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Chillin' out till it needs to be funded

European Debt: Dexia needs what I won't even lend the Republic of Germany

As Belgium gets coaxed into another bailout, and UK treasury sells off Northern Rock(Virgin) for all of GBP 250 mln in cash (of which GBP 200 mln comes from WL Ross) Dexia’s bailout marks the traveling of currency from a loan between two parties to something, no creditor would sign for. In fact I would say if it were not for the traders taking part in auction to scale the walls of yield in the next few days, sometime hours..

The EUR 90 bln in guarantees promised to Dexia are not forthcoming as Belgium realises the predicament of issuing unlimited guarantees without any currency/collateral/wild turkey hope to back that guarantee, which means that the Belgian government even wants the bad bank created from Dexia to trade.

Belgium apparently would like to get away with less than half of the 60% guarantees it promised in the deal as Fiscal inspections from


Image via Wikipedia

ECB make an appearance and the Government’s report card becomes critical in the scheme of things. However they might have done, they were in the same situation in Greece and Belgium even 10 years ago and a decade of “wild uncontrolled spending” basically stems from the same Maastricht criteria which n the fine print look to enforce the max. 2% inflation, min 3% growth dictum, Germany itself falling out of the criteria and the entire Euro zone debt ineligible currently

In October, Dexia secured state guarantees from the two countries and Luxembourg for up to 90 billion euros of borrowings over the next 10 years, but talks on the fine print are showing little progress, De Tijd said.

As long as there is no final agreement, Dexia remains dependent on expensive emergency liquidity provided by central banks of about 30-40 billion euros in so-called Emergency Liquidity Assistance (ELA), De Tijd said.

While Belgium and Spain remain blockaded it remains to be seen if French downgrades are still more important to Paris, as political union in the EZ proceeds on “default” storylines and strictures of yore

There’s about €19.8bn held in ‘other claims’ in October, up from €2.37bn in September (box highlighted in red). Other claims (or ‘other assets’) are where you might find ELA sequestered in eurozone national central bank balance sheets, because the ELA borrowing is often in the form of a repo.

What? Lehman, risky? why!!! What? Germany risky? Why!!! and no one else will matter in a few days whatever paper you exchange within the ‘terrritories’

One comment on “European Debt: Dexia needs what I won't even lend the Republic of Germany

  1. Pingback: European Debt crisis: A silly note on a silly situation | The Banking and Strategy Initiative

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