State-backed bank securities seems much better than Ponzi, but I prefer Ponzi.
Why did the cost to recap Greek banks shoot up in the past 6 months? The cost of the greek bank recap is one of the big reasons the bailout money required has gone up, it is estimated that the amount of new Troika loans as part of the bailout is bigger than the PSI debt forgiveness. There is a reason the new PSI bonds trade at such a low price and that the PSI while being so large, has done little to change the debt profile of Greece. And a part of that reason is all the schemes to fund the banks with government guarantees and central bank money fell apart at the end. Since Draghi doesn’t lose money on any of his lending, the loss had to hit everyone else. So in spite of massive debt forgiveness the real level of Greek debt remains somewhat unchanged because the guarantees got converted to real money.
The enthusiasm the Spanish banks have had for Ponzi bonds is staggering given how much smaller the Spanish bond market is than the Italian bond market – these guarantees are a disproportionately large percentage of actual sovereign debt outstanding. We know that the central government is Spain has stepped up and provided verbal guarantees for some municipal debt – and who knows what they have done that hasn’t come to light, yet.
Be careful, and once again Spanish bonds having trouble holding on to early gains.
State-Backed Spanish Bank Securities Deposited at ECB (Table)
2012-03-15 12:45:06.496 GMT
By Brian Parkin
March 15 (Bloomberg) — Following is a table of government-
guaranteed bonds sold by banks in Spain, Portugal, Italy,
Ireland and Greece as security for European Central Bank funding
as of Feb. 27.
The information was provided on March 6 by the German
Finance Ministry to lawmaker Gerhard Schick of the Green Party
in response to a question. The data derives from the ECB’s
Eligible Assets Database:
Spain: 79.039 billion euros ($103 billion)
Italy: 78.032 billion euros
Portugal: 18.225 billion euros
Ireland: 27.707 billion euros
Greece: 67.244 billion euros
Total: 270.247 billion euros
For Related News and Information:
Top German Stories:TOPG<GO>
European Debt Crisis:EXT4
European crisis monitor:CRIS <GO>
More news on the EU rescue fund: NI EFSF <GO>
ECB purchases of sovereign debt: ECB BUY <GO>
–Editors: James Hertling, Alan Crawford
To contact the reporter on this story:
Brian Parkin in Berlin at +49-30-70010-6229 or
To contact the editor responsible for this story:
James Hertling at +33-1-5365-5075 or