Friday , December 15 2017
Home / Don Quijones
Don Quijones

Don Quijones



Articles by Don Quijones

Stressful Year Ahead for Spanish Banks

3 days ago

The “spillover effects.” 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Just how much more stress Europe’s banking system can bear will be one of the big questions of 2018. This year was already a pretty stressful year, what with two major Italian banks being put out of their misery while, another, Monte dei Paschi di Siena, was brought back from the dead. In Spain, 300,000 shareholders and subordinate bondholders mourned the passing of the country’s sixth biggest bank, Banco Popular, which was acquired by Santander for the measly price of one euro.
Now, a whole new problem awaits. A report published by Spain’s second largest lender, BBVA, has warned about the potential impact on the sector’s profitability of new rules on provisions due to come into effect in early

Read More »

A New Stealth Attack in EU’s “War on Cash”

5 days ago

And the definition of “cash” widens.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The EU’s Orwellian-dubbed Civil Liberties and Economic Affairs committee has approved tough new rules on cash that travelers might bring into or take out of the bloc. It’s also broadened the definition of cash to include precious stones and metals and prepaid credit cards.
For the moment the new definition does not include Bitcoin and other cryptocurrencies, for one simple reason: “customs authorities lack the resources to monitor them.”
Most importantly, the draft law will enable authorities to impound “cash” below the traditional €10,000 threshold, if criminal activity is suspected. The new rules would repeal the First Cash Control Regulation (CCR) from 2005, which requires

Read More »

The Euro Is Not Dead, Claims EU Survey

7 days ago

The mood has shifted.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Europeans are finally learning to love the euro, it seems, at least according to the latest edition of the Eurobarometer, which is published twice yearly by the European Commission: 64% of the respondents, representing 16 out of 19 Eurozone economies, believe that having the euro is “a good thing for their country,” the highest proportion since 2002, and up from 56% in 2016. Only 26% of respondents thought it was a bad thing.
A further 74% of respondents said that the euro is a good thing for the EU as a whole, the highest proportion in the 2010-2017 series. This is somewhat ironic given that even the ECB conceded this week that the main idea behind the euro as a driving force for regional economic

Read More »

Catalonia’s Post-“Independence” Economic Hangover Sets In

9 days ago

Uncertainty, threats, and counter-threats.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Catalonia’s recent declaration of independence may have been a largely symbolic act but the economic hangover it has left in its wake is very real. Last month the number of unemployed in the region rose by 7,391 — the highest rise in a month of November since 2009. During the same period the number of people registered with social security fell by 4,038 — the sharpest fall since November 2013.
The economic pain is already taking a psychological toll. According to a new poll published by Spain’s Center for Sociological Research (CIS for its Spanish acronym), the number of households that fear that their economic situation will worsen in the next six months surged from 14.2% in

Read More »

Inflation Surges as Economy Bogs Down in Mexico

15 days ago

Bank of Mexico caught in a vise.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In the last week, the governor of the Bank of Mexico (or Banxico), Augustin Carstens, stepped down in order to take over the reins as general manager of the Bank for International Settlements in Basil, Switzerland, while Finance Minister José Antonio Meade, handed in his resignation to run as the presidential candidate for the governing PRI party in next year’s general elections.
Despite the fact that the country’s two most senior public financial officials have left their posts within days of one another, and though the Mexican stock index is down about 9% from July, the markets still seem pretty sanguine.
But that doesn’t mean that problems are not stacking up.
Earlier this year Carstens

Read More »

The EU (with Help from Germany) just Made Monsanto’s Day

17 days ago

One of Germany’s largest companies is trying to buy Monsanto, which changes everything.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
A majority of EU governments voted on Monday to extend the European license for glyphosate, the active ingredient in Monsanto’s flagship product, Roundup, for another five years. One of the deciding votes was cast by the caretaker government of Germany, which came off the fence after abstaining in previous meetings.
The decision was made despite a petition signed by more than 1.3 million EU citizen-subjects calling for a European ban on the weedkiller.
The five-year extension is welcome news for Monsanto, which has found itself in the rather unusual position of being on the back foot in recent years, especially since the UN’s World

Read More »

