is this going to happen, or is bankia going to have to dump the 800,000 houses they own?

Wonder if they've bought a ticket for tonight's EuroMillions lottery rollover.

What a mess. Where are the Europhiles now? Even the mighty Germans cant sort this mess out. So much for the European dream, yet again it is about to disappear along with all previous attempts to colonize the nation states of Europe. Soon we shall all be free nation once more  I can feel the shackles of the EU bureaucracy are becoming less binding, the monolith is collapsing at last, thank goodness!!

Dick

It's going to happen. And the Spanish cant raise the sums needed off their own backs.

On the basis of yesterday they denied it, but today said they couldnt rule it out over the weekend, I'd say its a dead cert. You could almost put your house on it......unless you are Spanish of course. Market speculation will drive them to it otherwise. It's the size that is questionable. From what I have read, the banks alone need around E80bn, before you look at the regional governments. 

Greeks have no government yet. Its all not very good. If the Spanish bank rescue necesitates the Spanish state needing to ask for money, that could be half the EU pot of money spent. Once that happens, everyone will start running the fine-toothed comb over the greasy Italian state. 

i suppose there might be a  "golden wednesday" moment, with interest rates hitting 30% before they pull out of the euro just like 1992

 What difference will it make? These things happen. Whether or not Spanish banks need a bailout will make no difference to you today, tomorrow, next week or next year. British banks were bailed out. Did it make you stop farming, or change your rotations? 

As for Dick.............Well I think this is the 43rd time in three years he has posted that it is the end of the EU.  I agree Britain should never have joined, so, just to rub it in, I voted against the idea, but I know of a couple of posters on here who voted "For".

Jacobus:

Wonder if they've bought a ticket for tonight's EuroMillions lottery rollover.

  A Brit won half the rollover at about £70 million tonight so someone is happy.

However, does anyone else remember folks like Vince Cable and the great and good of the BBC telling us all that Britain is missing the Euro Train that all the other countries had hitched their wagons too and that, as a result we were going nowhere?

I ask this, not because of a desire to gloat at the poor sods in Greece and Spain etc but to point out to our younger members, that one must always be careful not to jump on a wagon simply because a lot of people are already on it who think they are going somewhere special.

I never cease to marvel at much of the wisdom of the ages and I do recall one of George Bernard Shaw's ( a fellow countryman of Mursal) dictums. He said, "The majority is always wrong."

GBS was not always correct but he was pretty shrewd when it came to assessing the metropolitan chattering classes.

 

 

 

    Spain should go back to the Peseta, set at a level to give their own people hope and incentive. this would get their internal economy going again. This would give them hope to get off the European financial treadmill. Unfortunately they are, very dependent on imports, (like us). Expensive Imports and foreign trading would be the sacrifice which I think would be worth the taking. Hopefully they would be able to return to their very good value holiday and tourist industries and internal businesses would start to grow again aided by high cost of imports. Foreign trading could be assisted by having a two tier Peseta. The silver Peseta would be used only for internal trading and the gold Peseta which would be valued higher would be used for foreign trading. I am now getting out of my depth!! Anyone like to comment?  

old mcdonald:

What difference will it make?

 

I think it will make a huge difference. Not to day-to-day business, but in the medium term for the EU project, and for all of us it will be a stark lesson in basic book-keeping. 

For the EU, the idea that weak members will be allowed to have full control of their finances will end. Those countries now face hard-times. And the people wont like it. There will be a rise in nationalism. Some may leave. Even the French political situation is starting to get queasy on potential austerity there. Its close fiscal union or disintegration as far as I can see - the end of the great muddle-along.

For all nations, this is the end of the 50s welfare dream. I can see bold political moves here to end state pension provisions - so sick will the government be with public sector workers bickering about their pensions, all new public sector workers, nay all people born after say 1990, will be told there will be no state provision and they should make their own arrangements. The idea that we can perpetually borrow money to prop-up our system of state freebies and early retirement will end. 

There is a key difference in the UK bailout. It is going to pay back. Yes, lending is now tighter for everyone, but most of the banks are profitable and at the same time a) repaying the handouts and b) reducing their reliance on cheap money. The government has raised the money themselves and much of it has come from domestic sources. Infact, the majority of our national debt is owned by UK individuals/banks/pension funds. This is a key contrast to the EU bailouts in which nation states are in hoc not to their own people but to others. Thats a big difference. When Greece decides not to pay, thats a big problem. If our citizens ever did, its only themselves they hurt, so our austerity reinforces itself.

