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The Spanish Prime Minister has denied today a story buzzing on the markets that Spain is secretly negotiating a Greek style bail out. However I did notice he did not deny that the Spanish economy was in difficulty.
This has had a negative effect on the Euro and equities. Madrid stocks today fell 5%. I don’t think he’s telling the truth. I think he is looking for some sort of financial or even moral support from other EU states. -
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From the NYT. Not pleasant reading:
http://finance.yahoo.com/news/Spain-Seen-as-Moving-Slowly-nytimes-1194509697.html?x=0&sec=topStories&pos=3&asset=&ccode= -
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In a modern economy the benefits that Shakeel has mentioned would indeed be achieved through the merger of similar organisations. However we are talking about Spain and Spanish practices spring to mind, which would probably mean that any merger would result in the new organisation being just the sum of its constituent parts.
Richard
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I saw the interview Zapatero gave protesting Spain did not need a bail out. He seemed almost manic in his denials. Like a man who knows the truth but cannot accept it himself. It brought to mind something similar from Greek and German politicos 6 months ago. 🙂
I think the markets have decided Spain is hiding the true state of their economy. I have thought that for some time. The worst offenders being the banks.
Spain’s contribution to the Greek bailout will just make things worse. Spain and Portugal will contribute €10bn between them. The new €17bn infrastructure project, recently announced by Zapatero and designed to create employment may well tip Spain over the edge.
The austerity Greeks are going to have to endure is truly grim but it’s the only medicine that will work to turn their economy round. Spain and UK needs something similar but in their consumer dominated societies the Spanish in particular are unlikely to accept it.
This last paragraph from Mark’s posted link sums it up well:-“When politics intervenes in the banking sector, obviously you get a clash,” said Jamie Dannhauser, who covers Spain for Lombard Street Research in London. “I don’t think that the recognition process of bad loans has really got going at all.”
How true 🙁
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According to Sky News, David Buick of BCG also says that Zapatero is hiding the truth and denying the well founded rumour that Spain is about to ask for a 280 Billion Euro emergency loan.
The US financial guru George Soros who made a killing betting Sterling would fall some years ago has said the Eurozone is now going into a strong downward spiral of Sovereign debt with the PIGS leading the way.
If I held Euros on deposit in Spain and the Eurozone generally, I’d probably be exchanging them for Dollars right now!
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@logan wrote:
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The austerity Greeks are going to have to endure is truly grim but it’s the only medicine that will work to turn their economy round.Greeks… austerity… medicine 😀
What economy? The oranges will still grow and the tourists will stil come, especially if
they go back to the Drachma. -
@flosmichael wrote:
Greeks… austerity… medicine 😀
What economy? The oranges will still grow and the tourists will stil come, especially if
they go back to the Drachma.With 23% VAT and increases of 10% on alcohol and tobacco it will make a holiday more expensive. 🙁
Breaking news:-
ECB’s Webber says Eurozone faces serious contagion risk, Euro falls further on fears about Spain and Portugal. Serious civil disturbances in Athens today. Stocks continue to fall. -
The situation in Greece and the Eurozone is getting really serious and many people even within Government appear to be in denial, this could impact on the UK as well.
I’m sure if it were’nt for the UK’s election, it would be splashed all over our newspapers and media.
At the end of the day the US Dollar always returns to King of currencies despite it’s blips.
The one bright spark for the Eurozone is that if the Euro falls heavily as predicted, it may become more affordable for travellers visiting and for retirees living there converting sterling although sterling has it’s own problems too.
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The Greek and Spanish (& UK) politicians are or were in denial as to the true financial position their country was/is in.
Our lot in Ireland were also in denial as were the Bankers. However I don’t think any country had/has bankers like ours in Ireland, who clearly lost all objective control and some may indeed finish up before the courts if it can be proved they acted in a criminal manner. One bank – Anglo Irish – is costing the taxpayer 22 BILLION Euro to help resolve its crazy and probably criminal lending to developers during the years up to 2008. And remember the population of the Republic is just under 5 million!
