Germany appears to have done a major U turn on allowing Spain and Italy’s economies a respite through direct funding of their banks.
The markets reacted very favorably early on in Asia and Europe but there are still a lot of questions to ask.
The most immediate effect seems to be that Spain’s banks will be recapitalized without the funds going onto the sovereign balance sheet.
The mechanism will be an ESFS loan that is converted into a longer term solution once the new European stability mechanism comes into being.
It all looks good though doubts may well set in during the day. Italian bonds will also be purchased by EU funds.
The turnaround came in a late night session at the Brussels summit in which the Spanish and Italians threatened to boycott all other actions until Germany agreed.
The sting in the tail is that Germany still needs to get parliamentary permission to set up with the new ESM, or European Stability Mechanism.
German parliamentarians are expected to vote this evening but Deutsche Welle points out even a positive vote will not see the ESM come into force quickly: “ German parliamentarians and state ministers are expected to ratify the European fiscal treaty and the permanent European Stability Mechanism (ESM) on Friday evening. This would end months of protracted political wrangling.
However, contrary to initial plans the fiscal treaty can not come into effect on July 1 because German President Joachim Gauck has said he won’t sign the law until constitutional complaints, which are expected to be filed as soon as the law is passed by parliamentarians, are examined by Germany’s top court in Karlsruhe.
Some parts of the German press is telling the story as a climb down by Spain and Italy, who were withholding support for the new EU growth plan, announced earlier in the week.
Details of the agreement will no doubt emerge during the day but as of now German politicians may well be reflecting on how their partners have been playing high stakes poker with German tax payers’ money.
forbes.com
The markets reacted very favorably early on in Asia and Europe but there are still a lot of questions to ask.
The most immediate effect seems to be that Spain’s banks will be recapitalized without the funds going onto the sovereign balance sheet.
The mechanism will be an ESFS loan that is converted into a longer term solution once the new European stability mechanism comes into being.
It all looks good though doubts may well set in during the day. Italian bonds will also be purchased by EU funds.
The turnaround came in a late night session at the Brussels summit in which the Spanish and Italians threatened to boycott all other actions until Germany agreed.
The sting in the tail is that Germany still needs to get parliamentary permission to set up with the new ESM, or European Stability Mechanism.
German parliamentarians are expected to vote this evening but Deutsche Welle points out even a positive vote will not see the ESM come into force quickly: “ German parliamentarians and state ministers are expected to ratify the European fiscal treaty and the permanent European Stability Mechanism (ESM) on Friday evening. This would end months of protracted political wrangling.
However, contrary to initial plans the fiscal treaty can not come into effect on July 1 because German President Joachim Gauck has said he won’t sign the law until constitutional complaints, which are expected to be filed as soon as the law is passed by parliamentarians, are examined by Germany’s top court in Karlsruhe.
Some parts of the German press is telling the story as a climb down by Spain and Italy, who were withholding support for the new EU growth plan, announced earlier in the week.
Details of the agreement will no doubt emerge during the day but as of now German politicians may well be reflecting on how their partners have been playing high stakes poker with German tax payers’ money.
forbes.com
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