Skip to comments.EU: Pressure on Spain to bow to bail-out
Posted on 08/01/2012 5:08:44 PM PDT by bruinbirdman
Italys leader Mario Monti is to make a last-ditch effort tomorrow to persuade Spain to swallow its pride and accept a formal rescue, hoping to clear the way for double-barrelled action by bail-out funds and the European Central Bank.
Mr Monti has emerged as the Latin blocs de facto prime minister.
The frantic diplomacy comes as investors wait nervously to see if German-led officials on the ECBs governing council will stand behind the banks chief, Mario Draghi, who triggered a euphoric stockmarket rally last week with hints of intervention in the Spanish and Italian bond markets.
"The situation is dramatic: markets will react very badly if the ECB doesnt deliver, said Dmitris Drakopoulos from Nomura, ahead of the ECBs crucial policy meeting tomorrow. The bond markets are continuing to signal deep alarm, with safe-haven flows into German two-year debt pushing yields to minus 0.08pc.
Former ECB governor Athanasios Orphanides said Mr Draghi had boxed himself into a corner. Expectations are now so high, the ECB will have to announce something, he said.
Bundesbank chief Jens Weidmann shows no sign of relenting, warning today that the ECB must not overstep its mandate or stray into fiscal rescues. He issued a blunt reminder that the German central bank is master of the euro project, and not just one bank among others. We are the biggest and most important central bank in the euro system, he told the Bundesbank journal.
While the Bundesbank does not command an ECB majority and has been outvoted in the past Mr Draghi must move with extreme care. Two German members of the ECB have already resigned in protest over bond purchases, seen as debt pooling by the back door. EU officials fear that Mr Weidmann may leave as well if
(Excerpt) Read more at telegraph.co.uk ...
EU bail out means the country's budget must be approved in advance by The Commission. Fiscal sovereignty has already been given up to EU by Ireland and Greece.
No doubt any in Spain with a few Pesos to rub together have their Pesos offshore in gold or silver.. unless they are nuts..