Europe bailout of Spain could cost $125 billion

Einstein was also right about how insanity is when you do the same thing over and over expecting a different result. When you bail out a country or even a sector of the economy via some Govt program it only delays the inevitable. But when the crash finally comes then it will hurt that many times more because of previous Govt interventionism.

It's like the guy who overdoses on aspirin to relieve a headache. The more you take then the more you become immune to the drug and the more the headache hurts. Not knowing why he has a headache in the first place he swallows the whole bottle leading to a fatal dose of some form of drug poisoning.

It's the same with all of these countries. They relieve their pain via bail-outs. Put once it runs out then an even bigger bail-out is needed. Until he economy finally implodes from an overdose of stimulus and quantitative easing.

1)De Guindos did say, however, that Spain would request enough money for recapitalization, plus a safety margin that will be SIGNIFICANT. The eurogroup statement said that meant the cost could reach 100 billion euros.

2)The Spanish acceptance of aid for its banks is a big embarrassment for Prime Minister Mariano Rajoy, who insisted just 10 days ago that the banking sector would not need a bailout.

3)the International Monetary Fund released a report estimating that Spanish banks need a recapitalization injection of at least 40 billion euros ($50 billion)

4)The exact figure of the bailout, however, has not yet been decided. De Guindos said the country is waiting until independent audits of banking sector have been carried out before asking for a specific amount. The audits are expected June 21 at the latest.

Well, I have listed all the above. Everyone's statement is conflicting. I have no clue how much money Spain is seeking for recapitalization of banks.Hope ECB can come up with solutions before tapping into IMF fund with lots of ristriction and criteria. Have not heard anything from Italy.

Other news sources have indicated the bailout as between 40 - 100 BILLION Euros. Where does all this money come from? It's extracted from essentially everyone and then handed over to bankers who have previously gambled away depositors' funds. If your average private business owner did anything even remotely resembling the bankers' actions, the person would be prosecuted and jailed for fraud, like Bernie Madoff.

Spain is not Greece. Economic problems, yes, but the bailout is real estate related, not overall debt. Bail them out and move on.

Agreed, paul.

Stop your siestas and get some work done! Perhaps if you guys did you wouldn't need a bail out.

This is why I was always against the euro and the eurozone. Once one or two countries go pop it throws the whole thing into turmoil.

Spain is not Greece. Economic problems, yes, but the bailout is real estate relate

d, not overall debt. Bail them out and move on.

Move on to a massive collapse.

Capitalism is ending. There will be blood.

Ironic how some like AiserX see government as the cause of such problems as exist in Spain when in fact the problems were caused by the free market. Private enterprises borrowed money from private banks to build homes for people who ultimately couldn't afford them (sound familiar?), and now private investors are betting through private hedge funds with private money that these banks will go under - and these private investors will make a ton of dough. Private industry made a mistake, and now private financial vultures are circling in for the kill. Failure in Spain would cause a domino effect leading to tremendous pain and suffering on a global scale, and yet some say the government should just let it slide. Foolish, when remedy is available at so much less of a cost.

It's ludicrous that some like Laguna mislabel crony-capitalism as free market and can not (will not?) recognize artificially inflating currency supplies leads to artificially low interest rates that encourage loose lending policies which lead to inevitable market bubbles created by crony-capitalists, who also know the brain-dead Keynesian politicians will urge their bailout, and these bubbles will inevitably burst. Yet, the same mindless supporters of loose money policies can't see the forest for the trees. That's way beyond stupidity, but is lunatic willful ignorance.

The whole house of Keynesian cards is about to come crashing down on their blunt, protruding eyebrow skulls.

Why should banks be the recipients of funds when it is their greed that is the cause of this debacle?

And the money will come from the ECB which will transfer the funds( debt) to Spain to be repaid back by the tax-payer.......yes,slavery!

When I ask when will the economic system Will be void? People don't realize that this economic system is corrupt, evil,unfair and DOES NOT WORK!!! Please wake up I wish the best for the world... why are we paying debts to the banks??? What for?? This is sad and depressing...

Ironic how some like AiserX see government as the cause of such problems as exist in Spain when in fact the problems were caused by the free market.

Hardly a free market when all loans are Govt guaranteed. It's the same as going to a casino in Las Vegas with the intent of gambling with no regard to risky losses knowing the casino manager will guaranteed your losses because he just happens to be your best friend.

