The EU’s Real Agenda: “Lie Until You Are About to Die”
by Phoenix Capital Research
The big news that the markets are attempting to digest this week is the €100 billion Spanish bailout. This action and the upcoming Fed FOMC meeting on June 19-20 will dictate the market’s action over the next two weeks and possibly for the remainder of the year.
The first of these topics, the Spanish bailout, is an extremely complicated affair. The key takeaway issues that need to be considered are:
How the bailout was performed: who was involved and who wasn’t.
The details of the bailout structure itself.
The financial implications of the bailout.
The political implications of the bailout.
Let’s dive in.
Spain has been denying the need for a bailout for months now. Indeed, a mere two weeks ago, Prime Minister Mariano Rajoy stated that Spain would not need outside assistance. In fact, when France’s President Francois Hollande implied that Spanish banks might need outside funds at an EU summit last month, Rajoy retorted, “Hollande does not know the state of Spanish banks,”
What’s peculiar about this statement was that it was made when the Bankia nationalization was already underway. Indeed, two days after Rajoy’s comment, Bankia asked Spain for €19 billion in bail out funds.
So we now know that’s Spain’s political leaders will lie right up until the point of systemic collapse. We also know that both Spanish banks and politicians are highly incentivized to not quantify the true extent of the risks inherent in the Spanish banking system (remember, Bankia was discussing paying its dividend in April… just one month before it requested a bailout and revised its 2011 €309 million profit to a €3 billion loss).
Thus, I would change the common phrase applied to the EU’s political/ financial policies from “extend and pretend” to “lie until you are about to die.”