How Much Would A Spanish Bailout Cost Europe?

(EU) Over the weekend in Europe it was said that Europe is coming up with a “Master Plan” which is being spearheaded by Italy’s Draghi. A rough copy will be ready by the end of June. Germany remains against Eurobonds until these new measures and further fiscal integration is in place.


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(ES) Spain Fin Min de Guindos is negotiating with EU leaders for a European bank funding mechanism.

(ES) In news related to Spain, as the country’s officials continue to deny that a bailout is necessary, Spain’s foreign affairs spokesman for parliament Jose Maria Beneyto said a bailout would not be “the apocalypse.”

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(ES) Research from HSBC estimates that a bailout of Spain could cost up to €450B over 3 years. In mid-March, an EU official said there is was about €240B remaining in the EFSF at that time. The ESM, which may become effective later in 2012, is expected to have initial funding of €500B.

How to interpret these headlines?

I think the short answer to the question “how much” is: Too Much.  The undoing of the EU may very well be initiated by Greece, but it will be completed by Spain in the form of a massive bailout request…  Both EFSF and ESM combined would barely have enough to fund for a Spanish Bailout, but with the political uncertainty in Spain and the high level of unemployment rate that is affecting the very foundation of its economy are not inspiring confidence that Spain will ever recover, least pay back the loan…

All in all, I see more trouble brewing in Europe and I believe EUR is likely to suffer another round of massive sell-offs in the next few weeks… the key is timing your entries, especially considering the golden opportunity that last Friday’s Non-farm Payroll has brought us… (Sell on rally EURUSD).

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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.


  1. matthew chua says:

    i thought 1.1800 was my personal target… maybe 1.1300 then.
    too big to fall.
    too big to save.

    thanks henry. you’re an excellent trader. and your retracement method really teaches me a lot of patience especially when the deviations are far worse or far better than your expectations!

    great job! more green pips to you!

  2. when should we start sell Eur/usd

    • I think for the time being (meaning today) around 1.2550/1.2600 level… of course, market is changing constantly but without any more negative news out of US this week, I believe we are safe. 🙂

  3. henry c says:

    you too much Henry Lieu, Wonder if theres anybody in the world who understand this business better than you. you are damn right

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