European Bank Run Watch: Spaniard Edition

Tuesday, 28 August 2012 14:05

European Bank Run Watch: Spaniard Edition ^Featured

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As part of my ongoing series which I started in January of 2010 - Pan-European sovereign debt crisis, I detailed the rapidly developing financial malaise in Europe, detailing the risk to the larger more respected western European nations as well as their perceived profligate brethren to the south. One name popped up that analysts and media failed to harp on... Spain - at least back then. Now, people are wondering how Spain will handle its new found (at least to non-BoomBustBlog subscribers) funding crisis. To wit, and as excerpted from The Spain Pain Will Not Wane:

Professional subscribers can now actually download the original Spanish Bond Haircut Model that we used to calculate loss scenarios - Spain maturity extension_010610 (The Man's conflicted copy). Despite the fact I was probably the most realistically bearish out of the bunch, things have actually gotten materially worse since this model was constructed two years ago, hence it can use a refresh. Alas, it is still quite useful.

In the general subscriber document Spain public finances projections_033010, the first four (or 12) pages basically outline the gist of the Spanish problem today, to wit:

Spain_public_finances_projections_033010_Page_01

Spain_public_finances_projections_033010_Page_02

Spain_public_finances_projections_033010_Page_03

Spain_public_finances_projections_033010_Page_04

The stress caused by Spain breaking the central bank will bring to full fruition the theory behind our European Banking and Insurance research from the last few quarters. All would do well to remember (and re-read, if need be),

This research, although over 2 years old, has proved to be quite useful and prophetic, till this very day. Ask the editors at CNBC as they ran this story: Spain Recession Deepens as Austerity Weighs

Spain's economy shrank further in the second quarter of the year and a slump in domestic spending accelerated, signaling a protracted recession as the country presses on with efforts to slash its public deficit.

Spain's economy fell back into recession in the first quarter of the year, when output fell 0.3 percent, and government estimates show GDP will probably fall for this year and next year as it pushes through further measures aimed at slashing a bloated deficit.Gross domestic product fell by 0.4 percent in the second quarter of the year, according to final data that confirmed a preliminary reading. But on an annual basis it dropped by 1.3 percent, worse than initial estimates of 1.0 percent.

The data came a day after Spain said its economy performed less well than expected in both of the last two years.

On Tuesday, the National Statistics Institute, INE, also revised down 2011 fourth quarter GDP to -0.5 percent from -0.3 percent.

Close to record high borrowing costs and an economy showing little sign of picking up any time soon is nudging Spain closer to calling for a European bailout, which analysts say is only a matter of time.

Those that follow me know that I have been warning on Europe and its banking system years before the sell side and mainstream financial media (reference the Pan-European Sovereign Debt Crisis series).

Well, fast forward to today's CNBC headlines and you get: Spaniards Pull More Money Out of Banks in July. What a surprise, eh? As excerpted:

A rush by consumers and firms to pull their money out of Spanish banks intensified in July, with private sector deposits falling almost 5 percent as Spain was sucked into the centre of the euro zone debt crisis. Private-sector deposits at Spanish banks fell to 1.509 trillion euros at end-July from 1.583 trillion in the previous month.

Hmmm!!! How's that bank run thingy work again? Oh yeah, as excerpted from the prophetic piece from July 23, 2011 - The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs! which detailed for my readers and subscribers the mechanics of the modern day bank run, particular as I see (saw) it occurring in Europe.