Oh It’s All Gone Quiet Over In The Eurozone!

Or has it? According to Anchalee Worrachate in Bloomberg:

“A report from the Bank of Spain showed Spanish lenders borrowed a record 126.3 billion euros ($161 billion) from the ECB in June as investors shunned the nation’s banks. Spain’s banks increased borrowing 48 percent from 85.6 billion euros in May. That compares with a drop of 4 percent to 496.6 billion euros that the ECB provided lenders in the whole euro area. Spanish banks haven’t sold any bonds publicly in the past two months on concern the nation won’t be able to cut its deficit without hurting the economy.”


Pretty hard to argue now the Spanish bank borrowing from the ECB is simply in line with the country’s share of total GDP I would have thought. Also, after having trended upwards ever so slightly for a couple of months, Spain’s industrial output actually fell back again in May (by 0.3%) while output in Germany roared ahead by 2.9%. Obviously not everyone is getting the same benefit from the weaker euro, could competitiveness have anything to do with it, I wonder?


Quoted in the Financial Times earlier today Klaus Regling, chief executive of the European Financial Stability Facility said the fund would be “ready to act whenever the politicians tell us to act.” I guess the situation of Spain’s banks would be one of the things he must have had in mind.

Using a footballing analogy, you get to see a lot in the press about how this club is chasing this player, while that one is chasing another one, until the moment of the actually negotiations comes. Somehow, at that point the sporting press goes strangely silent.

  1. Gloomy says

    Very eerie silence, but this is how credit crises work. Suddenly it will all start falling apart again and everyone will want to know what suddenly changed.

  2. Element says

    It’s not what the ECB does that matters, it’s what people do about this situation, going forwards, that will drive the dynamics and outcome.

    The EU Commission seems to think policy announcements and intents to protect the banks, at any cost, will drive the dynamics and outcome.

    It’s the people stupid.

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