Euroblown: ClubMed Money stampedes Northwards as French Lay Plans to Cut the Bond Market’s Throat

Capital flight from the eurozone is accelerating at an alarming rate. But the real figure to look at is that for money heading north within the zone. It is absolutely unprecedented. In March 2012 alone, some 65 billion euros left Spain for other euro- zone countries. In the seven months through February, the relevant debts of the central banks of Spain and Italy increased by 155 billion euros and 180 billion euros, respectively. While during that time-frame, the central banks of Germany, the Netherlands and Luxembourg saw their corresponding credits to other euro- area central banks grow by about 360 billion euros.

The real situation in Spain has been the subject of lies and spin for months. True Spanish debt-to-GDP, for example, is not 60% but closer to 90%.  Not a single Spanish bank is in the black. Relative to the behaviour of US housing, if Spanish housing drops as much then the correction will be a further 50%. In Spain, one home was  built for every new person as the population grew. Unemployment is 23%, with youth unemployment over 50%.

And the final nail in the coffin was hammered in last week, when Olli Rehn went there and said everything was just fine.

The yields of both Spain and Italy are out of control again. Mario Draghi’s ECB will find new ways for both overt and covert monies to hide the truth, but a small-scale qualitative phone Study I did starting last Thursday was unable to find a single credit trader or analyst in Europe who thought Spain had a ghost of a chance of survival.

There is no getting away from this: once Spain goes, the eurozone is dead. The Germans won’t bail out Spain – they couldn’t if they tried. Every major EU Member State – including the UK – now has an exit plan. Financial site Zero Hedge, for instance, reports an off the record conversation with a French diplomat saying that, once the elections there are over, France will recommend no more bailouts, and only issue guarantees to cover interest payments and trade deficits from here on. This effectively tells the bond markets to va t’en fou.

So here we are again, heading for that moment when the markets simply refuse to believe in bazookas, firewalls, and turnarounds in Bond confidence; when the markets have seemingly lost all interest in funding a given Sovereign….and this starts to be reflected in the yields they demand.

I’m not sure anyone in the MSM spotted this, but last week Spain’s interior ministry introduced new measures to criminalise “guerrilla” warfare methods (including online, texting and so forth) to incite protests. This is an accurate portent of what the Spanish elite expects. The end-game has been forecast for somlong now, some people are beginning to believe it’ll never happen. But the eurozone is in extra time now – and nobody knows what’ll happen once the penalties start kicking in.


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