About 18 months ago the Irish Government took serious corrective action with big tax increases across the board and reduced wages paid to public servants including – believe it or not – politicians. Almost all politicians who are current members of the Irish Dail (Parliment) and who were drawing pensions from previously held Ministerial posts, have been forced by public opinion to give back these pensions! Wages in private industry have been reduced by up to 10/20%
Ireland is becoming more competitive again.
Fingers are crossed that a new agreement recently negotiated between Government and Public Servant unions will be accepted by all concerned. This will result in revolutionary work practice changes that will result in greater efficiency at reduced cost to the tax payer.
The good news is, due to the painful corrective action taken by our Government the European Commission to-day stated our economy is expected to grow 1% this year and 3% in 2011.
If Ireland can do it so can other countries. However Ireland has a 18/24 month head start.
Meanwhile I doubt if, due to the size of Spain’s economy, it will require a bail out similar to that of Greece.
Of course it depends how much in denial the Spanish politicians are!
The longer they do not take corrective action the more painful it will be when it comes. -
Seamus, I don’t recall what you’re saying about the Irish Banks being so bad ever reaching the news in the UK, I think we all thought the British Banks were totally irresponsible even fraudulent too, and heavily involved with this sub-prime debt in the US.
Even now, British Banks are back to many of their old ways, it’s amazing how soon they are getting back into serious profit some having been bailed out by us and paying ludicrous salaries and bonuses again with no property censure from the Gov’t and FSA.
Agree with you Richard that a large Euro fall would be dire for many in Spain and other countries, maybe only the Brits in the UK and Americans would be beneficaries! It still wouldn’t induce me to buy property in Spain and Eurozone for a long while.
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@angie wrote:
Agree with you Richard that a large Euro fall would be dire for many in Spain and other countries, maybe only the Brits in the UK and Americans would be beneficaries! It still wouldn’t induce me to buy property in Spain and Eurozone for a long while.
Why would a Euro devaluation be a problem for those in the Euro zone? I’m not disagreeing, just curious.
My own feeling was that it would probably be a good thing, making Exports more competitive, and imports more expensive. I would expect that this would help to control/reduce unemployment, and of course help those living on UK sourced funds.
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I don’t expect Sterling to rise against any currency. The Euro today is just a blip and corrections will be made when traders take their profits. Here’s why:
http://www.telegraph.co.uk/news/election-2010/7681524/General-Election-2010-Europe-issues-warning-over-Britains-debt.html
If any other party but the Tories win tomorrow expect Sterling to fall considerably. They are the only party who have promised to start paying down the debt this year.
Britain is in for a big shock. Greek style austerity will have to happen. There simply is no choice.
If Brown stays on the markets will force him into the debt reduction measures he denies are necessary.
This election is an utterly dishonest exercise. -
I imagine a large fall in the value of the Euro would push up prices of basic commodities, food etc for ordinary folk, however it would help exports. A bit like a double edged sword I suppose.
It wouldn’t help those converting Euros back to Sterling and Dollars say after selling their property assuming it sells, but would help people with those currencies to purchase property in Eurozone. It’s a bit confusing but depends on personal current circumstances I think 😕
Retired Brits’ pensions would go further abroad and help them. 😉
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@angie wrote:
I imagine a large fall in the value of the Euro would push up prices of basic commodities, food etc for ordinary folk, however it would help exports. A bit like a double edged sword I suppose.
It wouldn’t help those converting Euros back to Sterling and Dollars say after selling their property assuming it sells, but would help people with those currencies to purchase property in Eurozone. It’s a bit confusing but depends on personal current circumstances I think 😕
Retired Brits’ pensions would go further abroad and help them. 😉
not so sure. The EU is quite self suficient when it comes to food production (vast subsidies).
Also I find it interesting that even though the euro is weakening, the pound has not benefited much (yet). -
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Bailing out Greece, Portugal and Spain would cost the EMU states 2 trillion Euros. Even they have not that sort of resource.
