Is Europe In Trouble Again: Hints Of Portuguese, Italian Bank Bailouts Suggest Not All Is Well


In the aftermath of Germany refusal to allow Italy to breach Eurozone regulations, and provide its banks with up to €40 billion in new capital, Italy has unveiled a new track to handle its insolvent banks and as Reuters reports, the Italian government may have to inject capital directly into weaker banks to bolster their financial strength, a government source said on Thursday, adding it was waiting for the results of stress tests being conducted by European banking authorities. The results of the tests are expected to be published at the beginning of the third quarter.
The source told Reuters the government was also working on a plan to increase the firepower of bank bailout funds Atlante, which was set up in April to help lenders raise cash and sell bad loans, by 3-5 billion euros ($3.34-5.57 billion) by the summer. The source said the government was in talks with private pension funds to seek additional contributions for Atlante. 
Other contributions were expected to come from the state lender Cassa Depositi e Prestiti and from a public company called Societa per la Gestione di Attivita.
And then, in a surprising follow up, the EU appears to have once again backtracked when Reuters headlines emerged suggesting that Europe would provide up to €150 billion for Italian banks"

    • LIQUIDITY SUPPORT APPLIES ONLY TO SOLVENT ITALIAN BANKS --COMMISSION SPOKESWOMAN
    Which, technically is none of them, but practically any bank can - after the sufficient non-GAAP adjustments - pass for solvent. 

    So is another major bank bailout event on the horizon? It appears so. And Italy may not be alone. In comments that were little noticed yesterday, Germany's Schauble said that Portugal may see another bailout too, saying "It would have to apply for a new program, which it would get. But the terms would be severe and it is not in Portugal's interests."

    As Reuters reported, German Finance Minister Wolfgang Schaeuble pressed Portugal on Wednesday to stick to its European fiscal targets and said that if it were to apply for a new aid program the terms would be harsh. Portugal's left-leaning government has set out to reverse its predecessor's austerity policies, aiming to grow its way out of trouble by boosting demand and set an example for other post-bailout euro zone countries.

    "Portugal would be making a big mistake if it does not stick to its commitments," Schaeuble told a news conference in Berlin.

    Pressed by journalists, Schaeuble stressed that Portugal would not need a new aid program if it sticks to EU rules. "They (the Portuguese) don't want it (a new package) and they don't need it if they stick to the European rules," he said. Portugal insists it will meet this year's budget deficit target of 2.2 percent, which is half last year's gap, and that no new measures will be necessary after solid budget execution in the first five months of the yea

    The Portuguese finance ministry said Lisbon was not considering asking for any new bailouts and was working to meet its EU targets and to cut its budget deficit.
    "Regarding the remarks made by Wolfgang Schaeuble, although he himself immediately corrected them, the finance ministry clarifies that no new aid program is being considered for Portugal," it said in a statement.
    Still, was Schauble's Freudian slip earlier that "it would get a new program" if it only just asked for it a hint of things to come? 

    And then there is, of course, the world's most systemically risky bank, Deutsche Bank...
    In retrospect, the UK may have exited Europe just in time.





    Despite all the exuberance over the Brexit bounce in US (and UK) equities, never minds bonds, FX, and credit being far less enthusiastic, Deutsche Bank is plunging once again this morning. 
    Having failed The Fed's stress test for the second year running and been diagnosed by The IMF as the world's most systemically dangerous financial entity, the giant Germanbank is getting slammed down almost 4% today, back near record lows as its 'Lehman-esque' path to devastation continues.



    As we previously conclude, considering two of the three most "globally systemically important", i.e., riskiest, banks just saw their stock price scrape all time lows earlier this week, we wonder just how nervous behind their calm facades are the executives at the ECB, the IMF, and the rest of the handful of people who realize just close to the edge of collapse this world's most riskiest bank (whose market cap is less than the valuation of AirBnB) finds itself right now.







