Spain and Portugal financial crisis puts Europe on brink

Okay, I'm not verse in the way the Euro dollar functions, so I have a few questions:

1) The way a country like USA works, is that if they want to print more $$, they just turn on the printing press and keep on printing, such as what obama is doing right now.

So how does EU works? Say Greece needs more Euro, and the ECB won't let them, what then?

2) Ea. member state has the authority to create euro coins, (not notes), although they are suppose to get the approval from ECB to create those coins, w/ the current situation of Greece, who's to stop them to create those coins, they obviously has the physical mechanism to create those coins.

And say Greece create 500 billion coins, and then say they only creates 50 billion coins, who's to know?

http://europa.eu/legislation_summar...roducing_euro_practical_aspects/l25058_en.htm

3) According to the Masstricht Treaty,

http://en.wikipedia.org/wiki/Euro#cite_note-25

Member States are meant to meet strict criteria such as:

i) a budget deficit of < 3% of their GDP,

ii) a debt ratio of less than 60% of GDP

but From this bbc chart:

http://news.bbc.co.uk/2/hi/business/8495174.stm

_46891454_govts_in_debt02_466gr.gif


All countries, including UK, Greece, Spain, Ireland, Italy, Germany has already exceeded the debt ratio vs. GDP, as well as their budget deficit of their GDP

so every member broke the charter?

Note: Even Spain is sitting at 54.3%, EU project their next yr.'s budget deficit to be exceeding 77%.

4) How come only Greece, Spain, Portugal is mentioned in the news? because according to the chart, Italy is also in the same boat as Greece, and so is Germany and UK, how come they are not in the news?

5) what if Greece folds? What's going to happen to EU?
 
Does anyone believe that the citizens of germany or other EU countries want their govt to send even a single euro to bail out Greece or another?\

Can Canadians or Americans imagines sending money to bail out the deficit of Russia or the Bahamas?

It is cheaper to kick them out.

As they say, beware of Greeks bearing gifts...
 
We've had a massive debt bubble. It will not be over, IMO, until countries - real, productive G7 countries, not BRIC pretenders - start defaulting on sovereign debt.

This process would go much quicker and smoother if the US would acknowledge the inevitable , and set the example by going first.
 
Quote from TraderZones:

Does anyone believe that the citizens of germany or other EU countries want their govt to send even a single euro to bail out Greece or another?\

Can Canadians or Americans imagines sending money to bail out the deficit of Russia or the Bahamas?

It is cheaper to kick them out.

As they say, beware of Greeks bearing gifts...
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You're wrong, TZ... You have to realize that the EuroZone has been a dream of several generations of Germans (and the French, to a lesser extent). Whether it's the result of post-WWII trauma or something else doesn't matter, but the Germans and the French are prepared to "help" Greece (obviously, with strings attached). The issue isn't with Greece and Portugal, which would both be cheap to deal with. It's Spain and, god forbid, Italy, which have economies almost three times and six times the size of Greece, respectively.
 
Quote from Martinghoul:

It's the writedowns that the Spanish banking system still has to take on various loans to property developers that are looking increasingly, shall we say, unpleasant.

EUR 8bn ain't gonna do the trick, not even close. The actual figure's closer to EUR 200 - 300bn.
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I don't see any foreclosures happening in Spain at all, and I spend some considerable time down there. Who's on the hook for all these "luxury" projects that now grind to a stand still? If you take a drive up the coast from Malaga to Alicante (Read: The Brits' favorite strip) there are literally thousands of deserted ghost buildings where building has stopped. It's a ghastly sight.

What about those 10,000s of apartment units that are now deserted. Those images of deserted streets and entire blocks of building from 2008 that made headlines, they're still there. Who owns this junk, where is this junk accounted for? They probably hired Bernie Madoff's accountant to cook the books and hide the garbage on some off-balance sheet vehicles at 100% of the 2007 mark. I'm saying this tongue-in-cheek, but heck I would not be surprised at all.

Has any volume to speak of been foreclosed or written off at all in Club Med? Me thinks not.
 