If what you say is true, then you have to justify your view with then you have to justify why other sectors of the economy that are not even remotely close to how regulated the financials are. Like the tech industry is massively free in comparison.

Also Spain is very much like Greece. ZeroHedge best makes the case for this. In amazing details. http://www.zerohedge.com/news/spain-greece-after-all-here-are-main-outstanding-items

Germany can pays all the debts so dont worry! The Germans owed the entire europe so they will packup the mess! What really annoying was Merkel being to mean and harsh that dragged down the entire world! Germany will pays euros as long as they exist!

More money down the drain ...

Why don't they just break up the European Union and get on with the Europe of old.

" And the money will come from the ECB which will transfer the funds( debt) to Spain to be repaid back by the tax- payer.......yes,slavery!"

EXACTLY! It's debt-slavery to the socialist-elite. The US and media often refer to the per-person share of the national debt as if each and every person "owes their fair share " decided of course by the pols who run up the debt. All animals are equal, but some are more equal.

Socialism always fails because sooner or later you run out of other people's money.

The EU (and US for that matter) needs to be broken back down to their original nation-states. Some will prosper more, some less, but each according to their own self-determined productivity.

It's ludicrous that some like Laguna mislabel crony-capitalism as free market and can not (will not?) recognize artificially inflating currency supplies leads to artificially low interest rates....

If currency supplies were inflated, why has the Euro crisis not spread to all countries using the Euro? Southern European countries use the same currency as those in the north, and its supply is not set by them. In fact, their banks offered interest rates a smidgen higher than offered in other countries; this is what brought in the flood of investment. Calling it "crony capitalism" implies the bureaucrats made the calls, but that is not the case: it was the free market, pure and simple.

...who also know the brain-dead Keynesian politicians will urge their bailout.

Keynesian economics has nothing to do with the current crisis; it is simply financial. I would imagine that many who would be the last to identify themselves as Keynesian nonetheless support it, providing they have a background in economics.

The whole house of Keynesian cards is about to come crashing down on their blunt, protruding eyebrow skulls.

Using words again without understanding what they mean results in such random statements. Clinton understood Keynesian economics, and that is why he was able to turn the deficit into a surplus during the go-go '90s. Bush did not; it was Cheney who infamously said, "Deficits don't matter." Run surpluses when times are good; spend those funds to spark recovery when times are bad: it is not rocket science. Someday, politicians will get this formula right, but at any rate, it has little to do with the current Euro crisis, which was caused by inherent stresses built into an economic system that papered over vast differences in policies and prevented normal economic mechanisms from correcting them naturally.

AiserX, excellent link with real data about how Italy is next.

I have a doubt. Why am I reading about "billions of euros"? Bankia SA is in need of aroun 23 thousand million euros, and not 23 billion euros. Bank rescue is of 100 thousand million euros, and not 100 billion. At least it is what we are hearing here in Spain, but please note that the difference from "thousand millions" to "billions" is "slightly" different. Sincerely, our goverment has been lying about everything since they got elected last year. You can look for all the videos around the internet and you will find Rajoy saying that there would be no cuts, that banks were not going to be rescued, and so on. Our politicians and bankers are just playing around with our money, and we are just dumb thinking about soccer and the Eurocopa. I'm Spanish, and that makes me feel ashamed. And really, really angry too.

Oh sh*t, I made a huge mistake there. 1 billion is 1 thousand million. I read so wrong :(( Sorry. Too worried about amounts of money that we cannot almost undersand. I was thinking of thousand of billions. My mistake. I'm sorry about that. Anyway, I still feel ashamed of being from Spain and of our government. At least I can speak English...

Spain should guarantee bank deposits and then force insolvent banks to close. Let whoever holds the bank debt take the losses. Bailing out the banks will only add to Spain's debts, leading to another crisis in a few months time.

Scrote, that has been discussed. There exists in Europe nothing like the FDIC. The problem with a bank run, though, is that it is self-perpetuating, both from the view of depositors, who rush to drain the bank of its funds and from speculators, who short its stock. This "bailout" is actually "cash replenishment" - that is, it is not free (it is supposed to be repaid and with interest) and it is only to be used to bolster confidence in the banking system.

