Our briefing coincides with the letter sent by Spanish Economy Minister Luis de Guindos to Eurogroup Chairman Jean-Claude Juncker, in which Spain officially requests a bank bailout. Unsurprisingly, the letter stops short of mentioning any specific amounts. The details will be nailed down ahead of the next meeting of eurozone finance ministers on 9 July.
Here's the letter in full, translated from Spanish:
I have the honour to address you [Eurogroup Chairman Jean-Claude Juncker] on behalf of the Spanish government, to formally request financial assistance for the recapitalisation of Spanish financial entities which will require it.
This financial assistance falls within the framework of financial aid for the recapitalisation of financial institutions. The choice of the concrete instrument through which this aid will materialise, will take into account the different options that are currently available and others that might be decided in the future.
The Spanish government considers very positively the declaration made by Eurogroup ministers on 9 June, which expressed support for the determination of the Spanish authorities in restructuring [Spain’s] financial system and their intention to seek financial assistance for the recapitalisation of financial entities, of an amount sufficient to cover the capital needs plus an additional safety margin, up to a maximum of €100 billion.
The [Spanish] Orderly Bank Restructuring Fund (FROB), which will act on behalf of the Spanish government, will be the institution which will receive the funds and transfer them on to the financial institutions.
The Spanish authorities will offer all their support in the assessment of the eligibility criteria, the definition of the financial conditionality, the monitoring of the measures to be introduced and the definition of the financial aid deals, with the objective to finalise the Memorandum of Understanding before the 9 July so that it can be discussed at the next Eurogroup meeting.
In this regard, the two Independent audits of the Spanish financial sector, as well as the FSAP analysis carried out by the IMF, should be used as a starting point.
1. Fully agree that the recap gap is more likely North of 100 Bn than substantially below that amount. First of all the Spanish economy hasnot bottomed out yet. And still a lot of bad loans looked to be rolled over (and have no provision against them).
ReplyDelete2. Depends a bit how the Spanish rescue is structured. For the banks it is likely the recap amount.
For the country itself it depends how it is structured, if required:
-Same as Ireland cs need to refinance the amounts to be rolled over.
-If by buying secundary market it is likely considerably higher than that (in priciple the by far most expensive option).
-Combined with PSI basically only the current deficit could be enough (a much lower amount).