Sunday, 22 July 2012

Eurogroup grants financial assistance to Spain's banking sector

Following the draft reported in this post, the euro area finance ministers (the Eurogroup) "unanimously agreed to grant financial assistance for the ongoing recapitalisation and restructuring of Spain's financial institutions. The agreed conditionality will be laid down in a Memorandum of Understanding, which will be signed in the coming days".  Se here and here for more details. The amount agreed is up to €100 billion, which only represents about 25% of what is really needed according to Nigel Farage.

When reading the statement, remember that words such as "financial assistance", "recapitalisation" and "restructuring" actually means "bail-out". The Eurogroup explains that [the loan] "...is warranted to safeguard financial stability in the euro area as a whole" and that "In addition, the banks will have to contribute to the cost of restructuring as much as possible with their own resources and detail their actions in order to minimise the cost on taxpayers". Wow, how nice of them to consider the taxpayers while at the same time stealing their money.


Under the terms, the money will be provided as a loan to the Spanish government, but without gaining seniority status. Spain's total debt would hence increase proportionally with the amount borrowed as a result of this bail-out. In addition, Spain "...will have to honour its commitment to correct excessive deficit by 2014..." (see here).

Little left of Spain's fiscal sovereignty now then.

               

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