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16 October 2012

FT: Opposition wanes to Spanish aid request


Opposition to a Spanish request for a second round of EU aid has begun to wither in recent days, both in Madrid and other eurozone capitals, clearing the way for the first use of a new, limitless European Central Bank bond-buying programme.

Under the outlines of the plan being discussed, Spain would request a precautionary credit line from the eurozone’s new €500 billon rescue fund, the European Stability Mechanism, which could be used to purchase Spanish bonds at auction in an emergency.

Because the aid would only be a credit line and not immediate payments to Madrid, the scheme is expected to face less political opposition in northern creditor countries. Mario Draghi, the ECB chief, specifically outlined the possibility of triggering ECB bond-buying if an “enhanced conditions credit line” was requested from the ESM when he unveiled his programme last month.

Although Wolfgang Schäuble, the German finance minister, has publicly argued that Spain does not need more assistance and is taking the reform measures and spending cuts necessary, there were indications from senior members of the Bundestag on Tuesday that Germany is preparing for a Spanish request.

German officials do not expect the request until after Spanish regional elections in Galicia, scheduled for October 21.

Eleventh-hour concerns have arisen over the request’s impact on Italy, with some senior officials concerned that a Spanish request, while temporarily placating eurozone debt markets, will only shift the focus onto Rome, which has much higher debt levels.

Full article (FT subscription required)



© Financial Times


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