Spain’s Third Biggest Bank Just Made it Harder to Get Cash

20 days ago

War on Cash bogs down, despite best efforts of government, banks, and credit card companies.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spain’s third biggest lender, CaixaBank, has just launched a pilot project in Madrid aimed at limiting cash services in their branches to less than three hours a day, from 8:15 am to 11 am. After that point, all cash operations, including the settlement of bills and cash withdrawals and deposits, must be conducted through an ATM.
Caixabank is not the first Spanish bank to try out such a scheme, but it is the biggest. Spain’s fourth largest lender, part state-owned Bankia, has removed all cash services from select branches (including my local branch), forcing customers to withdraw or deposit cash at the ATM or travel further afield

Read More »

Could Italy’s Banking Crisis Drag Down Mario Draghi?

23 days ago

Just don’t mention “Antonveneta.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
A blame game has begun in Italy that risks casting a bright light on the leadership of both the Bank of Italy and Italy’s financial markets regulator Consob. The controversial decision to award the central bank’s current Chairman Ignazio Visco a fresh six-year mandate despite presiding over one of the worst banking crises in living memory has ignited a tug-of-war between political parties and the president, who makes the ultimate decision on who to appoint as central bank chief.
The first to cast aspersions was Italy’s former premier Matteo Renzi, who, no doubt in an effort to distract from his own party’s part in the collapse of Monte dei Paschi di Siena (MPS), called into question the

Read More »

Spain’s Pension System Hits Crisis Point (and Everyone Ignores it)

27 days ago

But how did things get this bad?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
By most measures, sun-blessed Spain is an idyllic place to grow old in. Life expectancy is among the highest in the world, and the national pension fund’s payout ratio (pension as percent of final salary) is the second highest in Europe after Greece. But if current trends are any indication, that may soon be about to change.
The country’s Social Security Reserve Fund, which was meant to serve as a nationwide nest egg to guarantee future pension payouts — given Spain’s burgeoning ranks of pensioners — has been bled virtually dry by the government. This started ever so quietly in 2012 when the government began withdrawing cash from the fund. Some of it was used to fill part of the

Read More »

The Next Italian Bank Threatens to Topple

29 days ago

Sharp Dose of Deja Vu for Italy’s Teetering Banks.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In a speech that did little to calm investors’ nerves, Italy’s finance minister said yesterday that he was “strangely optimistic” about Italy’s economic outlook. Senior eurocrats in Brussels are far from convinced. “Italy’s accounts are not improving,” blasted European Commission Vice-President Jyrki Katainen at a press conference yesterday.
The financial situation in Italy, according to Katainen, is due to get worse with Italy’s deficit in 2018 now predicted to be €3.5 billion more than previously stated by Paolo Gentiloni’s administration in the spring. “The only thing I can say in my name is that all Italians should know what the real economic situation in Italy is,” he

Read More »

Uncertainty Hits American Farmers and Mexican Consumers

November 14, 2017

NAFTA 2.0 gets complicated.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
With the fifth round of NAFTA negotiations scheduled to begin next week, Mexico finds itself facing a very uncertain future. The free trade agreement upon which its entire national economic model was built is now looking precariously fragile. Ildefonso Guajardo, Mexico’s economy minister, told the Mexican Congress last week that the way things stand, an end to NAFTA “cannot sanely be ruled out.”
In such an event, the resulting economic pain for Mexico could be considerable, according to calculations from Banco Santander. It forecasts a 15% drop in exports and a 16% fall in imports if the US declared a full trade war rather than reverting to World Trade Organization tariff rules. Moody’s

Read More »

Global Banks, City of London Raise “Disorderly Brexit” Alarm

November 11, 2017

Shifting trillions of euros of derivatives positions could be hugely disruptive.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The growing prospect of a hard or disorderly Brexit is sending jitters through the global financial community. This week the Financial Times reported that a group of “large financial institutions with big London operations” had met with US Commerce Secretary Wilbur Ross to express their dissatisfaction with the lack of progress in Brexit negotiations.
“The fears over a potential Brexit no-deal are rising, as we move within 16 months of the UK’s exit from the EU,” said Joshua Mahony, market analyst at IG.
While New York stands to benefit from some of the disruption caused by the UK’s separation from the EU, there is rising concern that Brexit

Read More »