    Countries including as Austria, Hungary, France, the Netherlands, Italy, and Denmark are calling for referendums on their own membership of the EU, as well as on issues such as the migrant allocation policy and the euro.
    Front National leader for France, Marine Le Pen, stated in the European Parliament that the UK’s vote was a “signal of liberty and freedom to the rest of the world”, and that she “commit[s] to pursuing the path of liberty [for France] – to be a free people”.
    Here’s a look at Europe’s most emboldened member states, dissatisfied by the EU’s push for ever closer union, looking to challenge the authority of the political bloc and take back their sovereignty.

    Movement – Danish People’s Party (DK). Denmark’s second largest party, which, along with two other right-wing parties, supports the Liberals in the minority government.
    Aside from the recently-liberated Britain, Denmark is the least integrated into the politico-trading bloc out of the remaining 27 nations and is broadly sceptical of deeper EU integration.

    The Danish People’s Party (DK), led by Kristian Thulesen Dahl, called for a ‘Danexit’ should Brexit succeed. The Danish populists hope to use Britain’s exit negotiations as a template, believing that with the groundwork already done for them a referendum would be successful in Denmark.




    France – ‘Frexit’


    Movement – Front National. 

    Key figures – Marine Le Pen (left), leader of the Front National; Marion Maréchal-Le Pen (right), politician and niece of Marine.
    There has been a rising groundswell of Euroscepticism in France where a protracted economic crisis and anger over immigration have led to a rejection of the EU, with the nation polling at over 50 per cent of citizens as having a strong desire to have a referendum on membership.

    Austria – ‘Auxit’



    Movement – Freedom Party of Austria (FPÖ)
    Key figures – Heinz-Christian ‘HC’ Strache (left), Chairman of the FPÖ; Norbert Hofer (right), politician and member of the FPÖ, former candidate for President of Austria (2016 election).
    Freedom Party of Austria (FPÖ) leader HC Strache has called for a return of powers from Brussels to national parliaments, an end to the Schengen Agreement, and the returned right for Austria to control its own immigration policy.

    Norbert Hofer narrowly lost the Austrian presidential election – the result of which is currently being investigated for postal voter fraud – and the party is favourite to win power in the Austrian elections in 2018.



    The Netherlands – ‘Nexit’


    Movement – Party for Freedom (PVV) 
    Key figures – Geert Wilders, founder and leader of the PVV

    Leader and founder of the Party for Freedom (PVV) said of the ‘Patriot Spring’ that it was a reaction to the authoritarian and undemocratic EU, and that the “genie” of populist, pro-freedom politics was “now out of the bottle”. Following the vote to Brexit he has called for the Netherlands to hold its own referendum on membership of the EU.  



    Italy – ‘Itexit’



    Movements – Five Star Movement (M5S); Northern League
    Key figures – Virginia Raggi, Mayor of Rome (above, left); Beppe Grillo, co-founder (above, centre); Chiara Appendino, Mayor of Turin (above, right) of M5S.  Matteo Salvini, MEP and leader of the Northern League.
    Co-founded by comedian Beppe Grillo, the Five Star Movement (M5S)  wants to see a referendum on the euro, and said it would gather signatures in order to force a referendum on the single currency so that “the Italian people can decide on monetary sovereignty”.
    Hungary, though not seeking a referendum on its membership of the EU, wants to attack the Brussels bureaucrats on specific issues.  Namely, President Viktor Orbàn is committed to holding a referendum on the EU-imposed migrant quotas.
    Furthermore, Hungary, along with the other Visigrad countries (Poland, Czech Republic and Slovakia) post-Brexit have slammed the EU, and called for reforms.
    Sweden – Sweden Democrats called for a British-style referendum, though does not expect a ‘Swexit’ to happen any time soon.  However, the party leader Mattias Karlsson said: “With Brexit, I think the tide has turned. We can see that a larger proportion of the Swedish population are increasingly eurosceptic and in favour of leaving the European Union,” he said. “In the end I think it will be very hard for the establishment to refuse these people a vote.”

    Germany – though the populist Alternative for Germany (AfD), headed up by Frauke Petry, celebrated Britain’s exit result, deputy leader Alexander Gauland said any referendum proposal would have to be “carefully considered” and that the party shouldn’t make decisions “in the heat of battle”. Significantly, there is not the appetite for leaving the EU, a recent poll showing that 17 per cent of Germans would vote to leave the EU with 79 per cent voting to remain.