The only alternative for these countries is restructuring (default) on their debt repayments. That would cause a major sell off and the Euro would collapse. EMU would be history as Germany and France run for cover.
Make no mistake this is the worse crisis the EU has had to face. Greek public debt is open ended and huge. Even this proposed bail will not be enough.
It will be interesting to see just how long it will be before EMU implodes. I expect it soon and so do the markets. -
El Anciano
I think Angie may have misunderstood which country I was referring to when I mentioned “dire consequences for most people in this country”. I was referring to the UK.
As the E.U. is one of our major trading partners any major revaluation of sterling against the euro would have a significant and negative impact on UK imports and exports, which would have a knock on effect in terms of economic activity, jobs and tax receipts. In short we would be back in a recession with an ever increasing budget deficit, which of course would lead to further reductions in public expenditure and tax increases. There would be greater pressure on the private sector to cut wages in order to retain competitivness in Europe and well I think you get my drift.
Richard
I should add that the cycle that I describe above would then lead to a natural correction in the value of sterling (devaluation), which of course would have been the natural process in Spain and Greece had they still retained their own currencies.
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Some stats here
http://www.guardian.co.uk/news/datablog/2010/feb/24/uk-trade-exports-imports
Look at the IMPORT figures!
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That’s an excellent link Katy it’s the first time that I have seen the figures broken down by country in that way
Although I had expected the E.U. trading block to be the biggest exporters to this country I hadn’t expected one of the E.U. countries to be the biggest (I thought it would have been China)
Richard
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I would hate to predict anything at all, a few minutes before the election in the UK has even started, and I live in Spain. At the moment, the pound is rising against the Euro, probably because of the Athens riots, and it could rise further if Cameron wins.
Spain is in trouble, along with the UK among others, but it’s easy to forget the size of Spain along with its position as the fourth largest EU economy; and any comparison to Greece is plain silly.
This is not a good place to invest in property, not now or in the foreseeable future, nor is the US where property values have fallen ever further, and anywhere in the Eurozone is uncertain territory for investors.
The only sensible place for investors in these turbulent times is the good old UK, where prices have risen by 7.5 percent over the past year. Tomorrow morning will be a good time to make a decision.
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Will this be a life line for Spain and Portugal?
http://www.ft.com/cms/s/0/f4df457c-5862-11df-9921-00144feab49a,dwp_uuid=2b8f1fea-e570-11de-81b4-00144feab49a.html?nclick_check=1
This is quantitative easing and in effect a bail out which Zapatero has denied Spain needs. The ECB will loose all credibility if their red lines crumble in the face of difficulties.
They lie in public and beaver away in private trying to buck the markets. Well we all know what happens when you try that. -
Fact – Politicians utterances, world over, are laced with large portions of ‘economical with the truth(isms)’. Otherwise called lies.
Our – Irish – politicians and bankers told lie after lie about the economy and so-called strength of the banks.
‘The fundementals are good’. Does this phrase sound familiar to all of you no matter where you live?
Meanwhile I, as one who imports and exports (75%) of goods from/to the UK/IRL I have noticed my UK customers are by and large in denial as to the true state of their economy. Thanks to the lies of their politicians.
Without doubt being able to ‘print’ extra billions of Sterling has helped to cushion the ordinary citizen from the reality of what was really taking place in the GB economy.
With a new Government from to-morrow, finding out for the first time the true state of the economy, expect serious cuts in public expenditure and extra taxes to pay for it all.
As an exporter of goods into the UK I wish for a stronger GBP. However, I expect Sterling to fall in value.
Yesterday my business converted a substantial 6 figure Sterling into Euro – rate .85. (Not too long ago it was .89/.90).
Let’s see what happens during the next couple of months.Seamus Kilcock
P.S. If you can buy USD – I did last week at 1.31 to the Euro. To-day it’s 1.27!!!
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