September 2, 2012

Spain bank-run reaching disastrous levels

The central bank of Spain just released the net capital outflow numbers and they are disastrous.

During the month of June alone $70.90 billion left the Spanish banks and in July it was worse at $92.88 billion which is 4.7% of total bank deposits in Spain.

For the first seven months of the year the outflow adds up to $368.80 billion or 17.7% of the total bank deposits of Spain and the trajectory of the outflow is increasing dramatically.

The Spanish ten year now yields a 6.81% and their thirty year is yielding 7.34%.

Spain has now set up a fund for its regions to tap of $22.6 billion and this may not even be close to what is asked for or required with the regions needing some $50-75 billion in assistance. Many of the regions in Spain are not paying suppliers or their other local debts and the situation is clearly out of control.

On top of this Bankia, late Friday, reported out bad loans of $8.24 billion and an operating loss of $5.58 billion causing the government to promise to inject $5-6 billion into the bank immediately to prevent its collapse.

Furthermore, Spain has the highest unemployment rate in Europe, even higher than in Greece, with a 25.1% jobless rate. For those under twenty-five the job situation is extreme with a 53% unemployment rate.

Between December of 2011 and the end of March 2012 the Spanish banks bought $109 billion of the Spanish sovereign debt. Much of this was facilitated by the ECB who lowered the collateral rules and handed the money to the Spanish banks in such a size that very bad things will result if Spain hits the wall and defaults.

Then since March the trend has reversed and the Spanish banks have sold $21.3 billion of Spanish sovereign debt with $11.7 billion in July alone as capital flees from the Spanish banks.
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