Well, see if you can make out what they’re saying here.
http://ftalphaville.ft.com/blog/2012/09/26/1177721/taking-responsibility-the-esm-way/
| September 26 9:37am
The reason for this confusion is that Monti, Rajoy and de Guindos basically presented the results of the June summit as a promise (it was actually a blackmail as they said they would not bring discussions to an end unless they got their way) that the ESM could directly inject capital into troubled banks. I think Merkel basically out-manoeuvered them by giving a conditional agreement but requiring the fiscal compact to be signed into law first.
However, it was crystal clear if you read the documents that this would not apply to the €100bn package for Spanish banks, which would initially go through the FROB (therefore be sovereign risk), but there was the possibility that at a later date it would go "go through" the ESM. However, there was no clarity as to whether that meant the ESM merely had responsibility for allocating and monitoring or actually had the economic risk.
The fact remains that the media and the markets swallowed the description that de Guindos et al gave without properly reading the documents.
As far as I can tell, the other issue is in its current format, the ESM can only be used for lending to states. As an example, Finland has made it very clear that the ESM as APPROVED is only for senior sovereign debt. How everyone was able to convince themselves, this meant they could invest in bank CAPITAL (which is a long long way down the risk chain) is beyond me. If they do wish to invest in bank capital, then the ESM needs to resubmitted to the 17 parliaments.
The final caveat really is belt and braces...
"direct bank recapitalisation by the ESM should take place based on an approach that adheres to the basic order of first using private capital, then national public capital and only as a last resort the ESM."
In summation, for those who blithely assumed that the Spanish would be able to get the rest of the EU to cover the losses on toxic bank assets, did they really think this was going to be waved through simply because Merkel didn't want to spend all night at the conference table? I'm just surprised it has taken so long to work this out...
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τα έγραψα κι εχθές:
«Μπλόκο» Φινλανδίας, Ολλανδίας στην αγορά ομολόγων από ESM - Ποιος νίκησε είπαμε;;;
Μέρκελ: Δεν ξέρω τι λέτε εσείς, εγώ πάντως δεν υποχώρησα σε τίποτε
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