FXstreet.com (Barcelona) – The latest developments with regards to Spain via the EU Finance Ministers meeting overnight is somewhat mixed. After a 9-hour meeting the official statement noted that the Eurogroup has reached a political understanding on the draft MoU on Spain’s assistance program. The aid is to be provided to Spain via the EFSF until the ESM becomes available and then transferred to the ESM without gaining seniority status (although Schaeuble’s comments were contradictory as we discuss below).
The final approval of the Spanish program is envisaged by the 20th July. Ministers also confirmed earlier press reports of the one-year extension to Spain’s deficit reduction program to 2014. In a post meeting interview Mr. Juncker also told the press that he foresees €30B of the €100B Spanish loans to be disbursed by the end of the month with the remainder most likely following in the autumn after a more detailed review of the banking sector. Juncker also said that the bailout terms for Ireland and Portugal could be eased.
Although some clarity around Spain’s bailout is welcomed the “ESM direct bank recap” proposal is moving rather slowly as technical discussions will only start in September. Direct ESM recap was one of the EU Summit highlights at the end of last month and there had been some expectations the new regime will apply retroactively to Spain. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “Whilst the official statement mentioned above acknowledges this, the German Finance Ministers’ comments were somewhat contradicting, and it appears the tension between Germany and the rest of the Eurozone is still quite evident.”