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Euro Zone Crisis: Bailouts For Spain, Cyprus; Health Woes For Greek Officials

Euro Zone Crisis: Bailouts For Spain, Cyprus; Health Woes For Greek Officials
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This Thursday and Friday, European leaders will be meeting at a crucial summit in Brussels. As German foreign minister, Guido Westerwelle, said on Monday, “This will be a decisive week for Europe.”

So far, the auspices are not exactly looking good for the euro, the euro zone, Europe and (in the wider view of things) the global economy.

On Monday, European stock markets tumbled and the euro fell amid fears that European leaders will be able to resolve the ongoing crisis. Here is some of what else happened:

Spain Requests a Bailout Without Calling It a Bailout

Monday started with Spain making a formal request for aid of up to €100 billion (about $125 billion) for its banks. But as Giles Tremlett observes in the Guardian, “Mariano Rajoy’s government refuses to even call this a bailout.” The government wants the funds to go directly to its ailing banks but euro zone rules require that they be funneled through Madrid, which would add to Spain’s sovereign debt. Hence, the Spanish government seems to be trying to drag the process out as long as possible, in the hope that the rules might shift by the time it receives the funds (which might not happen till September, when more audits of Spanish banks are available).

There is quite a lot to be sorted out: A think tank, Open Europe, argues that “taking into account that Spanish house prices may drop another 35 percent, the country’s banking sector could need an immediate €110bn capital injection to withstand potential losses.” Open Europe also estimates that the total exposure of EU countries to the Spanish economy is around €913 billion.

Later on Monday, Moody’s downgraded 28 Spanish banks due to the country’s debt and “souring real estate loans.” Twelve banks were downgraded to junk status. These cuts also indicate the extent to which the Spanish government’s creditworthiness has been reduced, says Bloomberg. Two weeks ago, Moody’s downgraded Spain’s sovereign debt to near-junk-status.

Cyprus Needs a Bailout Too

On Spain’s heels, Cyprus became the fifth euro zone member to request a bailout. Cyprus’ banks, which are heavily exposed to debt-ridden Greece, have been struggling; the small island nation may need as much as €10 billion ($12.5 billion). It needs €1.8 billion (about 10 percent of its gross domestic product) by Saturday, to shore up its second-largest bank, Cyprus Popular Bank.

In all, Cyprus’ banks have outstanding loans or other money at risk to the total of €152 billion, which is eight times the size of Cyprus’ GDP, says the New York Times.

Portugal Says It Won’t Require More Austerity (?); Housing Prices Up in Ireland For First Time in 5 Years

Both Cyprus and Spain have quietly noted that they hope the requested bailouts come with fewer terms than those for Portugal, Ireland and Greece. Portugal receive a €78 billion rescue package; its prime minister, Pedro Passos Coelho, says that it is meeting its budget goals and will not require further austerity measures, though there seems to be some popular doubt about this.

Housing prices have risen in Ireland for the first time since May of 2007. These had “slumped 50% between their peak and trough” so the small rise (0.2 percent in May from the previous month) is seen as a sign that prices are stabilizing.

Greek PM Has Eye Surgery, Finance Minister Discharged From Hospital and Resigns

The post of finance minister of Greece is, as the Guardian’s Helene Smith notes, “possibly the worst job on the continent of Europe,” Greece’s economy shrinking for the fifth straight year, some 1.2 million Greeks unemployed and “the easing of Greece’s latest EU-IMF sponsored bailout agreement now seen as vital if the debt-choked country is to get out of its economic death spiral.”

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Photo of flags of EU member nations by lednichenkoolga

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15 comments

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5:21AM PDT on Jun 27, 2012

European union will collapse eventually... but why, is another issue....

8:31PM PDT on Jun 26, 2012

A second currency is needed that is based on assets...equity NOT debt. This would work in the Euro and the US. In the US it would be a US Treasury Dollar, equal to a Fed Reserve Note, by law. Each state would be given money in proportion to their assets over a 10 year period. No flood of currency here. No nationalizing the FED. Nearly same in Euro, but each country must realise the currency is a claim to their assets (gold, silver, land, property, and all government assets). Establish value by audit. Make the currency work for the citizens, not only the Rothchilds.

7:22PM PDT on Jun 26, 2012

sigh

4:25PM PDT on Jun 26, 2012

I believe that people are inherently fair. What is wrong with the present capitalist system is that it is blatently unfair. Normally this unfairness, although always present, is hidden below the surface, below the awareness of our ordinary lives, although we do get glimpses now and then. It is when the system emplodes upon itself, as now, that the unfairness of it all becomes apparent. If all this has taught us anything, at least, it should have taught us that we need to change the system - or - this will just happen, as history has shown, again and again and again.

1:10PM PDT on Jun 26, 2012

You can be assured of more bailouts and tax cuts for the rich and more austerity measures and cuts of benefits for the poor you can bet on it.

11:21AM PDT on Jun 26, 2012

Who will bailout the US? When it's house comes crashing down the quake will be felt by the whole world.

10:25AM PDT on Jun 26, 2012

Thanks for the article.

8:12AM PDT on Jun 26, 2012

What a mess! Doesn't look too good... wonder how long this house of cards is going to stay up for before it comes crashing down?

7:03AM PDT on Jun 26, 2012

Mais uma vez eu digo na Care2 o que é Alemanha hoje tem um estado que ao fim da cada ano dá lucro e tem uma economía mais rica deste planeta terra não há hoje nelhum continete do mundo que encoste a Alemanha mais unida ainda bem que hoje a Alemanha é democrática

6:24AM PDT on Jun 26, 2012

Europe is in a big sh** (From France)

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