Now Moody’s downgrades seven GERMAN banks as Spain begs for help

  • Spain needs around €40bn to prop up its debt-laden banks
  • Long-term plans for eurozone unlikely to address imminent Spanish crisis
  • FTSE and German DAX both rise ahead of meeting of the ECB
  • Tory MP says Greece must leave euro to avoid a catastrophe

By
Daily Mail Reporter

07:41 EST, 5 June 2012

|

09:14 EST, 6 June 2012

Seven German
banks have been downgraded by one of the most reputable rating agencies
amid fears that eurozone debt will hit the country.

Moody’s
said it would be cutting the rating of Germany’s second biggest bank,
Commerzbank AG, from A2 to A3 for the long term with a negative outlook.

Moody’s said its move was driven in part
by ‘the increased risk of further shocks emanating from the euro area
debt crisis in combination with the banks’ limited loss-absorption
capacity.’

Despite the downgrading of the banks, world markets rose, buoyed by the prospect of action from the European Central Bank which is due to meet tomorrow to discuss the crisis.

Germany’s DAX rose 1.68 per cent
while the FTSE was up 1.93
per cent at 5361.84 this afternoon.

Commerzbank AG, Germany's second biggest bank, has had its rating downgraded by Moody's from A2 to A3

Commerzbank AG, Germany’s second biggest bank, has had its rating downgraded by Moody’s from A2 to A3

Bailout is impossible: Finance minister Cristobal Montoro has begged the EU to help recapitalise Spain's debt-laden banks

Spanish Prime Minister Mariano Rajoy said Europe 'needs to support those that are in difficulty'

Spain’s treasury minister Cristobal Montoro
(left) said markets’ doors were closed to Spain while Prime Minister
Mariano Rajoy (right) said Europe ‘needs to support those that are in
difficulty’

The ECB isn’t likely to take any new
steps that will address immediate concerns when it meets, analysts say, even as anxiety builds
over the deteriorating outlook for Europe’s economy and banking system.

Indeed Herman van Rompuy, European
Council president, will detail long term plans for eurozone integration that are not intended to deal with Spain’s crisis as it asks for help.

Spanish Treasury minister Cristobal Montoro has said high borrowing costs mean that Spain ‘doesn’t have market doors open’ to it as he begs for more money to help its debt-laden banks.

The
request for aid comes as the European Union unveiled plans to stop
taxpayers’ money from being used to bail out failed banks.

Elsewhere the UK’s treasury committee chairman, Andrew Tyrie, has also said that Greece should leave the euro.

He believes that the ECB cannot solve
problems facing the country and plans need to be made for an orderly
exit.

If Greek voters don’t vote for austerity measures Greece could be
kicked out of the eurozone causing chaos.

He said that a contingency plan should be made to make Greece leave or face a ‘catastrophic’ exit.

He added that a bailout for Spain
would now be impossible, and the amount of money needed to prop up its
troubled banking sector is estimated to be around €40bn.

He did not explain why a rescue would
be impossible, but many analysts fear the size of the economy would
stretch the resources of existing European rescue mechanisms.

Spain’s economy represents 12 per cent of the eurozone’s output – twice that of Ireland, Portugal and Greece combined.

The appeal from Europe’s fourth largest economy came as the G7 group of leading nations held crisis talks.

Spain, the fourth biggest economy in
the eurozone, is set to put €2bn of bonds up for auction tomorrow,
considered to be a key test for the country.

Mr Montoro urged the European Union to help  recapitalise its debt-laden banks.

‘The
risk premium says Spain doesn’t have the market door open and that we
have a problem in accessing markets when we need to refinance our debt,’
he said.

There will be some relief for
taxpayers when the European Commission unveils its proposals to make
bank shareholders and creditors shoulder the burden of losses rather
than taxpayers.

Cash injection: Santander chairman Emilio Botin says a relatively small figure of £32billion would be enough to prop up Spain's ailing smaller banks

Cash injection: Santander chairman Emilio Botin says a relatively small figure of £32billion would be enough to prop up Spain’s ailing smaller banks

It is hoped that this will prevent a
run on the banks which could pull the entire system down. Spain’s prime
minister Mariano Rajoy
echoed Mr Montoro’s comments adding that Europe ‘needs to support those
that are in difficulty.’

