90 seconds at 9 am: Spain says only wants bailout without harsh conditions, raising new Euro-zone fears; Stock rally stalls; NZ$ becalmed at 81.5 USc

Here's my summary of the key news overnight in 90 seconds at 9 am, including news Spain appears reluctant to ask for a bailout if it involves harsh new austerity conditions, raising fears the European Central Bank (ECB) will not get the necessary green light to buy Spanish bonds to calm the Euro-zone crisis.

Global stocks, commodities and Southern European bonds have rallied sharply in the last week on hopes ECB bond buying may calm the Euro-zone crisis, so the suggestion that Spain may not want or get a bailout from European rescue funds undermines those hopes.

The ECB has said it will only buy Spanish bonds in conjuction with a rescue coordinated by the European Financial Stability Fund after a Spanish request for a bailout. See more here at AFP.

The Euro fell and European stocks fell around 0.3%. US stocks closed broadly flat in a lightly traded market dominated by Northern Hemisphere holidays and Olympics-watching. See more here at Reuters.

Meanwhile Germany bund yields fell after news German industrial production fell 0.9% and German exports fell 1.5%, suggesting the Euro-zone economic slowdown is gathering pace. Spanish long term bond yields rose. See more here at Bloomberg.

In Britain, the Bank of England slashed its economic growth forecast and cut its inflation view, opening up the possibility of yet more money printing to try to boost the British economy.

The Bank of England's Governor Mervyn King warned the impact of the Euro-zone economic slowdown was worse than expected and he lamented the pound's rise vs the euro despite the money printing, saying it was hurting exporters. See more here at Bloomberg.

The New Zealand dollar was broadly stable at 81.5 USc, with markets looking ahead to labour force figures at 10.45 am expected to show unemployment down slightly to 6.5% and modest employment growth.


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Would somebody in the Franco/German Politico please ask the Elephant in the room to stomp out the burning duck that is the E.U. once and for all.
 To witness the unsavory lingering death of the poor duck is an abomination......not to mention all the flapping and sqwaking a some what unnerving distraction.

LOL......why watch a comedy show...

They want to stuff the duck a little more to get more foie gras?

LOL, Spain, thats so funny.....please just give us a shed load (Im being polite so I dont get banned)  of money and we'll not pay it back.
um.......(Im being polite so I dont get banned)

Si' Steven......it would seem the Inquisitors can dish it up but cannot stomach the torture that is Austerity.
All joking aside, a terrible situation for the citizens of the E.U., as the lingering uncertainty  only leads to a fearful and despondent outlook for most....while the vultures  capitalise on the (carry on)carrion.

Yes it seems to me heads I win, tails you lose....however I read that some of the rich in the USA are getting concerned that they dont get lyched. So that strikes me that they know they are doing wrong but will still carry one doing it.
Whats the difference between murder and enslaving someone with life long debt and the misery and exploitation that results? After 30 years of this experiemnt is this all we really have?

Well I dont think it was the Govn (debt) though, but the ppl being crazy with property, and the Govn having to bail the banks to stop anarchy....ditto Ireland. So the Q is of course when Hughy P wants to build more here in NZ, where did all the ppl go in Ireland and Spain?

It's easy to laugh at Spain but there are huge political problems with allowing a team of EU officials to move into your government departments approving daily expenditures.  Any government of the day who allowed it would be hung out to dry by their voters.
Roubini said it like this; "It's one thing to give up a certain degree of national fiscal sovereignty for the sake of doing the right thing and stay in the Euro, another thing is to become a neocolonial appendage of Germany via the troika"
This cuts to the core of the flaws in the EU federal structure and the lingering threat of national exit from the union is going to place enormous financing pressure on Italy and Spain and quite possibility cause loss of market access, thereby triggering a real crisis.

Your not wrong there Ralphie....good post ..!!
I guess if I couldn't find a smile in it though I'd weep in depair......!
It began as a greek tragedy and quickly became a plauge of locust.
 P.S. Ralph.....your thoughts on the ongoing viability of the E.U. as we know it would be appreciated.

C'mon. This nonsense has been going on for 4 years. Spain hasn't lost any more money or jobs this year. Got lost some years ago. Why the drama now? Light news day? Spin the bottle? Who's next? Meanwhile Greece rounds up illegal overstayers and deports them.

I think iconoclast eveything to do with the E.U is being milked for all it's worth, while the values that brought about it's inception appear to be the lowest ranked of importance.
It's the unraveling..that is torturous.......
Merkel....now look Mario , we own you..!
Mario......no you don't !
 Merkel...do too..!

Mr Christov Sir,
Who can say what will be.   My thought is the EU almost certainly cannot survive in it's current form.  It is currently stuck in a kind of no mans land between a tighter union (like in form to the US or Canada) and unwinding the whole thing.
Despite vast criticism they have done a good job of holding off major explosions, but by 'kicking the can down the road'.  Not to denigrate that achievement, that's all the US has done as well.  Greece has been propped up like a rag doll but that hasn't in any way stopped the forces that are closing in on them.
On one hand the market pressure on Italy and Spain has increased and there is a likely risk they will lose access to markets sometime in the next 12-24 months.  This would be a real crisis (not like Greece) because they are the 3rd and 4th biggest economies in the Euro zone.  That's a problem for two reasons.

  • They don't have a fund large enough to bail out economies that large.
  • They don't have any political/legal/fiscal structure to deal with it either.

On the other hand there is pressure to "bail out" but close examination brings into stark relief the structural limitations of a currency union.
There is no banking union at this time.  So the banking sector has become prey to balkanisation, meaning people moving funds across borders for protection.  Think about that in comparison to Canada or the US where it wouldn't make any sense to transfer your money from British Colombia to Ontario to protect it.
There is no fiscal union at this time.  So no method exists for inter union transfers.  In the US for example if a state has a finance problem up to 40% of the problem is effectively placed on federal shoulders through payments like social security and tax breaks of various sorts.
There is no system for debt mutualisation.  As a result german tax payers are being to asked to directly carry greek tax payers, which is both economically unjust and politically non salable.
There is no political union at this time.  We see a taste of what will happen in Greece, when forces seen as outsiders try to dictate conditions like austerity measures.  A group can stand together through adversity but they must do it together and own it together.  Even if agreement is reached for fiscal and banking union there must be political union so peoples can be represented.
At this point time is their greatest enemy and the error of the past is now seen as the lack of urgency towards a closer union.  Pride gets us all in the end.
My best guess;

  • Smaller deficit economies will eventually exit (forced or willingly) the Euro zone so in the end it will be much smaller than the current 17 countries.
  • They will agree to a functional degree to increased union, fiscal, banking and maybe some kind or joint parliament.

Thank you Ralph for your detailed response ,with qualification.

  • Smaller deficit economies will eventually exit (forced or willingly) the Euro zone so in the end it will be much smaller than the current 17 countries.
  • They will agree to a functional degree to increased union, fiscal, banking and maybe some kind or joint parliament
  • Hmmmmm....politicaly speaking the ground is ripe for socialism, the possibility of a German withdrawal while remote, still exists.
  • The funny thing is as the economy of the E.U collapses the political landscape will undergo changes accordingly, I think this may have a commanding influence on blocks that form post exit or expulsion, perhaps seizing it as an opportunity to become the new  Germany of the block........not saying it would function mind you just reflecting on the human response portion of it.
  •  Thanks again for the input , enjoyed it.

When ever something similar has happened with a company you just know its a dead man walking and its way past the time to leave because the next issue is you wont get paid......been there, its not pretty.

Ralph, perhaps the sage George Orwell just got a little previous with 1984?
Regards, Ergophobia