Spain Upended by Deteriorating Financial Condition

Spain Said to Accelerate EU Bank Bailout After Collateral Limits – Bloomberg.

Let’s read between the lines here. The Spanish are claiming that their banks need a bailout because the ECB imposed limits on accepting government guaranteed bonds as collateral. This change took place on July 4, which is 41 days ago; therefore, this is not the real reason that they are requesting the €30bn tranche now. The real reason is that Spanish banks are deteriorating more rapidly than expected, and some of these banks are not going to make it to September without help.

Remember, too, that Spain just hiked its projected budget deficit a full-point to 4.5% of GDP. Additionally, the regions (like our states) are out of money and require bailouts, too, but the budget deficit has not been adjusted to reflect this reality, yet.

It all adds up to Spain requesting a bailout in September. If you think it will cost only €100bn, then you have not been paying attention to the Eurocrisis.


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