Speculators have big guns, and when they sense a weak target, they will attack it, even if the target is still financially viable. The very attack itself is enough to bring down a shaky but still healthy institution, and when it targets an entire sector, it can obliterate it. These attacks can be mitigated only with equal firepower from the other side. If fortunate, little or none of this "replenishment" will actually be used.

But your point is well taken: Europe needs to tighten its financial system, institute broad, binding requirements on all of its members, and provide institutionalized guarantees to guard against such future attacks. The future may look to this point as the date individual nations gave way to pan-national governance.

The "$125 billion" price tag is pure fiction. In reality, this continuing bail-out is open-ended, because it is structural and a logical and unavoidable result of the common Euro currency.

The Euro critics predicted EXACTLY THIS already 13 years ago when the Euro was introduced with so much hype.

Then, the starry-eyed politicians did not listen, But now, with one bailout chasing the next bailout, week after week, with each subsequent bailout bigger than the other, they are STILL not listening. That is simply mind-boggling.

If they continue along this road, it will eventually come to and end anyway.... when the payer countries, i.e. Germany, Holland, and Finnland, but reality it really hinges Germany, are bankrupt too. Then everybody will be in deeper doodoo than they can even imagine now.

Insanity!!

Laguna:

" Europe needs to tighten its financial system, institute broad, binding requirements on all of its members, and provide institutionalized guarantees to guard against such future attacks. "

You are so wrong about the situation. This is not about "attacks" and "speculators". Speculators like hedgefonds simply take advantage of existing contractiditions. The existing contradiction here is the EURO system which is unsustainable and will bring down everybody if continued to a full transfer union.

They are only like sharks in the ocean, attacking the weak and dying creatures which can not live anyway.

By blaming the "speculators", you are simply blaming the messenger for the message that Euro politicians refuse to hear.

The problem is not any evil "speculator", the problem is the idiotic Euro system, which economists have warned about from the start.

"If currency supplies were inflated, why has the Euro crisis not spread to all countries using the Euro? "

What do you call the existing contagion?? Are you so blind?

"Using words again without understanding what they mean results in such random statements."

Maynard, it doesn't take an Alinsky disciple to see through your smokescreen.

". Clinton understood Keynesian economics, and that is why he was able to turn the deficit into a surplus during the go-go '90s."

Yet another leftist myth that has long been debunked, but enough deluded leftists simply enjoy cruising down the river Denial.

Spain is getting merely the first of what will become a series of bailouts, only to be quickly joined by Italy. The contagion will spread like Black Plague. It's only a matter of time, and likely not long.

The coming Grexit will begin the unravelling.

The whole house of Keynesian cards is about to come crashing down on their blunt, protruding eyebrow skulls.

You have lost me here Herve. Why Keynesian is blamed? You are mixed up with apple butter to s*** and it will not fly. Are you talking about public policy? Do you understand why Spain needs bailout money?

Yet another leftist myth that has long been debunked, but enough deluded leftists simply enjoy cruising down the river Denial.

Hah. Today's crop of Ann Rand-worshiping, Austrian economics spouting, austerity touting rightists were for the great majority GWB supporters, no doubt. When one's policies have failed, one may either admit defeat or do a deft shit and claim that what one had advocated had never actually been enacted - and that involves denying reality.

The Euro zone is going down, and so many on this board seem fine with that. Sure, some people's memories are too short to remember the violent nature of European history and the important role that the European Union and the Common Currency have played in making a return to such a past seem so unlikely. Okay - how to decouple without global economic havoc?

100% of the counterarguments on this thread have offered no solutions. What - more austerity, perhaps?

How did Spain ever get into this sitation? Did it have anytrhing to do with that previous socialist Zapatero?

How did Spain ever get into this sitation?

Due to high unemployment for a decade, the bubble is bursting and snowballing..This is not Greece.

These countries should have been allowed to fail or (made to fail) ages ago, we would now be coming through the other side of it, as painful as it might have been, Continuing with these band aid measures is not solving the problems and it's only making them worse and pushing the real hurt down the road. They should have gotten it over and done with long ago.

This long drawn out process is putting too much uncertainty in the world economies and holding any real recovery back.

Clean it up and lets all move forward.

How did Spain ever get into this sitation? Did it have anytrhing to do with that previous socialist Zapatero?

Nope. Spain, like other Mediterranean countries - namely Portugal, Greece, Italy, France work less, rest more and are less productive than their north Europe counterparts, but they share the same life style. No wonder they're called Lazy European countries. Spain even afforded going to a war - with Bush and Blair - without having the necessary budget for that. In other words, Spain & Co spend a lot, rest a lot and are parasites on the back of other efficient countries, like Germany.

Same song different chorus. Governments offer artificially low interest rates, banks take advantage of low rates to offer artificially low rate mortgages, consumers take advantage of mortgages, 20 years down the road it bites everybody in the rump. They need a sweeping overhaul of their banking system. Let interest rates rise up to market levels and allow foreign banks from the US and asian nations (China included) to bring more capital to the party to buy up sunk banks at rock bottom prices.

This "bailout" is actually "cash replenishment" - that is, it is not free (it is supposed to be repaid and with interest) and it is only to be used to bolster confidence in the banking system.

Thanks to a generational dependance on recklessly low interest rates and government pushes for more construction Spain has become a massive liquidity trap and no amount of recapitalization will help. Spain has already bought controlling shares in a couple of their largest banks and they are still tanking, so how is adding more debt to their books supposed to help the situation? The entire continent is over leveraged as it is. One more straw and this cammel's back is broken.

100% of the counterarguments on this thread have offered no solutions. What - more austerity, perhaps?

The European idea of austerity has been what most nation's would consider a haircut. Raising the retirement age 2-4 years? Considering how long people live now retirment age should be well into the 70's. Skimming a bit off of some of their entitlement programs that have ballooned to titanic proportions? And the kicker is that in most countries they haven't even started the bulk of their 'austerity' programs yet and they've already been rejected.

In the UK and France many measures weren't going to take effect until 2014 but people are complaining about them so visciously that many have been scrapped. Frankly unless European nations make their countries more attractive places to open up businesses they could drop all the Euro's in the world and it wouldn't solve the problem. Nobody is investing in Europe, nobody wants to deal with the constant hassle of burdensome taxes and labor 'rights' that act more like punative measures to employers than as protections for workers.

Can you honestly say that you'd want to open a business when it takes tens of thousands of Euro just to get everything filed, then you have to deal with a russian roulette of hiring processes because its such a pain to hire and fire people, then you have to prove compliance, and after all is said and done you have a massive chunk of your profits shaved off.

European policies need to be reconstructed to foster foreign investment and private sector business. Because neither is happening right now and given how service oriented the European economy is a lack of foreign interest will be a deathblow, whether it comes today or tomorrow is the only question left unanswered.

The EU was a bad idea to begin with. Wanting to trade with each other is fine, but countries should not have to bail out other countries. Germans shouldn't be bailing out Ireland, or Spain, or anyone else. If this continues, all of Europe's economy will plunge. There were warnings against this thing but the politicians didn't listen.

Keynesian economics has nothing to do with the current crisis; it is simply financial.

It has everything to do with Keynes theories. The premise is that Govt spending and incentives can somehow grow an economy and that Govt should step in when the private sector stops spending. These bail-outs are just what Maynard Keynes wanted if people stopped spending.

Using words again without understanding what they mean results in such random statements. Clinton understood Keynesian economics, and that is why he was able to turn the deficit into a surplus during the go-go '90s. Bush did not;

There was no surplus during the 90's. Not when the value of the $ kept eroding and when Govt spending kept increasing. The trend in Govt is that spending always goes up more so then the previous year. Also if you want to talk about some "balanced" budget during the 90's then you have to take into account the Community re-investment act, social security, medicare and other entitlements were still there. Now Bill Clinton during his many speeches likes to brag about how he "balanced" the budget during his years. When in fact that is not the presidents job but the house speaker whom was Newt Gingrich at the time. But Clinton was pretty much stealing credit that was never there.

Speculators have big guns, and when they sense a weak target, they will attack it, even if the target is still financially viable. The very attack itself is enough to bring down a shaky but still healthy institution, and when it targets an entire sector, it can obliterate it. These attacks can be mitigated only with equal firepower from the other side. If fortunate, little or none of this "replenishment" will actually be used.

