Necessary But Not Sufficient – John Mauldin

Necessary But Not Sufficient – John Mauldin

 We woke up this weekend to a €100 billion “rescue” of Spanish banks, and the initial
reaction of the market was relief. But did we not just see this movie, but with Greek subtitles
rather than Spanish? Was this another of those “necessary but not sufficient” plot lines that Europe
is so good at? Kick the can down the road and hope for a happy ending?
Pardon my skepticism, but I see numerous problems. In the first place, €100 billion will not
be enough. While the current estimates are closer to €40 billion (if you ask the Spaniards), JP
Morgan estimates it will be more like €350 billion. Others estimate more or less, but €100 billion
is decidedly optimistic. Even the Spanish authorities are acknowledging that there is another 35%
downside for the housing market, which is the main source of the losses. It appears that has NOT
been included in the guesstimates.