!
Next up is Spain, followed by Cyprus according to this article. Who next, Italy, France, Belgium is in the mire too?
http://www.guardian.co.uk/business/2012/jun/07 … intcmp=239
Interesting comparison between Spain and Cyprus. Whilst Cyprus is much smaller it is similarly as corrupt, (developers, agents and lawyers all in bed together) had a massive property boom and bust, high transaction costs, lots of poor build standards,
and general lack of regulation and in denial too 🙄
- June 9, 2012 at 11:18 am #109584
Truth is Angie the property business has always attracted spivs. The difference this time around is the banks and politicians got into the act as well, especially in relatively under developed Mediterranean countries. The smell of easy money was irresistible.
Can the market be repaired? Probably but it will take many years before confidence returns both buyers and lenders have been hurt badly.
I doubt we will see property booms again in my lifetime, regulation by government may see to that. However would you trust any politicians to act decisively? Just look at the EU debacle and how they waffle, pontificate and have endless meetings, never achieving diddly squat.
- June 9, 2012 at 1:56 pm #109586
Hi Logan, I agree that it is very unlikely for boom days to return for the so called ‘hot overseas property markets’, most of which have been exposed for their hype and lack of standards and regulation. I also don’t think that people have either the disposable money nor ability to get finance as they once had or were able to. Also people are more savvy now thanks to forums like this one and Press/media coverage.
To think it wasn’t long ago that someone started the first of the feeding frenzy property markets (who was the first I wonder) and probably started in Spain, and then copied by all and sundry, there was no normality about it when you now think of it? People went in blind on whatever the sales people told them then.
I can’t think of any major estate agent for example abroad who was ever prosecuted for gross mis-selling, negligence, tax evasion, fraud, non payment of bills, etc, has anyone been sent to prison or deported from these countries? 🙄
Have any of these countries, Spain, Portugal, Turkey, Bulgaria, Cyprus, Dubai, Thailand and the rest, ever gone after these people, or would that then call into question the taxes and revenues they made out of this business by turning their blind eyes? 😡
- June 9, 2012 at 7:39 pm #109591
Whatever happened to all those bank stress test late last year!!
Pretty much all the Spanish banks passed with flying colours, except one or two. Total bullshit!!!
- June 10, 2012 at 5:49 am #109595
I believe we posted the stress test were BS at the time on the forum. Some of us knew the truth and said so. They even gave Bankia among others a positive reading.
I really do wonder what the point of any of this is any more. It’s just debt on debt on debt. The entire economy of Spain has died.
Resuscitation with more debt and given to the very people and organisations who caused the debacle is potty.
Let ’em all fail and start again with a completely new system. Sack everyone who ran these banks and bring in new blood from outside Spain is my view. The entire banking system in Spain is compromised.
- June 10, 2012 at 9:46 am #109597
- June 10, 2012 at 12:44 pm #109603
I can understand the protestation of the people. If I was to grant funding to Spain/Spanish Caja’s. I would put the two conditions, foremost.
a) All Assets of the Bank i.e. securities should be sold within say next six months i.e. Land, properties, warehouses, factories etc at a fire sale price. This will than clear all the toxic assets & we can then establish the real shortfall and what amount is required to shore up the Banks/Cajas
b) Ensure that no Banker, Politician, Church establishment, Mayors, lawyers, Surveyors, conntected with the past events ever work in a position of power/influence.
- June 10, 2012 at 1:12 pm #109604
Luis de Guindos the finance minister said in his press conference today that this now €100bn will not be a bail out of Spain’s economy!
What a laugh. This €100bn will be added to the national debt balance sheet and further increase the chances of Spain defaulting on it’s existing debt obligations. They have simply found another lender willing to pump in liquidity. There is no mention yet of the rate the EU will demand on this new debt either or when they expect it returned or what strings will be attached.
The markets tomorrow will not buy it for a second. I expect Spanish bond yields to rocket.
A country cannot just pile up debt upon debt and expect no one to notice.
