20120715-215929.jpgGood morning

The headlines:

  1. German lawmakers agree to the Spanish bailout.

    Link: apparently, this was important.

    It makes me laugh. The Germans approved of the Euro bailout of the Spanish banks only after they had “assurances” that Spain will remain liable for the aid.

    Oh yes. Just like Greece remained liable for her debts…

  2. And while we’re on the point, there’s an awkward clause in the new draft EU budget law.

    Link: the fire-extinguisher versus the firewall story.

    The new draft budget that establishes the deficit limit for the Eurozone countries* has had a new clause included by the European Parliament.

    The provision basically sets up an EU fund that would help to pay the debts of the 17 euro countries – which sounds a lot like joint-debt sharing, eh?

    To backtrack a second: a lot of the new European governments are in favour of issuing eurobonds, which are basically bonds guaranteed by the Eurozone as a whole. As opposed to the current system of German bonds (issued by the German government, to be repaid by the German government..ish), Greek bonds (issued by the Greek government, to be repaid by the Greek government..ish), and so on. The current system gives countries like Germany a really low cost of borrowing, and countries like Italy and Spain a really high cost of borrowing. A Eurobond system would give every European country the same cost of borrowing.

    Germany does not want this.

    But doesn’t a European fund that helps repay the debts of all 17 euro countries sound almost exactly the same as bonds collectively repaid by all 17 euro countries?

    Her Angelaship will not be pleased.

    But many are saying that the fire extinguisher of bailouts (delaying the problem) is being replaced by an EU fund firewall.

    I wonder if the politics of it all might result in Germany leaving the Euro?

    *This all-important rule will basically limit how much a government can spend on credit. 

  3. The other-Libor probe banks.

    Link: the investigation rumours.

    Deutsche, HSBC, Société Générale and Credit Agricole are the names floating about.


  4. And while we’re on that point, will Libor be the war of the banks?

    Link: A storm of suing.

    The concern is that the banks might start suing each other over the Libor rigging.

    Wall Street suing Wall Street.

    I believe I’d like to see that.

    Of course – I think that this is paranoia. The banks no doubt have too much on each other to start suing. #CanOfWorms #WiseToLeaveItClosed

  5. South African cuts its repo rate.

    Link: SA surprise.

    After this week’s MPC meeting, the SARB cut the repo rate to 5%. It’s a “surprise” because only 2 analysts out of the 18 surveyed by Bloomberg made the right call.

That’s all for now.

Have a good day.