He said: ‘The most urgent and important thing is we have a problem of financing, of liquidity and of debt sustainability.’

Herman van Rompuy, European Council president, will detail long term plans for eurozone integration that are not intended to deal with Spain's crisis

Herman van Rompuy, European Council president, will detail long term plans for eurozone integration that are not intended to deal with Spain’s crisis

A G7 source said Germany was pushing Spain to end its resistance to a rescue from the eurozone’s bailout fund.

Spain has been trying to gain direct aid without having to submit to the political humiliation of an assistance programme.

Meanwhile David Cameron will hold talks on Europe’s debt crisis with German Chancellor Angela Merkel in Berlin this week.

The chairman of Spain’s largest bank
said yesterday that the European Union could solve his country’s
financial problems by contributing £32billion to some of its most
troubled banks.

The comments come ahead of a telephone
conference between the finance chiefs of the G7 group of industrialised
nations, which fear that Europe’s failure to get to grip with its
worsening financial position will drag on global recovery.

Emilio Botin, of Santander, said the
prospect of a bailout for the nation’s government would be ‘bad for
Spain’, insisting instead on an injection of €40billion to such banks as
Bankia, Catalunya Caixa and others.

The Spanish government has been trying
to come up with a plan to recapitalise Bankia, the country’s
third-largest bank, after its management requested £15.4 billion from
the government in May.

The cost of international bailouts so
far amount is £69billion for Ireland, £63billion for Portugal and
£236billion for Greece, leading to deep worries about the price of a
Spanish lifeline.

Mr Montoro said Prime Minister Mariano
Rajoy’s government, which took power in December after a landslide
election win over the previous Socialist administration, had a mandate
to reform.

EURO CRISIS POURS COLD WATER ON WORLD MARKET

Evidence
that Europe’s debt crisis is continuing to drag down world economies
pushed stock markets lower today, ahead of the G7 conference call about
the crisis.

U.S. officials
have said Washington expects more action to strengthen the European
banking system in the next two weeks before a meeting of the Group of 20
major economies in Los Cabos, Mexico, later this month.

Germany’s
DAX retreated one per cent to 5.922, while France’s CAC-40 rose 0.4 per
cent to 2,967. Markets in London were closed for a second day for the
Queen’s Jubilee celebrations.

The euro fell back 0.6 per cent to $1.2429.

U.S.
markets also looked set to open lower. SP futures fell 0.2 per
cent to 1,271, while Dow futures edged down 0.03 per cent to 12,059.

Earlier in Asia, stock markets rose following a move by Chinese authorities to boost consumption.

Japan’s
Nikkei 225 index rose one per cent to 8,382 after suffering sharp
losses the day before. Hong Kong’s Hang Seng added 0.4 per cent to
18,259.03, and South Korea’s Kospi gained 1.1 per cent.

He said: ‘We had the vote of Spaniards
and that is the task they gave us. We understand that our future is in
Europe, in the euro. And we should clearly bank on the institutions
taking decisions.’

Mr Montoro’s comments seemed to chime
with Mr Botin’s, with the finance minister agreeing that an
EU-established banking union would allow ailing lenders to seek help
without governments intervening.

Mr Montoro declined to set a figure of
how much money the sector would need to cover toxic loans and
mortgages, but said the question was where the money would come from –
and insisted the EU must make progress on banking unity measures.

As bond markets charge exorbitant
rates to lend to Spain, investors fear Madrid may be forced to seek
external aid to finance a bailout of the bad loan-ridden financial
system.

A report for clients by HSBC has
calculated that over three years the costs of a bailout for Spain would
be £365billion, of which £80billion would go towards the banks.

While analysts have priced a banking
rescue at between £50billion and £160billion, Mr Montoro said the sum
required to recapitalise the financial sector ‘…is not a very high
figure, it is not an excessive figure’.

No
cut is expected later today in the ECB’s benchmark interest rate, which
is already at a record low of 1 per cent. And there’s little prospect
that it will serve up more cheap emergency loans for shaky banks anytime
soon. It handed out €1 trillion in such loans in December and February.

Analysts say the ECB has a strong motive for staying put until it sees some movement from governments.

‘The
ECB looks tired of being the eurozone’s fire brigade and seems to have a
preference for staying on hold,’ Carsten Brzeski, an analyst at ING in
Brussels, wrote in a note to investors. ‘It looks like the ECB will want
to keep the pressure as high as possible to tackle political
complacency.’

Here’s what other readers have said. Why not add your thoughts,
or debate this issue live on our message boards.

The comments below have not been moderated.

You would have thought that after the plunder of the Americas Spain would have saved the riches for a ‘Rainy Day'(and that goes for Portugal as well).

How is it going to help by giving Spain money to bail out it’s banks if the cost of borrowing is already too high for them to afford surely they won’t be able to pay back the loan. The ECB aren’t going to help Spain out and now that Germany have had seven of it’s banks downgraded they are going to protect themselves first so they won’t help out Spain. It’s time all these summits stopped and someone took the decision to get Greece out of the euro, once that happens then those other countries that need to may follow, then we might start to get some stability in the markets. At the moment nothing is happening. All these leaders are talking but no one has come up with anything which is going to help. The only thing they do agree on is that no one is going to help Spain out, mainly because no one has any money left. Someone for goodness sake do now what is inevitably going to happen and let Greece go.

Herman van Rompuy the European Council president will be using the failed state of Belgium as a model for Eurozone integration. They do not have a hope of success!

DM please get your facts rights and STOP scaremongering! The Spanish Finance minister has today confirmed that Spain has NOT asked for a bailout or indeed $40 Billion as you have falsely reported. Spain are awaiting results from an audit and various reports before deciding what needs to be done.

What i would like to know is Where has all this money the banks have lost gone???
– Gordon , Belmont, 5/6/2012 23:41 Into their pockets of course, all their bad debts are picked up by the taxpayer.. So the banker wins every time.

If a bank gives out a loan for a property developer who goes bust then the bank should pay the bill. It was their risk not the taxpayers. If a government is too over drawn then stop lending it money. As in Greece all the money they are borrowing from the IMF etc is going straight back to pay the banks who loaned the money in the first place. This is a death spiral. We have to stop this now and ban all EU governments from borrowing any more money, forever.

It’s an attempted extortion. As someone else wrote before, the USA was in much more trouble in 2008, but Moody’s didn’t downgrade them. This is just ridiculous!

I bet bully-boy Barosso will be expecting the UK to help out first, which we will, albeit grudgingly.

MOODY,S STANDARD AND POORS FITCH,they all got it wrong in 2007/8
What are these companies for.. they said that the american sub prime movements were AAA …who pays them for these announcments and also who gives them the Information the only people to benefit are the financial Mafia of Hedge funds and they will destroy any country just to make a profit….. the other thing is who are all these countries borrowing off and where did they get their money from in the first placeif all these countries defaulted and then start afresh that will kick these robber barons in their pocket and maybe start the world on a sane recovery

If you borrow say $5billion at interest when you have nothing. Then repayment comes and you can only afford to pay back £6billion, when you owe £7.5 billion to the bank. After that you need to borrow again, but as costs go up so must the loan – so you borrow £7billion, oweing £10billion, but can only pay £8billion back… and it goes round and round and round… until you owe £40billion in interest alone. Plus you want more to keep running, at interest. I don’t understand how we can pay it all off? – Suki Tin, Homeland, 6/6/2012 14:11. You can’t. All money created under the current system comes about as a result of loans being made. Money is created the moment a loan is taken out. No extra money is created to pay off the interest. Interest comes from the SAME pool of money as the loans. In brief, there is never enough money created to pay back both principal and interest and some people will lose. Whether this is intentional or not is debatable. Welcome to the debt slave machine..

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

You can skip to the end and leave a response. Pinging is currently not allowed.

Leave a Reply

Powered by WordPress | Designed by: Premium WordPress Themes | Thanks to Themes Gallery, Bromoney and Wordpress Themes