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With Portugal finally calling for help we now have PIG as a matter of fact.
Spain is commonly regarded as next in line. Certainly the markets may well target it now.
I read last week of a Spanish politician saying it would remain singular. I have to say, given the stakes involved, I lean slightly towards agreeing with him.
What say you?
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@kgpoc wrote:
I don’t believe Spain will need to ask for a bail out!
Anyone who thinks this is deluded.
Spain will need to assisted at some point.
The public sums do not add up — markets know it, banks know it. EU says Spain is safe and wont happen — wait till global credit taps are turned off by non EU investors.
Only long term (10 years plus from now) property owners/holders and those that hold off buying till 2014 to hold for while will be unaffected to a degree.
All short term speculators and flippers will be toast.
Those panicking now to get out have missed the boat and are now face life determining decisions if you are aged 35 or more.
— Munky
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Its quite odd really. Market sentiment seems to have turned in the last week or so towards Spain being able to handle their debt problem. Here is an an example:-
http://www.telegraph.co.uk/finance/economics/gilts/8436428/Spains-tough-stance-makes-it-different-from-the-rest.html
The sentiment seems to be based on the fact that it’s debt ratio as a percentage of GDP has gone down 1.4%. The recent budget austerity measures also are an improving factor.
Personally I think this sentiment is clutching at straws.
The banking crisis is festering and coming to a head. Spain needs to repay or roll over billions in debt this year. Unemployment is continuing to rise and the social security bill escalating. The population on variable mortgages will need to find more cash and consequently default, already at a record level will continue to increase placing more and more stress on the banking sector.
Spain is not out of the woods, its in the mire. -
hi logan
i was under the impression that what has caused the problem in portugal was due to the last austerity budget not being approved by the senate, which cuase the resignation of the president (or prime minister?).
I assume there is more confidence with spain (for this week anyway) because so far the spanish senate have been doing what is needed to keep the markets happy
correct?
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So far yes. There is a political and public consensus in Spain for austerity, unlike Portugal whose opposition seem to inhabit another planet. They will now have it imposed by the men from Brussels and it’s likely to be far tougher than the government tried and failed to get through the parliament. Stupid playing politics in a national time of need.
Although there is that consensus in Spain I am sure the real state of their deficit is yet to be revealed. The banks could be a tipping point. The economy is not going to grow in the short term and the deficit will increase.
If the bond markets keep faith Spain will avoid a bail out but it’s too close to call.
Ignore what politicians and bankers say on the subject they are simply trying to talk up market confidence like desperate estate agents. -
Spain will NOT need a bail out!
Let’s not quote figures adding up, because those can go both ways (japan)! This is whether the cap markets fund Spain for less that about +-7% for the next 3 years!
Lets look at where the others were first: Greece, Ireland and Portugal had the more capitalist of the socialists in power, so better business minded people in the eyes of the markets and they could not make it work.
In Spain you have the socialists in power and they were able to come up with some tough concessions (some say week, but they got some big ones through like the tax increase) with barely a hitch. The markets know that if you let this settle for a year and come back from more, you will probably get it. There is also the more Capitalist government PP waiting in the wings, and the cap markets will give them a lower risk premium than PSOE. Spain has about 5-8 of the European top 40 Companies (by market cap or revenue) and probably within the top 150 in the world. Portugal, Ireland and Greece don’t have 8 between them.
ERE (the government help plan for Spanish companies to take on their worker payroll) is decreasing and the new filings for extension are dropping too.I do not believe housing is a buy, I believe housing prices will still fall, I do not think the economy will do more than 1% growth annually for the next 2-3 years. Nor do I like Zapatero or Rajoy so I am quite sure I am not deluded.. 🙂
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I understand your points kgpoc and they are valid.
However I and other market commentators cannot be so sure. This year I think the figure is around €70 billion of bond maturity to repay. Then the bank restructuring to conform with Basle 111 estimated by Moddy’s to cost €100bn. So there’s a new €170bn of debt on top of the current pile.
Then add lack of growth to the mix, mass unemployment, lower tax revenues and higher social payments. If that scenario lasts an additional 2 years as you suggest what then?
The rating agencies will not simply sit on their hands whilst the bond markets become nervous. -
@logan wrote:
I understand your points kgpoc and they are valid.
However I and other market commentators cannot be so sure. This year I think the figure is around €70 billion of bond maturity to repay. Then the bank restructuring to conform with Basle 111 estimated by Moddy’s to cost €100bn. So there’s a new €170bn of debt on top of the current pile.
Then add lack of growth to the mix, mass unemployment, lower tax revenues and higher social payments. If that scenario lasts an additional 2 years as you suggest what then?
The rating agencies will not simply sit on their hands whilst the bond markets become nervous.taking into account the mass unemployment spain is in a far stronger position than it appears as we all know in spain these benifits do not last for ever like they do in the uk.so the stress caused by this group will ease as time goes on making on paper the situation seem like its improving.This could be where we will start to see unrest as people loose their benifits,houses and start to go hungry.
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So does the Spanish state simply cut them loose or place them on other benefits? There must be some other means of minimum support. If they gave people nothing it would be the only western democratic country which did not provide at least a subsistence allowance for their people.
Spain is not North Africa. If it were the African migrants will be very disappointed. 🙁 -
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That’s surprising to me. In France you can have a comfortable career living on the state if you choose, especially with children. Many make that lifestyle choice.
So this begs another question, why do so many immigrants work on the black doing labourer, usually agricultural work that the Spanish will not touch? Or is this another myth. -
@logan wrote:
So this begs another question, why do so many immigrants work on the black doing labourer, usually agricultural work that the Spanish will not touch? Or is this another myth.
Because many of the immigrants are illegal (sin papeles). Also they work in very bad conditions. In Almería they work long hours under plastic filled with toxic chemicals. Many work for as little as 4 euro per hour.
There was a report in the spanish media a few weeks ago where a Grandmother’s pension was keeping a family of five.
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Hard times indeed. I can only see the future consequences of this difficult economic situation in Spain being civil disorder and higher levels of criminality and stagflation.
Families no doubt rally round and help each other out but that is only temporarily sustainable.
I’m even more sure that unless Spain can create employment and increase it’s tax revenues an EU bailout will be required in the long term.
The country simple cannot compete in an economic environment designed to suit wealthier nations such as Germany or France. If it had control over it’s own economy, reformed is restrictive labour laws, reduce corporation tax and IVA, devalue it’s currency and export its way out of the mire as it did so many times before, then there would be hope.
Even the property market might become attractive to foreign investors again.
Trouble is aint going to happen. 🙁 -
Here is another example of the experts’ view of Spain:
I must admit it’s difficult to know who to believe, and I’m being sincere. The Telegraph reported on the same conference but didn’t mention anything about Spain being praised in this way by some seemingly knowledgeable economists.
Yet El Pais seems to be a respected newspaper, without a political agenda, the same edition highlights several corruption scandals in the country.
Who else can you turn to, to find out the truth? Reuters? If they came up with a short cable at some future date to say that Spain had applied for a bailout, then I would believe it and I would be surprised, but not that surprised.
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@logan wrote:
There is a general across the board ‘talking up Spain’ going on right now. If they think this hot air will convince the bond markets and rating agencies of anything they are truly deluded.
The talking up reminds me of owners of football clubs giving all their support to the manager on a saturday afternoon before firing him on the monday
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