Counterparties: Parsing the Spanish bailout

June 11, 2012

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This weekend Spain requested the bailout it had previously denied it needed – here’s the official statement (PDF). The Spanish government has formed the Fund for Orderly Bank Restructuring (FROB), which will accept loans of up to $125 billion from the euro zone and inject needed capital into its banks. The final details of the aid, however, will not be set until the European Commission conducts its own assessment of Spanish banks’ financial health.

Markets shrugged at the news. “The hourglass … has been turned over, but each time it’s happened in Europe over the past few years there seems to be less and less sand in it,” as one analyst put it.

Tim Duy thinks the problem is that the “half-life of European bailouts is getting shorter and shorter” and the FROB was a “last-ditch gamble on the part of the Spanish government to avoid a general government bailout”. As Felix notes, Europe choose not to bail out Spain’s banks directly, hoping to avoid the headaches and precedent-setting involved in a direct intervention in a member states’ banks.

And if a bailout of the Spanish (or Italian) government is on the way, Joe Weisenthal thinks Merkel may be losing her leverage; text messages – “Spain is not Uganda” – from the Spanish prime minister indicate he feels the same way.

For doom and gloom, EU officials have discussed capital controls, including limiting the size of withdrawals from ATM machines, if Greece leaves the euro. On the wonkier side, FT Alphaville has an excellent and detailed series of posts. – Ben Walsh

On to today’s links:

New Normal
The median net worth of the American family fell by 40% between 2007 and 2010 – Federal Reserve

Wall Street’s reaction to JPMorgan losing $27 billion in market cap: “I kind of shrug” – Bloomberg

Less Is More
The perfect tweet is perfectly boring, study says – The Atlantic

EU Mess
Lagarde: We have less than three months to save the euro – CNN

It’s Come to This
Romer: “The Fed is the only plausible source of immediate help for the American economy” – NYT

Social media is a factory, and we are a vast, unpaid proletariat – New Inquiry

The US recession is already here – John Hussman

Citi’s Panic/Euphoria model says we’re panicking – Business Insider

UK prime minister left his 8-year-old daughter in a pub – Reuters

John Hempton: “China is a kleptocracy of a scale never seen before in human history” – Bronte Capital
China’s industrial output, retail sales and inflation are all falling again – Reuters

Now that everyone is on it, Facebook is no longer growing like crazy – WSJ
Nasdaq still not sure why its systems completely failed during Facebook’s IPO – WSJ

The geography of abortion – The Atlantic Cities

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