What I find confusing about this is that, currently, all RBS accounts are being moved to RBS Scotland because all the non Scottish RBS accounts/banks are going to Santander. You can choose, move accounts to Scotland or have a Santander account instead.

RBS was bailed out by UK Govt.(UK populous!!) Santander is a Spanish bank and, one assumes, is in a similar start to other Spansih banks?

So, why is this "out of the frying pan into the fire" bank take-over of RBS outside of Scotland being allowed?

Rgds

Sskye

the fundamental problem i believe was not the euro, but irresponsible lending by banks to property speculators . this has resulted in a false construction boom and runaway house prices all across europe, except in germany where their banks only lend for industrial purposes and employment.

now these banks have ruined their governments by needing bailed out. they should not have been bailed.

peter george bernard shaw wasnt that clever, he was still praising communism as people he sent there were disappearing into the gulag.

what he said about the majority being wrong is good though, the majority are just sheep.

Housing / building booms were fuelled in Spain and Ireland by national governments not being able to set their own interest rates. So they become awash with very cheap money and not able to put the breaks on. Coupled with voters in all countries who hate to see house prices curbed. If inflation ex house prices is x, and house price inflation is y, they do need to be balanced in the long run like it or not.

Banks are businesses like we are. We have rules to follow - Nmax and all that which limit our profitability. I'm not sure how many banks, if any, broke the rules. But saying that, banks should a) have tighter rules and b) much higher punishments. The notion that investment banking arms of banks nationalised / bailed out by government could potentially profit from making financial bets on the very governments that bailed them out is, to be frank, sickening.

House prices need curbing in all countries. Sadly, they seem to be too political to touch. Alas. CGT on princial private residences would be a good start.

 Stop press - ECB vice-president expects Spain to "make a formal request" for bank cash this weekend.

 

tesla, it wasnt the govts who lent irresponsibly, it was the banks.

they threw out the 3x salary rule, with proof of income not required, and the rest is history

buy to let of course was evwen a worse culprit.

Not really. Banks were just doing what all good businesses do - make money. 3 x salary is not a rule written down anywhere. Nor does it say that there is any maximum loan to valuation etc. Whether there should be one, mandated by government is another thing. But if you were a bank with access to funds at one interest rate; could lend at a margin; had customers queueing up who would happily go elsewhere; then what exactly would you do? You jump on the bandwagon and let the good times roll.

I'd say it was equally the customer borrowing irresponsibly, and the banks not having enough security. But then not very many UK homes have been repossessed have they? 

And yes, government were lending irresponsibly - thats the crux. That there is an EU central bank who sets rates to curb inflation, which was unable to apply the brakes on economies that had sectors growing at many times the official inflation level. Thats a bubble and history is littered with them and their consequences. A major cause of bubbles (away from the public acting like sheep - which is known as "herding") is excess liquidity, which can very easily be tidied up by governments. They dont, because they enjoy riding the wave of prosperity.

So banks act rationally, as they are profit-driven businesses. They act within the rules set by government - in the main.

Governments act rationally, as they wish to be relecected. They enjoy the good times, and accept the moral hazard of bank bailouts.

People act rationally. They see something rising in value and persue it. They neither wish to be left out, nor leave "money on the table". By money on the table, I mean if you see a return of 4% and cash costs you 3%, you do it. Or someone else will.

None of this is new. It has been going on for centuries - Tulips, South Sea Islands (*cough* Darien scheme anyone *cough*). And it will continue. So it is both everyone's fault....and no-ones. Oh, and none of us will ever learn. We will accept speculative bubbles, but will always think we can get out before they burst.

tesla, my uncle retired from a senior position in an english bank about 1999, and was told along with his fellow retirees that they were dinosaurs who werent needed in a "modern bank"

rules werent needed, as sales volume would set your bonus, and caution was out of fashion.

they all shook their heads, predicted disaster and shuffled off. but oh how right they were.

as to rules, when i applied for a mortgage in 1986, 3x salary was the rule, and definitly not for letting out.

 

glasshouse:

rules werent needed, as sales volume would set your bonus, and caution was out of fashion.

Rules clearly are needed. Just like us farmers, we get pennies in return for following rules. 

We all know, that rules are made to be worked around. Thats what solicitors and accountants get paid to do. 

It is easy to see that by govrnments setting higher levels of tier 1 capital, that banks can be made to reign in the lending very simply and very quickly. Minimum ltvs for houses could be enforced, but with average age of 1st time buyers climbing, all that would do would be to shut the door for them getting houses, or force the government to bring out some scheme for them, which would inevitably be exploited by said lawyers/accountants. 

