Spain’s Not Getting a Bailout… Neither is Italy… It’s the END GAME Folks [Zerohedge]
July 7, 2012 1 Comment
Spain got a “bailout” or so the media claimed. Because I cannot find any entity in Europe with the funds to actually bailout Spain (the EUFN is tapped out, the ESM has major political issues, and Germany is risking a credit downgrade and insolvency based on its backdoor EU props).
As one would expect in this situation, things are rapidly going into hyper-drive in Spain. The weekend before last the country implemented capital controls including
- A minimum fine of €10,000 for taxpayers who do not report their foreign accounts.
- Secondary fines of €5,000 for each additional account
- No cash transactions greater than €2,500
- Cash transaction restrictions apply to individuals and businesses
Does this sound like the actions of an economy with a sound banking system?
On a related note, Italy is once again back on the brink: in the last 2 weeks Italy’s Prime Minister Mario Monti has said that the country is “flirting with economic disaster… [and] in a crisis.” He, like Spain’s PM Rajoy, has pushed for the ESM to buy sovereign bonds. He’s also asked the ECB to implement a mechanism through which it would buy Italian sovereign bonds whenever the spread between them and German bunds grows too large (a type of bailout).
Indeed, things are so desperate that he invited German Chancellor Angela Merkel, French President Francois Hollande, and Spanish Prime Minister Mariano Rajoy to an emergency meeting in Rome over the weekend. His goal was to convince EU leaders to allow Italy to receive funding directly from the EFSF and ESM.
The ECB and Germany have already rebuked this idea:
ECB Weidmann: Strongly Against Monti’s Proposal For Unconditional Funding
European Central Bank Governing Council member Jens Weidmann strongly opposed the proposal of Italian Prime Minister Mario Monti through which Italy could receive billions of euros from the European rescue umbrellas (EFSF and ESM) without meeting the assigned conditions of the aid, Sueddeutsche Zeitung reported.
For Italy, the advantage of Mr. Monti’s proposal is simply to avoid meeting the strict saving and reform requirements that are conditional to receive the aid. That in turn would create a unique funding path for Italy unlike what other European countries like Greece and Portugal had to accept to get bailed out.
Mr. Weidmann on the other hand considered that as a “detour” that would result in a state funding which is prohibited by the EU treaties and would undermine the regulatory framework of the monetary union. Besides, Italy already tried a similar method in the 1970s and failed, according to the report.