The Price of Chaos Rises in Spain

November 9, 2017

The longer the toxic process between Catalonia and Spain drags on, the wider the gulf grows.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
During a visit yesterday to Barcelona, the organizers of the Mobile World Congress, the world’s biggest mobile event, warned the City Council that unless the political situation stabilizes in Catalonia, they will be looking for an alternative venue after 2018. Barcelona has hosted the annual event every year since 2006 and it brings in billions of euros to the city each year, much of which ends up in the pockets of local taxi drivers, hoteliers, owners of bars, restaurants and brothels, Airbnb hosts and, last but not least, the thousands of professional pickpockets that flock to the city for the four day event.
John Hoffman, the

Read More »

Financial Storm Clouds Gather Over Italy

November 5, 2017

Wishful thinking may not be enough.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The financial markets have been exceedingly calm in Italy of late. At the end of October the government was able to sell €2.5 billion of 10-year debt at auction at a yield of 1.86%, the lowest since last December — an incredible feat for a country that four months ago witnessed a major bank bailout and two bank resolutions, and that has so much public debt that it spends €70 billion a year to service it, the world’s third-highest.
And there’s the ECB’s recent decision to slash its bond buying from roughly €60 billion a month to €30 billion as of Jan 1, 2018. Then there’s the over €432 billion of Target 2 debt the government owes the ECB, the growing likelihood of political instability as

Read More »

Spain Just Lit a Fuse Under Catalonia — its Richest Region

November 3, 2017

Acute uncertainty is like sand in the gears of the local economy. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
It’s amazing how fast the wheels of the Spanish justice system go round when the establishment wants them to, and how slowly they revolve when it doesn’t, which is usually when members of the same establishment — senior politicians and civil servants, bankers, business owners, or even royalty — are in the dock, which is happening with disturbing regularity these days.
On Thursday we saw Spanish justice at its fastest. In the dock was the recently sacked vice president of Catalonia’s separatist government, Oriol Junqueras, and seven other elected representatives of the breakaway region who stand accused of a litany of charges, including rebellion, which

Read More »

Catalonia and Spain Enter Dangerous Uncharted Territory

October 27, 2017

Emotions are high on both sides of the divide.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Today was one of the strangest days of my life. I woke up in a constitutional monarchy called Spain and will go to bed, the same bed, in a newly proclaimed republic. Catalonia’s impossible dream has finally come true, but it could be extremely short lived, and it could have very damaging long lasting consequences.
Spain’s Senate responded to the Catalan parliament’s declaration of independence this afternoon by ratifying the activation of Article 155 of Spain’s Constitution, the nuclear button everyone has been waiting for. This will allow the central government to take full rein of the region’s institutions and levers of power, including parliament, the police force, the

Read More »

NAFTA Effect: Global Manufacturers Bet on Dirt-Cheap Mexico

October 26, 2017

That wages have remained so low for so long is not by accident; it’s by design.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
President Trump’s repeated bashing of the North American Free Trade Agreement between the US, Canada, and Mexico has failed to dull the allure of Mexico’s maquiladoras for global manufacturers looking to cash in on the country’s much cheaper labor costs. Tecma Group, a firm that helps US and Canadian firms relocate to Mexico, has more business than ever. In the past few weeks alone, it has helped a cleaning equipment company and packaging company move.
Mexico Consulting Associates, headquartered in Chicago, has three new clients interested in Mexico. Keith Patridge, who heads McAllen Economic Development, estimates that at least 12 companies

Read More »

The EU Just Did the Big Banks a Massive Favor

October 26, 2017

“Testimony to the iron grip the financial industry’s lobby still exerts on governments and legislators.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The European Union’s executive arm, the European Commission, made a lot of bank executives very happy this Tuesday by abandoning its multi-year pledge to break-up too-big-to-fail lenders. Despite the huge risk they still pose to Europe’s rickety financial system, big European banks like Deutsche Bank, BNP Paribas, ING, and Santander can breathe a large sigh of relief this week in the knowledge that they will not have to split their retail units from their riskier investment banking arms.
Breaking up the banks would remove much of the risk from today’s government-backed banks, such as derivatives and other instruments

Read More »