Quote from makloda:

I don't see any foreclosures happening in Spain at all, and I spend some considerable time down there. Who's on the hook for all these "luxury" projects that now grind to a stand still? If you take a drive up the coast from Malaga to Alicante (Read: The Brits' favorite strip) there are literally thousands of deserted ghost buildings where building has stopped. It's a ghastly sight.

What about those 10,000s of apartment units that are now deserted. Those images of deserted streets and entire blocks of building from 2008 that made headlines, they're still there. Who owns this junk, where is this junk accounted for? They probably hired Bernie Madoff's accountant to cook the books and hide the garbage on some off-balance sheet vehicles at 100% of the 2007 mark. I'm saying this tongue-in-cheek, but heck I would not be surprised at all.

Has any volume to speak of been foreclosed or written off at all in Club Med? Me thinks not.
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My Belgian newspaper today talks about an 80 billion Euro exposure from local banks to the 'Club Med'. :D
 
Quote from makloda:

I don't see any foreclosures happening in Spain at all, and I spend some considerable time down there. Who's on the hook for all these "luxury" projects that now grind to a stand still? If you take a drive up the coast from Malaga to Alicante (Read: The Brits' favorite strip) there are literally thousands of deserted ghost buildings where building has stopped. It's a ghastly sight.

What about those 10,000s of apartment units that are now deserted. Those images of deserted streets and entire blocks of building from 2008 that made headlines, they're still there. Who owns this junk, where is this junk accounted for? They probably hired Bernie Madoff's accountant to cook the books and hide the garbage on some off-balance sheet vehicles at 100% of the 2007 mark. I'm saying this tongue-in-cheek, but heck I would not be surprised at all.

Has any volume to speak of been foreclosed or written off at all in Club Med? Me thinks not.
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Indeed... They are owned by the Cajas, which are, in turn, funded by the big Spanish banks. They are just sitting on these properties, 'cause they know they can't sell. Their best hope is to continue to be able to fund them and to earn their way out of the hole over the next few years. Judging by the Santander and BBVA results, this is exactly their strategy.

This has been getting a lot of airplay in the mkt recently:
http://www.propertywire.com/news/europe/spanish-developers-loan-woes-201002023858.html
 
Quote from makloda:

I don't see any foreclosures happening in Spain at all, and I spend some considerable time down there. Who's on the hook for all these "luxury" projects that now grind to a stand still? If you take a drive up the coast from Malaga to Alicante (Read: The Brits' favorite strip) there are literally thousands of deserted ghost buildings where building has stopped. It's a ghastly sight.

What about those 10,000s of apartment units that are now deserted. Those images of deserted streets and entire blocks of building from 2008 that made headlines, they're still there. Who owns this junk, where is this junk accounted for? They probably hired Bernie Madoff's accountant to cook the books and hide the garbage on some off-balance sheet vehicles at 100% of the 2007 mark. I'm saying this tongue-in-cheek, but heck I would not be surprised at all.

Has any volume to speak of been foreclosed or written off at all in Club Med? Me thinks not.
More...

indeed, European real estate markets have not corrected as they should have based on the current crisis.

As Martinghoul mentions, it is due to the fact that the ECB has thrown a lifeline to banks for them not to offload their RE.

In the case of Spain, it is ridiculous. Just check property prices around Barcelona, they still defy gravity laws.

It is also a problem in the UK were the RE market has been frozen on the back of very low interest rates which makes it more bearable to keep carrying a non-yielding asset as long as its value doesn't fall too much. By freezing the RE with low interest rates, prices do not move and you can wait, wait and wait.

You wait for time to heal hoping for inflation.

But, it becomes problematic if interest rates start rising.... and with the amount of refinancing down the line from sovereigns and corporates.... with a securitization market dead....with investors questioning the fiscal positions of countries....

Hence the risk of a bad end to this story, there is only so much dust you can hide under the carpet.

Not sure Italy is that much concerned but Spain and the UK for sure.

Greece is just a joke, I still wonder what they're doing in the Euro.

Portugal I can't comment.
 
WTF!:eek:

http://online.wsj.com/article/SB100...56927146.html?mod=WSJ_Real+Estate_LeftTopNews


The London Real Estate Bubble Is Back—and It's Scary

*
By BRETT ARENDS


LONDON—The one-bedroom co-op apartment is only a short walk from Hyde Park, and it boasts high ceilings and a purely decorative balcony.

