The European Summit which saw an agreement in principle to recapitalise Spain’s weakest banks has unravelled in an alarming way. This setback for the Spanish economy and the Spanish government will mean a loss of market funding for Spain. The EU will then be faced with options of whether to monetise Spain’s debt or or let it default since Spain is too big to bail out.
Ambrose Evans-Pritchard claims Merkel learned that she broke German law on the ESM rescue and that this is the reason that she and her finance minister have backpedalled on the deal they struck two weeks ago. But, of course, there has a been a vocal outcry against the deal in Germany as well because Merkel was rightly seen as having capitulated, making her look weak. No matter what the reason is, the effect is clear: Spain is again on the hook for not just sovereign but also bank and potentially regional debts. No one in his right mind would buy any Spanish sovereign debt under these conditions unless they were compensated with a high yield.
In my mind, this is a case of snatching defeat from the jaws of victory no matter how tactically brilliant Merkel appears. Europe will pay a high economic price for this blunder. it is going to get much worse from here.
- Merkel breaks German law on ESM rescue – Telegraph Blogs
- Spain forced to establish Asset Management Company as part of bailout « NAMA Wine Lake
- Spanish miners in mass protest against cuts | World news | guardian.co.uk
- Spanish PM Mariano Rajoy raises VAT 3pc in shock U-turn – Telegraph
- Spain to implement new VAT rate in August: source | Reuters
- Spain’s ghost airport: The ¿1BILLION transport hub closed after just three years that’s now falling into rack and ruin | Mail Online
- Pictures of Spain — Marginal Revolution
- De Guindos dice que se han logrado «dos buenos acuerdos» – ABC.es
- Spain pressed to inflict losses on savers – FT.com
- Sober Look: As Spain’s 2012 funding requirements increase, the nation may need to finds other buyers for its debt
- Spain must produce two-year reform blueprint to get eurozone money | Business | guardian.co.uk
- €166m sliced off the value of NAMA’s Irish commercial property in Q2, 2012 « NAMA Wine Lake
China
- China and Brazil face sustained slowdown as eurozone crisis takes toll | Business | guardian.co.uk
- China Lifts Spending As Growth Weakens – WSJ.com
- Like a Lead Zeppelin
Tech
- Apple Is a Safe Haven in a Tech World Riven with Fear – Barrons.com
- Apple to post fiscal Q4 miss on cannibalized Mac sales, analyst says
- Google Nexus 7 Review – Droid Life
Libor/Banks
- FORMER FED ANALYST: The BOE And ECB Probably Knew About LIBOR Manipulation – Business Insider
- The LIBOR scandal: The rotten heart of finance | The Economist
- Barclays chairman admits Mervyn King forced decision for Diamond to quit | Business | guardian.co.uk
- NY Fed Knew of Barclays Libor ‘Problems’ – Businessweek
- The Consumerist » How Does Someone Lose Their House Over A $474 Water Bill?
Other
San Bernardino, California, Weighs Chapter 9 Bankruptcy – Bloomberg
interfluidity » What is a bank loan?
Whom The Gods Would Destroy | A Fistful Of Euros
Dow-to-Gold Ratio | Crossing Wall Street
Misery for pensioners as annuity rates fall to new lows – Telegraph
Texas rejects key provisions of Obama’s health law | Reuters