Mish's Global Economic Trend Analysis

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Merkel to Approach Greece with "Growth Proposals" while Asking for Referendum on Euro; Elections Provide Yet Another Attempt to Snatch Defeat From Jaws of Victory; New Democracy Leads Latest Poll Posted: 18 May 2012 12:36 PM PDT Greek elections are set for June 17th following the impasse of the last election where no majority government formed. The "Destroy Greece to Save the Euro" clowns led by German Chancellor Angela Merkel are out in force hoping to turn the vote into a direct referendum on the Euro. The election is of course a direct referendum on the Euro, but Greek citizens are under three Fantasyland ideas. Three Fantasyland Ideas The euro is a good thing for Greece It is possible for Greece to stay on the euro but default on debt Greece can recover in the eurozone Merkel is doing her best to convince Greeks that number 2 is not possible and she is correct on that score. She is also promoting the Fantasland positions numbers 1 and 3. Merkel Asks For Greece Referendum on Euro MarketWatch reports Merkel Asks For Greece Referendum on Euro. Germany's chancellor reportedly proposed on Friday that Greece hold a referendum on its membership in the euro currency area, increasing pressure on the nation just as Group of Eight leaders are set to discuss the region's debt crisis this weekend. In a phone call with the Greek president on Friday, German leader Angela Merkel suggested that Greece could have a referendum on the euro when it holds national elections in June, according to media reports, citing a Greek government spokesman. Whether she actually did make the proposal is in doubt — her spokesman denied it, but the Greek official then reiterated that Merkel made such a request. Merkel Yields on Growth Measures As a matter of political expediency (or do I mean political suicide) Merkel-Hollande Meeting Yields Greece Growth Signal German Chancellor Angela Merkel and French President Francois Hollande said they would consider measures to spur economic growth in Greece as long as voters there committed to the austerity demanded to stay in the euro. Requests for measures to bolster growth will be "considered" and the European Union may also "approach Greece with proposals," Merkel said late yesterday at a joint press conference with Hollande during his first official visit to Berlin. "Greece can stay in the euro area," and "Greek citizens will be voting on exactly that." Is Merkel's Strategy Working? The idea that Germany is going to consider anything for Greece but still more austerity measures is yet another Fantasyland notion. Is proof of her strategy in the polls? The latest polls show pro-bailout conservatives leading Greece's conservative New Democracy party, which backs the country's international bailout, has retaken the lead from the anti-bailout radical leftist SYRIZA, a poll showed on Thursday, the first published since a new election was called for June 17. If elections were held now, New Democracy would win 26.1 percent of the vote compared with SYRIZA's 23.7 percent, according to the MARC/Alpha survey conducted on May 15-17. Based on this result, New Democracy would win 123 seats, the pollsters said. Combined with the 41 seats projected to be won by the Socialist PASOK, Greece's two major pro-bailout parties would command a 14-seat majority in the country's 300-strong parliament. Support for SYRIZA appears to have declined after the party refused to join a national unity government with all the other major parties, the MARC poll showed. In the previous survey by the same agency before the coalition talks collapsed, SYRIZA led with 27.7 percent, up seven points on New Democracy. Money Will Flow Along With Propaganda  For those holding the common-sense position Greece needs to leave the eurozone to recover, this may be a bit disconcerting. However, There is likely to be movement in both directions on the polls and I think this is just a temporary snap-back. Moreover, Greece is likely to run out of money before the next elections. Then again, if the polls show the Troika-clowns have a good shot at pulling this off, the money will flow right along with the propaganda. To understand what the battle to "save Greece" is really about, please consider Euro area official sector exposures to Greece in excess of EUR 290bn Total; EUR 84bn Germany, EUR 63bn France, EUR 55bn Italy, EUR 37bn Spain That link shows this has nothing to do with "saving" Greece, rather it is about saving German, French, and Italian banks (further destroying Greece in the process). The irony is every bailout attempt so far has done nothing but increase European banking losses. This attempt should it succeed in another bailout will do the same: increase losses. Three years ago total losses might have been on the neighborhood of 40 billion euros. Look at the losses now. The increased losses were caused by arrogant Troika-clown euroxcrats with asinine positions willing to repeatedly throw good money after bad. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Spanish Bad-Loans Ratio at 8.37 Percent, a 17-Year High; CDS at Record High; Bankia Suffers Huge Losses Purchasing 15.5 Million Its Own Shares to Stabilize Price; Spain Hires Goldman Sachs to Value Bankia Posted: 18 May 2012 08:46 AM PDT It's time for another roundup on Spain. Every day is time for another roundup on Spain. Today's report is on bad loans, and complete foolishness at Bankia buying its own shares hoping to stabilize its price. Spanish Bad-Loans Ratio Hits 8.37 Percent The Wall Street Journal reports Spanish Bad-Loans Ratio Hits 17-Year High Bad debts held by Spanish banks rose to a 17-year high in March and the cost of insuring the debt of two major Spanish banks against default hit a record Friday a day after the sector was hit by a downgrade, underscoring the continuing challenges posed by the country's five-year property slump. The central bank said that 8.37% of the loans held by banks, or €147.97 billion ($188 billion), were more than three months overdue for repayment in March, up from 8.3% in February and the highest since September 1994. The total number of non-performing loans is now almost 10 times higher than the level reported in 2007, just as Spain's decade-high property boom peaked. The rapid deterioration of the loan books was one of four reasons cited by Moody's Investors Service for its downgrade of the credit ratings of Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and 14 other banks in the country late Thursday. "Moody's announcement will increase speculation that the Iberian state will be forced to ask for external support in order to effectively tackle its banking crisis," said interest rates strategists at Lloyds Bank WBM. At 0956 GMT, Spain's IBEX-35 blue-chip index was up 0.5%, following a negative start. Bankia's shares gained 19% after they fell 14% Thursday and had suffered 10 straight days of declines, while those of other banks including also bounced after deep losses earlier in the week. Bankia Suffers Huge Losses Purchasing 15.5 Million Its Own Shares For the "oops" file, courtesy of Google translate please note Bankia bought 15.5 million shares to try to stop its collapse May 17, 2012 Bankia tried unsuccessfully to halt the collapse of its stock market price in the days when the crisis broke out of the entity. The bank bought 15.55 million of shares for 33,250,000 euros between 7 and 10 May, as has been reported to the National Securities Market. The result now is that accumulates heavy losses on these securities, which subtracts capital at a time when the bank is in need of them. In the previous 30 days, Bankia just had bought just over 5 million shares, according to El Confidential, which was published this morning purchases of shares of the entity. Bankia has failed in the attempt to halt the collapse, which today continues to fall that have become over 17% to 1.37 euros per share. At these prices, only purchases made ​​during those four days, Bankia suffer losses of about 12 million euros. But the losses are even greater in the previously performed operations to try to sustain the price at which the entity has accumulated treasury of 86.124 million shares, 4.319% of its own capital. In total, the bank has more than 100 million in losses to the treasury share transactions. Bankia Share Prices Today's rally looks pretty good but here is a little perspective on Bankia Share Prices. Union Silliness For the "where there's public unions, there's stupidity file" Unions urge Employees to buy shares in Bankia to prevent the collapse of the price. Bankia unions urge their employees and clients to buy shares in the company to prevent the collapse of its stock market price and help ensure its future, according to a statement of the Boards and Professional Association (CACAM). Under the slogan 'I buy Bankia. Do you? Are we united? ', These professionals Bankia broadcast a statement following an email I have received, the undersigned, with whom they want to send a message of confidence in the project entity. Bankia Bleeds Cash Meanwhile, Bankia bleeds cash and will not respond to questions. El Economista reports Bankia has lost 1 billion euros in deposits in one week. Bankia customers have withdrawn deposits worth over 1,000 million euros since the government announced its intervention last week, according to data presented suggest the board meeting yesterday. On Wednesday, Bankia not respond to Reuters requests asking whether there were bank runs Thursday and no one has commented on the information published by the newspaper El Mundo in its paper edition. Goldman Sachs Hired to Value Bankia Please consider Spain Hires Goldman Sachs to Value Bankia The Spanish government has hired Goldman Sachs to carry out an independent valuation of Bankia, the ailing bank taken over by the state last week, Spanish newspaper Expansion said on Friday. The U.S. bank will review Bankia's and its parent company BFA's books and determine within a month how much the state should inject to refloat the lender, which had to be rescued after its auditor, Deloitte, identified several gaps in last year's accounts. Expansion said without citing sources that Bankia's financial hole may reach 8 billion euros on top of the 10 billion euros it needs to set aside to cover potential losses on real estate assets, as required by two financial reforms passed by the government in February and last week. Is this one of those deals where a consultant is hired to give give a predetermined opinion? We will find out soon enough because no one can possibly determine "Bankia is a solvent entity". In fact, the entire Spanish banking system is clearly insolvent. Here's the question of the day: Is there any reason Bankia shares will not or should not trade for pennies at some time in the near future? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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