Daily Archives: July 12, 2012

James Mackintosh

The draft structure for Spain’s rescue of its banking system suggests a big chunk of the cost will be borne by private investors, through losses on equity and subordinated debt.

Unfortunately, this will hurt the ailing economy even more, and ultimately only save money for Spain’s eurozone partners. The bad news for banks (and good news for taxpayers and efficient resource allocation) is that it also sets a new standard for future bailouts, over-riding the local political desire to save creditors. Worse news for banks could be to come, as the logical next step is for the eurozone bail-out fund to establish rules demanding losses for senior bondholders in future bank rescues.

Charts after the break showing Spain and what looks like the mispricing of bank CDS. 

John Authers

Will the Olympics have a positive economic impact? The question is a big, and very political one in the UK at present, as London prepares to lock down for the games. But Goldman Sachs’ big analysis, just published, suggests there really could be a return on the London games. Watch the video with Huw Pill, Goldman’s chief European economist:

Among many other points covered in the report that we didn’t reach in the video interview: