Monday, 11 June 2012

Spain gets a backstop but it’s countdown time for Greece and the markets

Spain’s intention to seek financial assistance was welcomed this past weekend in a statement from the Eurogroup of finance ministers which set out the basis for a loan covering the capital requirements for Spain’s financial institutions ‘…with an additional safety margin estimated as summing up to €100 billion in total.’

Three cheers to the Eurogroup! Who knows whether €100 billion euros will do the trick for Spain’s banks but, in the context of the way progress in the eurozone has been made these past few years, the move is to be welcomed for its decisiveness.   

It remains for Spain to make a formal request for the loans and to agree to what the Eurogroup considers to be the appropriate conditionality, this being that the terms be ‘…focused on specific reforms targeting the financial sector…’. The government has indicated that it will wait for the audit by two consultancies of the banks’ financial positions before making any formal request. The reports of the audit are due a week this coming Thursday. More >

Mike Lenhoff
Chief Strategist

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