Catalonia’s Political Crisis Snowballs into an Economic Crisis

October 21, 2017

Independence would be “horrific” and amount to “financial suicide,” said Spain’s Economy Minister. But financial suicide for whom?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
It’s not easy being a Catalan bank these days. In the last few weeks the region’s two biggest lenders, Caixabank and Sabadell, have lost €9 billion of deposits as panicked customers in Catalonia have moved their money elsewhere. Many customers in other parts of Spain have also yanked their savings out of Catalan banks, but less out of fear than out of anger at the banks’ Catalan roots.
Moving their official company address to other parts of Spain last week may have helped ease that resentment, allowing the two banks to recoup some €2 billion of deposits. But the move has angered the roughly 2.5

Read More »

Petro-Plunder Worsens in Mexico

October 19, 2017

Scaring off sorely needed investments in fuel distribution systems.  
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
A year and a half after Mexico opened its fuel market to private competition, almost all gasoline sold at BP and Royal Dutch Shell stations continues to come from state-owned Petróleos Mexicanos, A.K.A. Pemex.
Mexico lacks a sufficiently advanced and coordinated network of oil pipelines and storage terminals that would allow the flow of imported products from the port to the gas stations. As the company’s chief executive, Jose Antonio González Anaya, said in a recent visit to Washington, Pemex has a “grotesque lack of storage and transportation capacity.”
Mexico allowed private companies to import fuel for the first time in April 2016 under broader

Read More »

Days of Living Dangerously in Catalonia

October 15, 2017

Fractured communities, splintered families, broken friendships.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In Catalonia the economy is already beginning to feel the pinch from the rise in political tensions, as tourist numbers plunge 20% to 30% and as hundreds of companies, both domestic and foreign, move their headquarters to other parts of Spain, albeit in most cases only on paper.
But there’s one business that’s doing a brisk trade: the flag business.
Wherever you go these days, flags are everywhere. For years the estelada flag, the starry symbol of Catalan independence, has been a ubiquitous feature of the urban landscape. But now the Spanish flag is doing its best to catch up. As Catalonia’s separatist movement grows in confidence, more and more balconies in

Read More »

ECB Suffers from “Corporate Capture at its Most Extreme”

October 14, 2017

Many of these banks are implicated in the biggest financial crimes.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
No single institution has more influence over the lives of European citizens than the European Central Bank. It sets the interest rates for the 19 Member States of the Eurozone, with a combined population of 341 million people. Every month it issues billions of euros of virtually interest-free loans to hard-up financial institutions while splashing €60 billion each month on sovereign and corporate bonds as part of its QE program, thanks to which it now boasts the biggest balance sheet of any central bank on Planet Earth.
Through its regulatory arm, the Single Supervisory Mechanism, it decides which struggling banks in the Eurozone get to live or die and

Read More »

Catalonia Crisis Far From Over Despite Market Surge

October 11, 2017

Hopes that Catalonia’s woes could be contained are fading.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
On Tuesday night, for the briefest of moments, Catalonia’s government severed its ties with Spain. The region’s president, Carles Puigdemont, declared independence from Spain at around 7.40 p.m., Spanish time. Then, roughly ten seconds later, he put it all on hold, to the visible dismay of many of his fellow travelers.
The markets were pleased, interpreting the suspended declaration of independence as a retreat from the brink. The Spanish stock index IBEX 35 surged 1.5% on Wednesday, and is up 3.4% in five trading days, making up a big part of what it had lost over the prior four trading days. It remains 7% below its year-to-date high at the end of April.
For many

Read More »

Spain Teaches Catalonia a Lesson about the Power of Money

October 7, 2017

Money is fickle and fearful.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Within 48 hours this week, Catalonia, Spain’s largest regional economy, lost three of its seven biggest homegrown multinational corporations and several large national companies — at least on paper — to cities in other regions of Spains.
The first important company to leave since Sunday’s referendum was mid-sized pharmaceutical company Oryzon Genomics SA, which announced on Wednesday that it was departing Catalonia for Madrid. The same path has been traveled recently by firms like Derby Hotels, Unico Hotels, WPP and Schibsted.
But it wasn’t until Banc Sabadell, Spain’s fifth largest bank, announced that it was changing its registered company address to Alicante, a provincial city on Spain’s

Read More »

