Counterparties: Parsing the Spanish bailout
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This weekend Spain requested the bailout it had previously denied it needed â€“ here’s the official statement (PDF). The Spanish government has formed the Fund for Orderly Bank Restructuring (FROB), which will accept loans of up to $125 billion from the euro zone and inject needed capital into its banks. The final details of the aid, however, will not be set until the European Commission conducts itsÂ ownÂ assessment of Spanish banks’ financial health.
Markets shrugged at the news. “The hourglass â€¦ has been turned over, but each time it’s happened in Europe over the past few years there seems to be less and less sand in it,” as one analyst put it.
Tim Duy thinks the problem is that the “half-life of European bailouts is getting shorter and shorter” and the FROB was a “last-ditch gamble on the part of the Spanish government to avoid a general government bailout”.Â As FelixÂ notes, Europe choose not to bail out Spain’s banks directly, hoping to avoid the headaches and precedent-setting involved in a direct intervention in a member states’ banks.
And if a bailout of the Spanish (orÂ Italian) government is on the way,Â Joe Weisenthal thinks Merkel may be losing herÂ leverage; text messages â€“ “Spain is not Uganda” â€“ from the Spanish prime minister indicate he feels the same way.
For doom and gloom, EU officials have discussed capital controls, includingÂ limiting the size of withdrawals from ATM machines, if Greece leaves the euro. On the wonkier side, FT Alphaville has an excellent and detailed series of posts. â€“ Ben Walsh
On to today’s links: