tag:blogger.com,1999:blog-36227136.post198661530982780816..comments2024-01-16T08:40:53.682+00:00Comments on <a href="http://www.openeurope.org.uk">Open Europe</a>: Who's afraid of the big bad bailout fund?OEhttp://www.blogger.com/profile/00556463374230498875noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-36227136.post-56768588531241203362012-03-30T16:39:14.707+01:002012-03-30T16:39:14.707+01:00Thanks.
So presumably the two €15 billion bond is...Thanks.<br /><br />So presumably the two €15 billion bond issues listed for March 8th, which unlike the others have no launch information attached, correspond to the €30 billion PSI, and the €5.5 billion short term bond the same day with no bid/cover information corresponds to the "accrued interest"?Denis Coopernoreply@blogger.comtag:blogger.com,1999:blog-36227136.post-85267583336748306222012-03-30T15:23:14.124+01:002012-03-30T15:23:14.124+01:00Thanks for the comments.
@Anonymous: Yes, very goo...Thanks for the comments.<br />@Anonymous: Yes, very good point about the mismatch in short term borrowing and long term lending. The EFSF will not have the cash to repay these short term bills and bonds so will probably have to keep rolling them over for decades. Indeed, lets not forget that this is the sort of mismatch that got the likes of Dexia into trouble:<br /><br />http://www.ft.com/cms/s/0/2ce2481a-fefd-11e0-9b2f-00144feabdc0.html#axzz1qCudUagW<br /><br />Looks unlikely that short term funding for the EFSF will dry up, but given the timescale upon which it needs to be rolled over it is far from prudent.<br /><br />@Denis: There are definitely questions over how quickly this money can be raised on the markets. As we noted in our commentary of the second Greek bailout, the huge amount which needs to be raised this year to help fund the banks will create a flood of EFSF bills and bonds onto the market. Whether sentiment is positive enough to fund all this at low rates is certainly questionable. We would note that on the level funds dispersed vs. raised, the money for the PSI and ECB collateral was simply issued as EFSF bonds, meaning cash did not need to be raised on the market. So the EFSF could just create these bonds (backed by its guarantees) and then put them to the desired use.Open Europe blog teamhttps://www.blogger.com/profile/14476470353790515912noreply@blogger.comtag:blogger.com,1999:blog-36227136.post-88199555618018780492012-03-30T14:54:46.953+01:002012-03-30T14:54:46.953+01:00The EFSF started out with negligible capital, and ...The EFSF started out with negligible capital, and looking at how much it has borrowed so far:<br /> <br />http://www.efsf.europa.eu/investor_relations/issues/index.htm<br /> <br />I find that to be about €71 billion in total.<br /> <br />While looking it how much it has disbursed so far:<br /> <br />http://www.efsf.europa.eu/about/operations/index.htm<br /> <br />I find that to be about €85 billion in total.<br /> <br />So rather than having many billions at its immediate disposal for illegal eurozone bail-outs, it presently seems to be overdrawn by about €14 billion.<br /> <br />It will have to borrow that money, plus the €138 billion "pending disbursement", which could mean that it will end up borrowing directly or indirectly from the ECB rather than from "global investors" in the free market.<br /> <br />Similarly although the ESM would start out with substantial paid-in capital, probably €80 billion, and could call in the additional capital as required, all of this is money which has to be borrowed, in this case by the eurozone governments rather than by the ESM itself.<br /> <br />Erecting a painted canvas screen with the word "FIREWALL" stencilled on it in large red letters could pass muster for a theatrical production, where the audience willingly suspends disbelief, but if it ever got to the point where it was actually needed to contain a fire then it wouldn't work.Denis Coopernoreply@blogger.comtag:blogger.com,1999:blog-36227136.post-53058280419129786802012-03-30T14:46:06.171+01:002012-03-30T14:46:06.171+01:00Another problem is that these rescue funds have to...Another problem is that these rescue funds have to raise the money. They do not have money ready to help out so they have to raise it before they can help. No-one but a fool would design a fire-bigade like that!<br /><br />Here is an anlysis of the recent fund raising of the EFSF by the economist blogger Shaun Richards.<br /><br />"On the other side of the coin let us look at the money raised by the EFSF recently. If we ignore the short-term borrowing we see that it raised the grand sum of 1.5 billion Euros with a twenty-year bond on the 19th of March and 4 billion Euros on the 21st. This looks rather thin compared to its actual and intended liabilities but let me give you the biggest implied criticism of it. It also raised just under 2 billion Euros of short-term borrowing on the 20th of March. So it lends long and borrows short! Ahem. In fact as its liabilities look even longer it finds itself having borrowed on an ever shorter basis in a travesty of how to manage a risk."<br /><br />As you can see such borrowing falls way short of all the promises.Remember the billions it has laready promised Greece?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-36227136.post-69578114748672142362012-03-30T12:45:38.895+01:002012-03-30T12:45:38.895+01:00The problem with these loan amounts is that they&#...The problem with these loan amounts is that they're reactive. If we have a problem down the road that requires more money or the propsect of financial annihilation, you can be assured that this lending limit will be revised upwards yet again.<br /><br />www.1percentblog.comAnonymousnoreply@blogger.com