Austerity has been in fashion several times in my short lifetime. So has spend,spend, spend. I expect to see both again several times before I am pushing up daisies. 

When I applied for a mortgage in 2002, I could borrow what I wanted on a self-cert. I didnt, and took 2.5 times my wage. If I had gone for it, I would be several times better off than I am now. Three times average salary today would buy the fat end of f'all without a deposit that would take decades to raise.

yes, and they are rebuilding their balance sheets out of our hides.

like you, i could have gone for it and borrowed millions ten yrs ago on self cert, and probably should have, but i predicted a collapse, and here it is, if the govt would let it run its course.

 http://www.bbc.co.uk/news/business-18382659

There's the bailout. And "significantly" more than E40bn. So I'll say double that and make it E80bn. Thats the "chuck a wodge at it to make it look credible". Banks bailed out, but 25% unemployment? Not great, is it?

-edit-

Its E100bn. 

And the comedy is that the Spaniards stressed it was just for the bank, not the Spanish govt. Although at 6% for them to borrow, it wont be long...

TeslaCoils:

When I applied for a mortgage in 2002, I could borrow what I wanted on a self-cert. I didnt, and took 2.5 times my wage. If I had gone for it, I would be several times better off than I am now. Three times average salary today would buy the fat end of f'all without a deposit that would take decades to raise.

My first mortgage was at 6% and was based on 1.5 times my salary. The wife's salary was not taken into account, on the grounds that she would probably get pregnant and have to give up her job and lose her income.

Our first home was a small terraced house (no bathroom and outside lavatory) valued at £500 on which a 10% deposit was required.

At that time in 1963, building societies and local councils were the chief source of mortgage money although some banks would also lend. All on similar terms to that I have outlined above.

The increase to salary times three and allowing two salaries plus 100% mortgages has something to do with the increase in house prices, as has an inbalance between supply and demand. (including more one person homes and a reduction in the practice of having 'lodgers.'

Changes by succesive governments to the funds banks are required to hold on reserve (I could be wrong but think that in the early sixties it was about 15% ) have also meant that they could lend more, thus making more money available to fund mortgage inflation. 

 

well said peter, if funds are unlimited, the price can rise exponentially.

i have a friend who reckons women should not work, and houses would be half the price.

i think the germans think that way too, they say a child should be raised by its mother, not childcare

glasshouse:

i have a friend who reckons women should not work, and houses would be half the price.

 

Which is entirely true as has been discussed on another thread, but house prices would then be driven by childless couples, and that a government would be required to keep everything in balance by somehow subsidising the family with a stay-at-home mother, or by penalising those who dont give birth. In a way, this would be easy as the amount of govt money that lets women put their children into nurseries could simply be paid to them in cash. However, the money the hm govt pays in support for chilcare goes straight into another worker's pocket, so back to the treasury. I havent the figures, but again the childcare sector probably employs more people directly than farming. 

glasshouse:

i think the germans think that way too, they say a child should be raised by its mother, not childcare

 

Although this is a massive contrast to the French system, which still doesnt produce overly damaged children.

Anyway, back on topic, E100bn for the Spanish banks. Will that halt the Euro crisis? If not, where next?

Peter Wells:

 

 

Changes by succesive governments to the funds banks are required to hold on reserve (I could be wrong but think that in the early sixties it was about 15% ) have also meant that they could lend more, thus making more money available to fund mortgage inflation. 

 

Just to clarify this, the rules regarding bank lending are determined under the Basel accord. The original Basel I regulations from the late 80's set Capital Requirements at 4% of Tier 1 (risk weighted) assets. Different assets were then allocated a risk weighting dependent of their perceived risk.  Property loans were given a 50% risk weighting (of the 4%) thus banks only had to keep 2% of their total mortgage loan book in reserve. These rules were revised under Basel II in the late 90's when the risk weighting on property loans was dropped to 35%, this allowed the banks to increase the value of loans against property, thus driving house prices higher.

http://wfhummel.cnchost.com/capitalrequirements.html

My understanding is that Basel 3 is going to require a higher level of capital requirements, and also subject the allotted risk weightings of financial instruments to much greater scrutiny. In any case, this wont be fully implimented for about 6 more years, but will tighten up lending. The alternative for banks would be to a) make more and b) retain more profit rather than paying it out as dividend / bonuses.

basel III means "screw your customers to death" and extract their capital to bolster ours.