Quick Spain thoughts — Marginal Revolution
Is there actually any news in the “deal”, summarized here? It’s long been known that Spain would end up getting a chunk of ESM and/or ESFS (indeed they had a quota of 93 billion euros and this is barely more at 100 billion euros), and now they have, although the details still are not announced. And Spain already had been given an extension on their austerity target, so not attaching “austerity conditionality” to this deal isn’t quite news either. Their obligations are already “floating” in this regard, because even the previous target could not be met.
Did I mention there were already a trillion euros lent from the ECB since December (not all to Spain)?
Is the deal in some way a new signal? I would think the new signal is that if you play a bit tough with the Germans you get a more relaxed deal, at least nominally in a way that you can take to your citizens. Maybe you think the more relaxed deal is a better outcome, but in the longer run does this keep the Germans on board? Does it keep Ireland on board? Do Greece and Portugal now wish to renegotiate? One hundred billion euros is unlikely to be enough, so what precedent is created when Spain negotiates for the next round?
Doesn’t this all mean that Netherlands, Finland, and Slovakia are getting somewhat rolled? They feel less responsible for the rest of the eurozone than Germany does.
How senior will the debt be from this new package? That seems like the key question to me. Very senior debt will kill the Spanish bond yields, but very junior debt will make this pure aid. How many eurozone countries are up for supporting pure aid on this scale?