- June 10, 2012 at 7:03 pm #109608
Rajoy is quoted as saying that the ‘bailout for Spain is a victory for the Euro’
It’s as if he’s talking about the Euro 12 football Cup Final and not the mess Spain is in financially 😆
Either way we will see, 1st their Banks have to be audited, then as Logan says, this maybe 100 billion euro will be added to their overall debt putting them in further financial mess. 🙄
Who needs Paul the Octopus RIP, or the Russian psychic pig, I predict further trouble ahead and ‘no joy for Rajoy’ 😉
- June 10, 2012 at 7:23 pm #109609
I suspect some dirty dealing on the spanish markets last week. Whilst all of Europes stock markets were falling Spains shares, particularly the banks were rising. Even with the downgrade to almost junk status didn’t knock it They rose 1.83% on Friday….it couldn’t have been because they knew the bailout was imminent would it…nah. The Spanish wouldn’t do anything like that would they 😆
- June 10, 2012 at 8:40 pm #109605
Forbes article says what many are thinking. Even so, expect a good pop in the markets tomorrow.
- June 11, 2012 at 6:18 am #109614
Markets always react positively in the short term to what they initially see as good news. Any excuse will do. Once the facts are digested and the bailout terms considered there is always a difference response.
The fact is that €100bn will add 10% to Spain’s deficit to GDP. The bailout appears to be conditional on Spain hitting it’s fiscal targets this year. Germany also seeks further reforms through out the Spanish financial sector. We still have to discover what interest rate Spain will pay.
For Rajoy to claim a victory is simply dishonest but we expect that from them. The real market reaction will start next week.
This is a short term fix, EU style kicking the can down the road and will do very little to improve the situation.
That Forbes article mirrors my own opinion and that of JP Morgan in that the real bailout figure required by Spain is close to €350bn.
- June 11, 2012 at 11:09 am #109621
From the Yahoo UK Finance page, it’s thought the Spanish bailout news is going to be short lived, and that the Spanish State itself will need bailing out. 🙄
- June 11, 2012 at 1:41 pm #109625
I love this on the Spanish bailout:
“This news is like wetting your pants at the north pole, it gives you a lovely warm feeling but soon leaves you in more trouble”
- June 11, 2012 at 2:41 pm #109628
Well we are all very clear on the bailout which er. isn’t one! The money will come from the EFSF or maybe the ESM. The interest rate will be 3% or even 4%. Once in Spain the money will be put into FROB( The Fondo de Reestructuración Ordenada Bancaria or FROB is a banking bailout and reconstruction program initiated by the Spanish). The loan will be supervised by the ECB, IMF and the EU. A bit like a Monty Python sketch 😆
- June 11, 2012 at 2:43 pm #109629
Can’t believe I’m saying this Logan, but the other analogy is known as ‘p—ing in the wind’ (for men only), it always blows back in your face, as will this bailout I’m sure 😆
Once the Greeks take to the streets again and complain about their unfair terms compared to Spain’s, they will no doubt form a disorderly Grexit as it is known and the dominoes could start toppling again.
Strange how the founder PIGS, are toppling, just leaves Italy of their members unless Ireland becomes substitute for the ‘I’! 🙄
Presumably this figure will increase dramatically soon 🙄
Yes katy, it’s hilarious really, if only it was a serious matter for Spain, 😆 I can’t believe this fiasco is not seen through by the markets.
- June 12, 2012 at 7:55 am #109636
Interesting article by IbexSalad
The author seems to think it’s been an excellent deal pulled off by Rajoy. I suspect it will count against him in future deals, but we’ll see…
- June 12, 2012 at 8:10 am #109638
A few traders lost their shirts yesterday in early market trades, betting on the upsurge the Spanish bail out initially caused. By midday they were selling furiously at a loss.
They should have read the wise folks on this forum. 😀
- June 12, 2012 at 8:35 am #109639
Sequence of forthcoming events for pondering that may further impact on things:
It will be interesting to see if the Syriza Party in Greece get in this weekend and what effect that will have on the Eurozone and Euro.
Spain’s soft terms for bailout or loan as they call it, how will Portugal, Greece and Ireland respond?
Cyprus to ask for bailout by end of month?
Focus to switch soon to Italy?
80% of Brits polled say they want the UK to quit Europe and a referendum should be called.
Is there a general consensus gathering, that Germany again wants European domination but this time without wars and if so will other Eurozone members choose to leave?
Any more? 😛
- June 12, 2012 at 9:10 am #109641
Any more? 😛
Yes the socialist party in France looks likely to gain a majority in the lower house in the run off election next Sunday.. They already dominate the upper house of their parliament.
