Courtesy of Mish.
As any clear-thinking person should have expected, Schäuble rejects ECB help for Spain
Berlin – For days, it is speculated that the European Central Bank (ECB) is planning, together with the bailout fund EFSF Spanish government bond buy – so come back to Spain to cheaper capital. The “Sueddeutsche Zeitung” According to the euro countries willing to support this approach . Federal Finance Minister Wolfgang Schäuble (CDU), but has now dismissed the reports in an interview with the newspaper “Welt am Sonntag”.
“No, at this speculation is not true,” Schäuble said the newspaper. The Finance Minister said it was already a sufficiently large aid package for Spain have been laced.
The 100-billion-euro package to recapitalize Spanish banks also close an emergency aid of 30 billion €. “The short-term financial requirements of Spain is not so great”, said Schäuble, “the painfully high interest rates – but the world will not, if you have to pay for some bond auctions a few percent more.”
Full Bailout Still Coming
Schäuble is saying the right things. For starters, ECB backdoor bailouts of Spain are likely against the German constitution. Even if they weren’t, why should German taxpayers accept the risk of any of these leveraged proposals that have been circulated, and recirculated?
It’s important to understand that the near-7% current market rate does not affect interest on prior bonds (only the current value of them). However, high rates do reflect the interest Spain would have to pay to float new bonds or rollover existing ones.
Thus, high rates reflect extreme stress and are unsustainable for the long-term, but they are not an immediate killer for Spain.
Regardless, Spain is deep in recession and there is no way it can meet its deficit targets. A full bailout of Spain is a certainty.
Mike “Mish” Shedlock
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