The northern tier will not allow the periphery banks to be recapitalized directly from the ESM.
What this means is that the bank bailouts of Greece and Ireland must be included in each country’s sovereign indebtedness. Spain’s upcoming €40bn bailout must also be included in its debt tally.
I am not sure why this is Merkel’s position. Either the northern tier just will not pay for these bailouts or they are trying to force more concessions from the periphery.
Spain is in a lot of trouble already, and no one had included the cost of its bank bailout for its future borrowing needs. This may well be the final straw that causes Spain to seek a full-blown bailout with conditions dictated by Germany and her allies.
On the other hand, it is common knowledge that the Spanish bank bailout will cost much more than €40bn, so perhaps they do not wish to be on the hook for the sum until they know what it is.
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