Hollande will then have the power to enact his election promises of spending more and reducing Sarkozy’s austerity program. The rift between him and Merkle will only deepen. I think that’s no bad thing but Merkle has a history of seeing off any opposition.
You can be sure Germany will do their level best to undermine Hollande and the bond markets may well oblige.
Here’s what the Germans really think.
- June 12, 2012 at 9:18 am #109643
Logan, did you hear the news last night?
If the Syriza Party wins the Greek election on Sunday with their anti austerity card and say ‘sod our bailout terms’, it was said that there are plans already drawn up for the Eurozone to:
Limit withdrawals from ATMs and Banks in the Eurozone.
Have cross border checks on travellers so as to stop any carrying of large amounts of wonga between countries.
All this to stop the likelihood of a major run on Europe’s banks, scary stuff, but if I had deposits in any of these countries, I would withdraw it this week 🙄
- June 12, 2012 at 9:25 am #109644
It’s just contingency planning Angie, Governments do it all the time and the media hype it up. Don’t panic, I’m calm, act in haste repent at leisure. 8)
- June 12, 2012 at 9:33 am #109645
Fortunately I don’t have to move funds from Eurozone countries logan 😉 I feel cool calm and collected 8)
The other old sayings though, are, ‘Snooze, you lose’ or ‘he who hesitates is lost’ what if one day this comes true? 🙄
Either way I imagine there will be more withdrawals this week because of the report, it’s getting like a soap opera now 😆
- June 12, 2012 at 1:44 pm #109648
According to this article today, attention is already turning to Italy 🙄
Article cuts off so ignore subscription bit!
Another domino leaning like the Tower of Pisa ❓ 🙄
- June 12, 2012 at 1:58 pm #109649
- June 12, 2012 at 1:59 pm #109650
More strings to Rajoy’s ‘victory’. Germany in charge telling other democratic leaders what to do. Bond yields heading north.
- June 12, 2012 at 3:40 pm #109651
Going well the bailout isn’t it, didn’t Rajoy do well 🙄 Now 18 spanish banks downgraded and bond rates up to 6.83%!
I ought to have posted this in the Euro is here to stay thread!!
- June 12, 2012 at 4:33 pm #109653
Very well indeed katy 😆 when you see the likes of H. Van Rumpy Tumpy involved it doesn’t inspire confidence 😆
Get to the banks quickly everyone: 500 million euros a day leaving Greek banks 🙄
Not secret now, ‘don’t panic Capt. Mainwaring’ : 🙄
- June 12, 2012 at 6:08 pm #109654
my daughter is off to france on a school trip on thursday so i have given her all the euros i had laying around and told her to spend the lot i think she will be popular with her mates
- June 12, 2012 at 6:22 pm #109655
Forgive me but you need to understand the bigger picture. The Euro is not about to collapse even if Greece exits the Euro little will change. Spain is not going to default on it’s debt at least not in the medium term.
There is more than sufficient resource to deal with any short term response to Greece electing a far left government. At least 2 trillion and more.
Markets are suffering schizophrenia right now, most others understand the situation with a calmer eye.
- June 12, 2012 at 8:07 pm #109656
According to Christine Lagarde there is only 3 months to save the Euro. Wasn’t that slogan from the global warming hype 😆
Can you imagine an individual attempting the same as Spain 😯
Guy goes into the bank and asks for a loan as he has reached his credit limit on cards.
Bank manager “how much do you need”
“well I am not sure, will let you know in a few weeks time. What is the interest rate”
“Could be 3% or maybe 4%”
“What are the terms and conditions”
Eer..don’t know until we contact head office and they have a few meetings”
And si it goes…crazy!!
- June 12, 2012 at 8:21 pm #109658
logan, I don’t think for one minute that the Euro is about to collapse, not even if Greece grexits the Euro and I know Spain is not about to default on it’s debt in the short to medium term, I do understand the bigger picture you see. I haven’t said either is about to happen imminently.
However, I doubt Spain will be able to repay it’s debt for years to come, I’m pointing out the stupidity of the whole farce that is the Eurozone and the Euro at present. Much of my comment is a poking fun at the crazy situation that’s getting cazier 😆
We’ve had Greek, Irish and Portuguese bailouts already, a Spanish bailout dressed up as a loan being sanctioned and about to add to their enormous debt and interest on Bonds, Cyprus about to ask for one (small fry in comparison), we know both Italy and France are both in the maird, Belgium is uncomfortable, austerity abounds for all of them and that makes up half the Eurozone members. Not a very successful Eurozone being patched up constantly and who knows how long for?
I’m perfectly calm about it, I’m in the UK which thankfully kept out of the Euro, we have enough problems without it, however markets are not keeping a calmer eye on the situation, they crash one day and zip up a few days later, which suggests more panic to calm. Economists too are pretty damning, not that calm either 😉
- June 12, 2012 at 8:27 pm #109659
katy, sorry I was posting at same time.
I like your analogy, and would add that same bank manager says ‘oh BTW, for your loan, you will have to guarantee the loans of all our other customers as well as your loan, you know chip into a pot’
Not only Lagarde but Soros said the same (3 months to save Euro) recently and I remember he bet right on Sterling and made a packet, lucky man 😉
- June 12, 2012 at 9:32 pm #109661
I think Greece will go for the austerity package and stay in…it will be another “victory” for the Euro 😆
- June 13, 2012 at 4:56 pm #109670
Seems as if Greece will need another bailout later this year…if they stay in. Also many economists think that spain will need another bailout (or whatever they like to call it 🙄 )
- June 25, 2012 at 8:52 pm #109912
Little ol Cyprus has now asked for a bailout apparently, so linked to Greek debt problems 🙄
- June 25, 2012 at 9:12 pm #109913
Where cheap money is handed out why would one not take it ??? Uk is a good example. Bank took the momey & did not lend.
In times of credit crunch cheap money is candy for the kids. At this stage there is to financial stigma attached to accepting bail out funds. I am certain all the bail out amount to various countries will be written off.
- June 26, 2012 at 6:00 am #109914
It’s not that simple Shakeel. In exchange for bail out cash the country concerned has to submit to a rigorous budget deficit cutting programe and lasting austerity. The men in black from the EU and IMF arrive and take control of the finance ministry.
The public are forced to endure hardship and a savage reduction of public services.
Most governments cannot recover electorally and are soon removed.
Requesting a bail out is a desperate move of last resort. Spain so far has got away with this pain by requesting a bank bail out not funding for the government budget. However those funds of €100bn will balloon the deficit making further requests more likely.
- June 27, 2012 at 2:07 pm #109937
With Cyprus being the 5th Eurozone economy to ask for a bailout, no 5 of 17, with possibly Italy, Belgium, and even France muted as possible new candidates, that will take the total to near half of the Eurozone in desperate trouble.
Whoever thought this babble of tongues in so many different nations could ever possibly work under one control, I feel it was doomed from the start, some like Germany have profited from it, there’s even a North/South divide, surely it will either end in tears or have to be completely re-worked again? 🙄 Thank goodness the UK stayed out 8)
- June 27, 2012 at 3:36 pm #109938
Here is the agenda for the meetings tomorrow and Friday…seems mainly to concentrate on photo opportunities…sheer farce 🙄
- June 28, 2012 at 2:32 pm #109953
Very interesting exchange:
What Will Germany Do?
By Anatole Kaletsky
Now that the Greek election is over, with the pro-bailout parties gaining enough seats for a slim majority, Europe can return to the regular cycle of panic, relief, disappointment and renewed panic, that we have observed for the past two years.This time, however, the relief rally may be even shorter than usual, since the market’s attention will soon shift from Athens to Madrid, Paris and, above all, Berlin. Since Greece has no chance of meeting its financial targets, the new government will soon need significant new concessions from the troika. Assuming that Germany resists such concessions, as well as the much larger ones that will soon be required by Spain, the fundamental contradiction of the euro project will again be brought into focus. A single currency can only be sustained within a fiscal and political union that can mutualise and monetize the debt— something that Germany refuses even to discuss.
If this situation persists, then one of two things could happen. The debtor countries could resign themselves to permanent depression and bankruptcy as they sink further into debt traps and Greek-style crises which will ultimately push them out of the euro one by one. Or they could turn the tables on Germany. Instead of letting Germany impose its economic and political philosophy on Greece, Ireland and Portugal—and in the near future on Spain, Italy and probably France—the Club Med countries could unite and impose their economic philosophy on Germany.