Speculators are the one who help drive accurate market signals. It's a way of saying to the politician and reckless private companies "you are wrong and here is why". With the earnings to back it up. Now your also contradicting yourself in that quote because an institution cannot be "shake but still healthy". Hugh Hendry made the good case and in good humor about the role of the speculator against your Keynesian Nobel hero Joseph Stiglitz http://www.youtube.com/watch?v=E4MAifsp-8E

Also by mitigating the attacks of speculators with equal firepower is another way of saying "bail-outs". Again the speculator is there to help drive market signals, they analyze bad institutions when no one else does and helps bring it down, thus removing an entity that will only waste scarce resources in the economy. Ironically Obama also blames speculators for his failures as well. Simply put, a speculator gets rid of harmful institutions before they can do any more harm. And I used to engage in speculation BTW.

100% of the counterarguments on this thread have offered no solutions. What - more austerity, perhaps?

Free-markets, free trade and a lot less Govt. You mention the tumultuous history of Europe and obviously your afraid of some future conflict in the event of a Euro collapse. But your solutions are all Govt proposed programs and interventionism. Yet all of Europe's bloody conflicts were in fact the result of big Govt.

Lastly

Scrote, that has been discussed. There exists in Europe nothing like the FDIC.

Again the same ZeroHedge link http://www.zerohedge.com/news/spain-greece-after-all-here-are-main-outstanding-items The FROB ( Fund for Orderly Ban Restructuring ) is the European equivalent to the FDIC.

AiserX and TheQuestion, thank you for your detailed posts. It's good to read your posts and associated links.

Laguna, you would be well-served to read Mises "The Theory of Money and Credit". You would learn.

@Herve, Alan Greenspan believed in "The Theory of Money and Credit" and failed. He tried to keep the insterest rate very low too long causing housing bubble in US. Look at a mess we need to clean up his mess.

@AiserX

It has everything to do with Keynes theories.

I agree that Bush used Keynes theories for TWO wars ,and none of the G spending went to capital investment for job growth and stimulating economy.

When we combined this factor with poor monetary policy lead by Alan Greenspan for years as I listed above, US debt has snowballed by 2008. It was a predictable outcome. The Theory of Money and Credit theory encourages propencity of money too much too fast. It is time to request all FDIC US banks to reserve more cash reserves, so that we will never repeat the same mistake again.

@global,

"...theory encourages propencity of money too much too fast."

Sorry, but what do you mean?

Herve, propencity of money meas in economic is that you go to your bank for deposit with $1, then the bank may lend it to 2nd bank $0.99 then 3rd bank lend 99% of $0.99.

@global, Thanks for clarifying what you meant. BTW, I tried to address your position on Greenspan but my post has been removed. If you would check Gary North on Greenspan 1966 2005, you'll find an excellent article.

I agree that Greenspan did precisely the wrong actions at the wrong time, but completely contradicting the principles of Mises.

The injection into the Spanish banks may delay immediate ruination, but only briefly. Even Spain's PM stated it's going to get worse in the near future. I wish it weren't so, but it is IMO.

@Herve,

No problem., Herve.

I read his book in the past before US financial sector almost went off the cliff. There are many issues I did not agree with him. During the 2008 financial woe, he admitted his theory failed in front of the US congress.

I just want you to remember the important issue you will never forget: LAW and ECONOMICS go together. That's the reason most of US senetors and House of Representatives are lawyers with economic backgrounds..

Tuntematon Sotilas:

" The EU was a bad idea to begin with. Wanting to trade with each other is fine, but countries should not have to bail out other countries. "

Actually, the EU (in a less ambitious form, simply as a coordinating body between nation states) makes sense. The cause of the current disaster is the Euro (the shared currency), which was created as political project against the warnings of economists.

And yes, countries should bail out each other. Not only that, the bailouts are explicitly forbidden in the Maastricht treaty, which all the EU governments signed. As is buying of of government bonds by the ECB, as it now does daily.

But the EU politicians are breaking their signed agreements left, right and center. The Maastricht treaty, signed with so much fanfare, is now not worth the paper it was written on! It is a truly horrible display of dishonesty, economic ignorance and deceipt.

@WillB, the above well said.

The "Spailout" is of course no solution, but simply forplay for the next, bigger Spailout II, followed by Spailout III, and so on.

And where does the money for these illegal bailouts come from? Big silence from the Euro politicians.

And where does the money for these illegal bailouts come from?

@WilliB, Sound like China has been investing. to Euro. Sooner or later, Euro's finance will be controlled by China just like they have done to US.