The Absurd ESM

The ESM Has Been Inaugurated: Spain’s €3.8 Billion Invoice Is In The Mail | ZeroHedge.

Check out this chart, which I copied from ZeroHedge:

The PIIGS plus Cyprus actually have to pay €37bn to their own bailout fund! It gets better. These same countries are on the hook for a total of €259bn. Greece and Portugal are already being bailed out, which means that they are being loaned the money to place into the ESM increasing their indebtedness. Isn’t a bailout supposed to reduce debt? If millions of people weren’t suffering from the social effects of an economic depression, this might be funny.

Both Fitch and Moody’s gave the ESM AAA credit ratings. Only 6 of the 17 ESM members have AAA credit rating, so they must be using their old subprime models to assess the creditworthiness of this fund. If your broker tries to sell you ESM bonds, make sure he does it in person so you can punch him in the face.

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2 thoughts on “The Absurd ESM

  1. This is what I was talking about!
    I was aghast that Germany’s contribution is just a bit over twice that of Spain… ESM contributors are bound to its (future) capitalization demands regardless of whether they leave the Euro. I understand that they’d need to leave the EU entirely.

    Through the looking glass: Mainstream media repeating ad nauseam that bailout money is practically being shoved in our pockets, but we are valiantly resisting because we don’t really need it. We have actually done better at austerity than demanded, so naturally we can ease off from here on. (???)

    • The situation is very complex. There are reports that the Merkel and her cabinet think that they cannot get more aid for Greece, a bailout for Cyprus and a bailout for Spain separately through the Bundestag. The plan seems to be to continue whipping up support and voting on all three packages after the Presidential election but before the end of the year.

      I wouldn’t worry about the ESM requirement. The ECB has been loaning Greece money so that it can pay off maturing bonds held by the ECB, so why not do something similar for Spain or another country in trouble. There are plenty of tricks left in the bag.

      The whole point to all of these shenanigans is to keep the eurozone together. Spain can’t get kicked out of the eurozone without starting the dreaded domino effect, so it won’t.

      Remember that all of these countries have been subject to deficit targets since the founding of the euro, and these have rarely been met.

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