June’s meeting of the Euro area’s leaders was one of the rare summits
that produced a concrete breakthrough that was welcomed by most
observers as a genuine step forward. The summit statement began with the bold sentence
Today, in a joint statement, the finance ministers of Germany, Netherlands and Finland have effectively asserted that, despite the bold words of the statement they agreed to in June, Spain will remain caught in a the vicious banking-sovereign circle. The statement articulates some “principles” for how ESM should operate. Two of the principles are particularly important. The first:
We affirm that it is imperative to break the vicious circle between banks and sovereigns.And then asserted that
This decision was widely viewed as crucially important for Spain’s economic future. With the risk of significant banking recapitalization costs weighing heavily on the market’s assessment of Spanish debt sustainability, the announcement was seen as a crucial step by Spain’s Eurozone partners towards sharing the risks associated with its banking sector.When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly.
Today, in a joint statement, the finance ministers of Germany, Netherlands and Finland have effectively asserted that, despite the bold words of the statement they agreed to in June, Spain will remain caught in a the vicious banking-sovereign circle. The statement articulates some “principles” for how ESM should operate. Two of the principles are particularly important. The first:
Read more: http://www.forbes.com/sites/karlwhelan/2012/09/25/germany-to-spain-and-ireland-drop-dead/the ESM can take direct responsibility of problems that occur under the new supervision, but legacy assets should be under the responsibility of national authorities
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