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Spanish Finance Minister Begging Germany For Credit Line To Stall Full Bailout Request

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With Spanish Bonds hitting 7.5% and €28 billon to be rolled over in October, Spain has been hoping that the ECB would go back to buying their bonds but unfortunately Germany looks to have blocked that route. The next step is to send Finance Minister Luis de Guindos to Germany and beg Schäuble for a line of credit to keep the country running. It is most likely going to be rejected to force a request for a full sovereign bailout, thus joing the club. Who’s next?

Spain faces a bond rollover of €28 Billion in October and is rightfully scared about 2-year bond rates of 6.5%.

El Economista notes the Spanish economy minister is at a meeting in Berlin to discuss Government Request for a Credit Line to Save the Year and forestall an imminent financial collapse.

This is a heavily Mish-modified translation from the article ….

Luis de Guindos will meet with Wolfgang Schäuble to negotiate measures noting the ECB is already 19 weeks without buying debt.

Eeconomy minister, Luis de Guindos, now travels to Germany for talks with German Finance Minister, Wolfgang Schäuble. The appointment is key because Spain is running out of time. With the 10-year bond about 7.5% and the risk premium on the 632 basis points, Guindos nevertheless insisted that Spain will not have to ransom all for a full sovereign bailout.

Instead, he asks for the European Central Bank (ECB) to resume purchases of Spanish bonds in the market.

Guindos believes Mario Draghi is not the problem. Rather, bond purchases have stopped primarily because Germany is opposed. To mutate this position and to convince Schauble to give permission to his emissaries at the ECB, Jörg Asmussen, and Jens Weidmann, Luis de Guindos traveled to Germany

Analysts are unanimous: An imminent financial collapse is at stake. If pressure on Spanish bonds continues and Treasury loses its access to the bond market, Spain cannot cope with the massive debt maturity that awaits him in October, close to the 28 billion euros. Amounts may be even greater if Spain has to funnel money to the regions requesting the help of special liquidity fund.

Therefore, sources close to the government have admitted they are considering other alternatives. For example, the negotiation of a temporary line of credit with which to address the maturity of its debt, and perhaps even financial assistance for Spain’s regional governments.

This option is based on a premise well known in the eurozone, of buying time. A credit line would serve to dampen fears today, waiting for the agreements reached at the June summit, including the implementation of a single banking supervisor and an operational Stability Mechanism.

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SA Banks Brought To Court – Monetary System UnConstitutional

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Wow, the banking system around the world is taking a beating. In the last few weeks we have had LieBor, HSBC money laundering, Irish bankers arrests and now in South Africa, the 4 biggest banks and Reserve Banks are to be taken to court because the money lending (fractional reserve lending system that we all use) is fraudulent and unconstitutional.

In what certainly has the hallmarks of a David vs Goliath battle, SA’s four biggest banks and the Reserve Bank have been served with summons to defend themselves against allegations of unconstitutional banking practices.

The papers were served by the sheriff of the court on behalf of the plaintiff, a non-governmental and not for profit organisation, New Economic Rights Alliance (NewERA).

NewERA is asking the High Court to declare SA’s money lending system fraudulent and unconstitutional. The system of loans and credit advancements is an “unfair, self-serving, monopolistic, economic activit[y] that [results in] arbitrary deprivation of property, monetary depreciation and inappropriate conduct,” court papers allege.

According to Scott Colin Cundill, director of NewERA, the action is not financially motivated. “We are not suing for money. We are asking the court to suspend all legal action between the banks and SA citizens, until a full investigation has been undertaken into our banking system.”

FNB, Standard Bank, Absa and Nedbank confirmed receipt of the summons. While Nedbank was still studying the summons, FNB, Absa and Standard Bank confirmed that the matter will be fully defended.

3 practices at the heart of the case. 1 Fractional Reserve banking, 2 Seigniorage, 3 Securitisation.

At the heart of the issue are three trade practices (in particular) conducted by banks. NewERA intends to show that these are unconstitutional.

