Rajoy

Esther Bintliff

Spain’s prime minister Mariano Rajoy, speaking in parliament today [our emphasis]:

“The next European Council on June 28 and 29 must launch a clear and decisive message on the irrevocability of the euro and the single market.”

But this is what Angela Merkel had to say last week, according to Spiegel.de:

“I don’t think that there is a single summit at which the big design will appear,” she said on ARD.

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Esther Bintliff

DANI POZO/AFP/GettyImages

Questions? Mariano Rajoy gives a press conference on June 10. Dani Pozo/AFP/GettyImages

The initial rally that greeted news of the eurozone’s €100bn emergency loan for Spanish banks petered out so quickly that you might have missed it altogether if, say, you’d had a lie-in on Monday morning. Clearly this was not how it was meant to be. The eurozone ministers who agreed the deal with Spain on a two hour conference call on Saturday must have hoped it would buy them at least a few full days of investor confidence. Instead, the yield on Spain’s 10-year bonds rose to a fresh euro-era high today. Here are some of the best news stories, analyses and comments on Spain’s so-called ‘bailout-lite’, from the FT and elsewhere: Read more

Alan Beattie

10-year Spanish bonds over past month - Bloomberg

Yields on Spanish 10-year bonds over the past month – Bloomberg

The market reaction to the Spanish bailout continues to validate the infallible eurocrisis trading rule of “buy on the summit, sell on the communiqué”. Why so negative, especially for Spanish sovereign debt?

As has been extensively pointed out, the Spanish rescue is a roundabout way to do a bank recapitalisation. Instead of taking direct equity stakes in the banks, the EFSF/ESM has had to lend via FROB, Spain’s bank rescue fund, thus increasing Spain’s sovereign debt load and raising all sorts of tortuously tricky questions about seniority.

So why do it this way? It’s the old story of policy architecture not reflecting the realities of the world economy. Read more