Catalonia Chaos Begins to Squeeze Spain’s Financial Markets

October 4, 2017

Bank shares plunge. Money is already on the move.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spain’s biggest political crisis of a generation, which has led to the complete breakdown of communication and understanding between its government in Madrid and the separatist region of Catalonia, is finally beginning to take its toll on the country’s financial markets.
Spain’s benchmark index, the Ibex 35, slumped nearly 3% following its worst day of trading since the Brexit vote last June. Spain’s 10-year risk premium — the differential between the yield on its 10-year bonds and the yield on Germany’s 10-year bonds — soared to 129 basis points. And that’s despite the fact that the ECB continues to buy Spanish debt hand over fist.
But it is the banks that have borne the

Read More »

How Did Things Get So Bad in Catalonia?

October 4, 2017

Will Spain trigger Article 155 of the Constitution?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Unless concrete measures are taken to calm tensions between Madrid and Catalonia, one of Spain’s richest, safest and most visited regions could soon be plunged into chaos. With neither side willing for now to take even a small step back from the brink, the hopes of any kind of negotiated settlement being reached are virtually nil, especially with the European Commission refusing to mediate.
Since Sunday the Spanish government has even ruled out dealing with Catalonia’s president, Carles Puigdemont, and its vice president, Oriol Junqueras. In other words, the communication breakdown between Madrid and Barcelona is now complete.
But how did things get so bad in Catalonia?

Read More »

Catalonia’s Dark Days Ahead

September 30, 2017

It isn’t just about what happens on Sunday; it’s about the ensuing days and weeks.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The next 72 hours could be crucial not only for Catalonia, but also for the rest of Spain and Europe. For now, the cards are overwhelmingly stacked in Madrid’s favor. The central government enjoys the outward support of all European institutions, key Western partners and has the full power of the law on its side as well as the full arsenal of state repression at its disposal.
After confiscating millions of ballot slips and thousands of ballot boxes, and launching what Wikileaks’ Julian Assange has termed the “world’s first Internet War” against Catalonia, freezing telecommunications links, occupying telecoms buildings and censoring hundreds

Read More »

ECB Wants to Weed Out Smaller Banks to Cut Competition

September 29, 2017

Europe needs “brave banks” willing to conquer new territory.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The biggest financial problem in Europe these days is that it is “over-banked,” according to Daniele Nouy, Chair of the ECB’s Supervisory Board, and thus in charge of the Single Supervisory Mechanism, which regulates the largest 130 European banks.
In a speech bizarrely titled “Too Much of a Good Thing: The Need for Consolidation in the European Banking Sector,” Nouy blamed fierce competition for squeezing profits for many of Europe’s banks while steadfastly ignoring the much larger role in the profit squeeze played by the ECB’s negative-interest-rate policy. ECB President Mario Draghi agrees.
The profits of the largest 10 European banks rose by only 5% in the

Read More »

Wall Street and City of London Press Panic Button on Catalonia

September 27, 2017

“Sometimes you have to keep the black swans in mind.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In recent days, JP Morgan Chase, Goldman Sachs and ING, have warned about the political situation in Spain’s richest region, Catalonia, where a banned referendum on national independence is scheduled to be held on Oct. 1.
JPMorgan advised its clients to reduce their exposure to Spanish government debt. Although the bank does not foresee Catalonia achieving independence, it believes that developments in the region could lead to a resurgence in Spain’s risk premium.
In the last five weeks the premium (the cost differential of Spain’s 10-year bonds vis-á-vis Germany’s) has increased from 101 to 121 basis points. It’s still not much compared to the 630 points that it

Read More »

The Steep Price of Disaster in Mexico

September 24, 2017

Rebuilding with no insurance and little government aid.
Wolf here: Don Quijones and his wife, who is from Mexico, spent part of the summer in Mexico but returned to Spain a few days before the earthquake. DQ’s in-laws live in Puebla, Mexico City, and Morelos — among the hardest hit places. They got through it unharmed and are more or less OK for now. But a lot of uncertainties remain. My thoughts are with them.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Rescue efforts in Mexico are beginning to wind down after a trepidatory (vertical) earthquake unleashed destruction and bedlam in Mexico City and the two central states of Puebla and Morelos on Tuesday. The temblor took place 32 years to the day after a horrendous quake killed at least 10,000 people in Mexico City

Read More »