When one trillion dollars is not enough…
The 85 billion euros bailout of Ireland is starting to send chills down the spine of Mr. Market (at last!). Portugal and Spain just stated they do not need a bailout which means a bailout is needed big time. Remember Greece? Ireland? Please note that this 85 billion euros rescue for Ireland is a drop in a bucket because the Irish Banks owe more than US$600 billion to foreign banks (UK, Germany, France, US).
Now the big one: Spain. Ironically, Spain is too big to fail and too big to bailout. The EU AAA rescue fund of 440 billion euros + the IMF extended fund of US$500 billions which amounts to US$ 1 trillion would not be enough. Saving Spain is 7 times Ireland.
The creditors, the banks who made those loans don’t want to take the losses. Hey who does? The governments are trying all their mighty to paper it over, to act tough with austerity measures (how’s that working in Greece?) in the hopes that they can solve this problem by wrecking their own existence – which in turn won’t be of much help to the banks – won’t it?
Now looters are not always the one you would think. Some European governments are getting creative in getting their hands on some fresh money. Ireland for one had to use their own pension fund to bailout themselves: they are putting 17.5 billion euros of their National Pension Reserve Fund on the line as part of the 85 billions bailout package. Even with this act of good will from Ireland taxpayers, the term for the EU-IMF credit line is not cheap: 5.8% and many think that Ireland won’t be able to repay. Now isn’t that great. Hungary and France are also moving in on long term assets like pension funds to fill short term deficits. Well what can we say – all these bailouts are costly and someone has to pay for it.
They were 100 000 Irish people manifesting in Dublin icy streets yesterday. Wonder how long this thing can go on before somebody, somewhere gets really angry.