With every day that passes, and especially since the French election, it is becoming clearer that the problem country for the euro—the odd man out in terms of economic structure and the chief obstacle to any political resolution of the euro crisis—is not Greece, Spain or Italy. It is Germany. It is Germany that refuses even to talk about mutual debt and banking guarantees. It is Germany that insists on self-defeating fiscal austerity and intolerable political conditions for the debtor countries. It is Germany that vetoes quantitative easing by the ECB, which could cap bond yields and relieve deflationary debt traps. And it is Germany that makes the other euro countries uncompetitive, discourages devaluation of the euro against the dollar and refuses even to relax its own domestic fiscal policies to reduce its trade surplus and support growth.
Suppose then that Angela Merkel refuses to make any compromise on debt mutualisation or ECB monetisation when a political or market crisis next strikes one of the debtor countries, as it surely will. The obvious answer would be for the Club Med governments to point out that Germany has become the obstacle to a resolution of the euro crisis. Mrs Merkel could then be asked, one last time, to abide by majority decisions that are necessary for the survival of the euro and in the interests of all its members. If she refused to do this, Germany could be politely asked to leave. And if Mrs Merkel refused to fall in line or voluntarily leave the euro, the other countries could easily call her bluff by creating conditions that would be unacceptable to the German public. The obvious way to do this would be to force a vote in the ECB for unlimited quantitative easing to monetise government debts.
German public opinion would surely oppose this, but they could not prevent it because Germany has just two votes on the Council of the ECB —and even assuming support from Austria, Finland, the Netherlands and Slovakia, the German faction would command only 6 votes out of 23. If the two German ECB representatives were forced to resign in protest (again!), it is easy to imagine German public opinion demanding immediate withdrawal. A new Deutschemarks could rapidly be issued by the Bundesbank and, while the German banks and insurance companies would suffer large losses because of a mismatch between their euro assets and their New D-Mark liabilities, they could be readily recapitalised by a government suddenly freed of the contingent liabilities imposed by the rest of the eurozone.
This kind of euro break-up triggered by German revaluation would be much less disruptive than a “break-down” caused by devaluation in Greece or Spain. In the case of a German revaluation, there would be no contagion or capital flight, as there would be if Greece, then Spain, then Italy and France were knocked out of the euro one by one. There would be no lawsuits by disgruntled creditors.
Best of all, from both the legal and the economic standpoint, the legacy euro created by a German withdrawal would survive as a more viable common currency for the remaining countries of the eurozone. With Germany outside the euro, France, Italy and Spain could rapidly devalue their way back to competitiveness within Europe—and also internationally, by encouraging the new euro to devalue rapidly against the dollar, yen and RMB. Without German opposition, the ECB could imitate the Fed and the Bank of England, buying bonds without limit so as to slash long-term interest rates. And if quantitative easing produced an even weaker euro or higher inflation, so much the better, since the Club Med countries have always relied on devaluation to promote export growth and inflation to eliminate debts.
A break-up of the euro caused by Germany’s departure would be very bullish for practically all global risk assets, with the obvious exception of German export and bank stocks. German bonds would also suffer huge losses, since the German government could decide to repay its bonds in legacy euros, rather than redenominating all its obligations into appreciating new Deutschemarks. For a government that had just spent hundreds of billions on recapitalising its banks for the losses they suffered in France, Spain and Italy, it would be tempting to burn foreign bondholders, rather than offering them a further currency windfall.
Germany Has To Stay: A Riposte
By Francois Chauchat
In his Reuters column last week (see here), and his recent Daily, Anatole argues that it may be more logical for Germany to leave the eurozone, rather than Spain or Italy. Germany is indeed the main outlier in economic terms; if it were removed, intra-euro zone economic dispersion would be much lower. However a scenario where Germany is the only country that exits is not just improbable—it is also undesirable:
Germany has long been considered by the other Europeans as the main vector of reforms, and a catalyst for change in France and Southern Europe. While Germany hardly fits the Anglo-Saxon ideal of a flexible, free-market economy (although more so since the inception of Gerhard Schroeder’s reforms), the country is a more acceptable model for Europe’s laggards than that provided by the US or the UK. If Germany leaves, which textbook would guide the economic policy of the South? Mao’s red book? Economic history, as well as simple logic, shows that lasting growth cannot be achieved on the sole basis of devaluation and money-printing. Without supply-side and welfare state reforms, a Latin Union would have no economic viability. In this respect, we had a foretasteof how things “work” in the south when Germany was weak and busy fixing its own problems during the counter-shock years of the unification (1995-2005). The cost of capital plunged in Europe, and instead of taking this opportunity to reform their economies at a lower cost, France and Southern Europe did exactly the opposite: vested interests largely dictated stupid economic policies of social-clientelism. I do not want to see what would happen if the debt problems of these countries are fixed through devaluation and quantitative easing.