The first is the fractional reserve banking system. The conventional view of this system is that only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done deliberately in order to expand the economy by freeing up capital that can be loaned out to other parties. “Our issue with this is that new loans can be created without having the actual cash to back them,” says Cundill.

The second is the process of seigniorage. This is the profit that the SA Reserve Bank (and governments around the world) earn from the difference in the cost of printing money and the face value of that money. “The way in which these notes enter the banking system and therefore the public, and thus how seigniorage is charged, is a very little known or understood process.”

The last matter that NewERA is taking issue with is securitisation. This is the financial practice of pooling various types of contractual debt such as residential home or car loans, repackaging it and selling this consolidated debt to various investors. It was the practice of selling toxic debt, packaged as collateralised mortgage obligations, which triggered the financial crisis in 2008.

NewERA will also argue that the lack of transparency regarding how banks make use of depositors’ money, prevents individuals from making informed decisions when dealing with agreements that affect their financial well-being.

“What we want is the development of co-operative, sound economic principles to ensure that risk and, or fault does not devolve onto the consumer unnecessarily and unconditionally, causing loss of property, investments and value,” says Cundill.

NewERA has 154 members who are joined in the application.

The application is also supported by more than 115  000 people, Cundill says.

The banks have ten days in which to file their intention to defend.

Source: moneyweb.co.za

Italian Cities Going Bankrupt Next

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This euro debt crisis lurches on as early reports are surfacing from Italy of many cities struggling, so much so that they are even considering closing schools. Last week it was regions in Spain that were bust followed by a spike in Spanish bonds, now the focus will shortly shift to Italy and already we are seeing an increase in bond prices. The EURUSD is currently at 1.208, at what level will it be by the end of the summer?

The ordinary Italian citizens are beginning to see the big picture and there are reports in LaStampa of panic setting in across social media sites regarding the current state of Italy’s economic situation.

ITALY’S financial outlook darkened today amid warnings that 10 cities are at risk of bankruptcy and schools may not be able to open in the autumn because of drastic spending cuts.

The cities at risk of running out of money include Naples, Palermo in Sicily and Reggio Calabria, on the toe of the Italian boot, according to the Italian press.

“The situation is becoming worse by the day,” said Graziano Del Rio, the president of a national association of municipal councils.

The warning came just days after Mario Monti, the prime minister, expressed fears that Sicily, which has a high degree of fiscal autonomy, was on the brink of a default.

Cities and towns in southern Italy have for years been plagued by mismanagement, corruption, the wasteful use of EU funds and infiltration by the Mafia. But the “black list” of cities at risk also includes some in the north of Italy such as Alessandria, in the Piedmont region.

Italy’s regions face “a serious situation”, said Annamaria Cancellieri, the interior minister, although she downplayed concerns that Sicily would be forced to default.

Since when have things got so bad that schools need to close? Obviously, this points to how serious the situation is brewing in Italy. Why couldn’t it have happened in my day? Somebody always benefits from a crisis 😉

Deep cuts to Italy’s provinces may mean that some schools will not be able to open after the summer holidays, the president of the provincial government association said. “With these cuts we won’t be able to guarantee the opening of the school year,” said Giuseppe Castiglione.

Mr Monti hopes to reduce the country’s €2 trillion national debt by dissolving 64 of Italy’s 107 provinces, addressing long-standing concerns that they are an unnecessary and wasteful tier of government.

The government plans to slash €500m from the provinces’ budgets this year and a further €1bn in 2013.

The Monti government is pushing ahead with an ambitious spending review that envisages cuts to government services worth €26bn over the next three years.

Mr Monti reiterated that he will step down in Spring 2013, paving the way for elections.

Finally, Berlusconi will make another bid to be president once Monti steps down. The way look at it is, this presidential election can be viewed as an IQ test for the nation. A vote for the corrupt Berlusconi is a vote for Dumocracy.

Silvio Berlusconi has indicated that he will try to become prime minister for a fourth time, a declaration that has only increased market nervousness over Italy’s economic future.

Source: Irish Independent, MISH

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