Yours for a mere $1.5 million. It seems quite a high price, especially for a property whose ground lease will eventually expire, leaving you with nothing.

If you're looking for something bigger, you can get a duplex with two bedrooms in the center of town ... for $3.3 million. And if you're willing to slum it a bit and cross the River Thames to the unfashionable South Bank, you can get a modern three-bedroom apartment with a genuine balcony, and views of the river, for $4 million.

Looking at the real estate listings here is like stepping back in time to that unreal, giddy world of three years ago—before Lehman, before subprime, before AIG. Back to a period when everyone was either rich or on their way, either from flipping condos or running hedge funds, and the only direction was up.

But these prices are now, and they contain an ominous message: The London real estate bubble, arguably the biggest one of all, still hasn't popped.

If history is any guide, it surely will. Burst bubbles typically fall a long way, in due course, and there is no reason to believe this one will be any different—despite the usual rationalizations you hear in this town today, and which you heard in, say, Florida in 2005 and Tokyo in 1988.

London real estate has actually bounced off the bottom in the last nine months. Prices are now down a mere 9% or so from their 2007 peaks, according to data tracked by mortgage giant Nationwide Building Society. The average home in London, including all those dreary outskirts that go on and on and on, is $436,000. That's even higher than it was as recently as 2006, when the bubble was in its late stages. In the fashionable center of town—where the properties cited at the top of this article are all located—the prices are astronomical.

Overall, British prices have only fallen about 12% from the peak. When compared to household incomes, they stand far higher than they did even in 1989, at the peak of the last property bubble.

This matters for everyone—including those who will never visit Britain and have no direct interest in the real estate market. That's because there's one big question hanging over the U.S. and world economy right now: "Is that it?"

In other words, is the crash over? Has the Great Recession come to an end? Are we now heading back, albeit slowly, to normal economic growth rates and rising assets? Or is this just the eye of the hurricane?

No one knows the answer for sure. (I don't either, but at least I admit it.) But London real estate prices are one of the most worrying signs that "That isn't it," and that there is a lot more bad news to come. The other shoe, to put it plainly, hasn't dropped.

Jeremy Grantham, chairman of Boston money firm GMO and a British expatriate, argues that the British property bubble may be the biggest since the infamous one in Japan 20 years ago. It's notable that when that bubble burst, prices fell from 1991 through 2005. They fell again last year. There were many false dawns along the way. Many assumed the crash was over the worst after the rout of the first few years .But the real damage came afterward, as prices kept sliding, year upon year.

People here will tell you that London is unique. Well, yes. But everywhere is unique.

A money manager this week explained to me that the London real estate market now functions as something of a global financial Laundromat: Properties are bought up by tycoons from Russia, the Middle East and elsewhere eager to get their money out of their own country. But so what? An overpriced market is still an overpriced market. Losing money on Mayfair apartments is no better than losing it to, say, a corrupt government.

Prices here were also buoyed by the hedge-fund boom. Perhaps that is back again. If so, it's something else to be worried about. Another speculative mania is the last thing we need.

But if London real estate is buoyed by the uniqueness of the town's economy, there is a disturbing degree to which the reverse is also true. This is a ridiculously expensive city to visit. I seem to hemorrhage money with every step I take. I was wondering, as I got out of a taxi the other night and severed the requisite two limbs to pay the fare, how I ever afforded to live here all those years.

The answer is, I couldn't—even though I earned a perfectly good salary. What made a difference was the money I made on my apartment, which doubled in value between 1997 and 2003. Two years after I sold it, in 2005, it had nearly doubled again. Remove this alchemy from the equation of ordinary Londoners, and the bars and restaurants and theaters would be a lot emptier.

Meanwhile, the British government is borrowing and spending on a huge scale to prevent an economic implosion. The national debt jumped by a fifth last year, surpassing 60% of annual output. In a sign of what is now driving economic activity, the average public-sector employee, according to official statistics, now earns about a fifth more than his private-sector counterpart.

The markets are certainly worried about the long-term implications of the U.K.'s spending binge. It costs twice as much to insure British government bonds against default as it does German or French bonds.

But if you looked at real estate prices, you'd never know it.
 
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