Politically, the consistency of any Latin Union would not be superior to that of the current eurozone. A Latin Union would be led by France. Just writing or reading this sentence, you have lost the Spaniards. Spain is a proud country, which historically sought alliances with the North againstFrance almost each time there were power redistributions in Europe. Moreover, most French and even many Italians would be extremely uncomfortable participating in a union that has lost its bad cop. If the French and others today agree, reluctantly, to pay for the Greeks, it is because they know that the Germans and the Dutch pay too! And finally, what do we make of Belgium? I doubt that even the Walloons would be enthusiastic about a Latin Union.
Germany would lose too much. First, its financial sector would see hundreds of billions disappear on the devaluation of the euro versus the revived Deutschemark. Most banks would thus have to be nationalized. And it would do no good to lighten its exit cost by paying its external debt in euros rather than its new currency. This would just push the DM even higher, and so German banks would lose even more on their €500bn exposure to Southern Europe, France and Belgium. In addition, the Bundesbank would have to bear an even higher cost on the unwinding of its €700bn claim on the Target2 interbank liquidity system. Indeed, when you add these two claims together, you get €1.2trn, which is more than the €1trn of German public debt held by non-resident investors. All the potential gains of keeping external debt in euros rather than denominating it in DEM would be eaten up by the losses in the banking sector. And on top of these direct losses would need to be added indirect financial losses, the economic costs of litigation, and, last but not least, the collapse of the profitability of the export industry in a country where exports accounts for 45% of GDP.
Most people outside continental Europe do not realize how deeply national laws, regulations and political projects are permeated with European directives. Breaking up the euro would thus be like unscrambling an omelet, and this is not just a monetary omelet. Even an exit of Germany alone would still call into question the viability of many legal, economic and political aspects of the European Union. The disruption would be considerable.
Finally, Germany would feel both guilty and orphaned to leave the most ambitious European project ever conceived.
Theoretically and practically, the only scenario in which a euro break-up could be done at an acceptable cost would be a clean, general and well-organized break-up where all euro members would have secretly pre-agreed on the terms, and that would keep the project of European integration alive (see An Alternative Euro End Game [subscribers only]). The probability of this ideal scenario is, unfortunately, not much higher than the one we have just discussed.
- June 28, 2012 at 3:35 pm #109957
On pure economic levels these ideas make perfect sense and would work well.
The problem is the European project is purely a political and philosophic vision designed to keep Germany inside the tent pissing out than outside the tent pissing in.
The last century suffered from that to enormous cost.
A rampant Germany possessed with economic muscle, independently running large across the continent without EU membership controls is a worse case scenario.
- June 29, 2012 at 2:05 pm #109975
Here we go again, first it’s German Banks which stand to gain from this latest move to help Spain and Italy as they are heavily exposed to Spanish Bank debt, those Germans won’t do anything without covering their position 1st 🙄
Now Finland has demanded collateral for it’s portion of the bailout fund, can’t blame them either, so no doubt others in the Guarantor fund will follow their lead 😉
Seems like Spain and Italy are just not trustworthy, I wonder why ?:lol:
- July 2, 2012 at 1:06 pm #110017
Apparently Bankia is still offering a 40 year mortgage with zero deposit on some properties that they are finding really hard to move.The amount of interest that an owner has to pay will be staggering.This reckless lending is what got the world into this housing mess in the first place. In Canada where the banks are in a sound financial state, the maximum mortgage is a 25 year term with a 10% downpayment. To think that the taxpayer is having to bail out these bankers who still are allowed to make such irresponsible loans shows the poor quality of the Spanish financial administrators.
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