SPAIN’S ECONOMY MINISTER has reportedly discussed the possibility of his government needing a full-on sovereign bailout from the Eurozone’s bailout funds – potentially needing up to €300 billion.
Reuters reports that Luis de Guindos discussed the possible sovereign bailout in a meeting with German finance minister Wolfgang Schauble on Tuesday – the same day that the cost of a 10-year loan for the Spanish government hit an all-time record of 7.62 per cent.
Reuters, citing an unnamed eurozone official, said Schauble had refused to discuss the possibility of a sovereign bailout until the new European Stability Mechanism – the Eurozone’s permanent €500 billion bailout fund – is formally established.
That won’t happen until at least September, as Germany cannot join the fund until its Constitutional Court gives it clearance to do so, and its ruling is not expected for several weeks.
“De Guindos was talking about €300 billion euros for a full programme, but Germany was not comfortable with the idea of a bailout now,” the official told Reuters.
Spain strongly denied the plans when questioned this morning.
Any need for a full-blown Spanish sovereign bailout would pose the greatest challenge yet to the survival of the euro – with Spain’s funding needs swallowing up well over half of the ESM’s €500 billion capacity.
A sovereign bailout – on top of the €100 billion that Spain’s banks are already getting from the ESM and its precursor, the EFSF – would also be bad news for Ireland, which will have to contribute 1.59 per cent of the cost of any bailout.
If the €300 billion figure was accurate, this would mean Ireland could face a bill of €4.77 billion to contribute to the Spanish sovereign bailout.
Ireland’s Supreme Court yesterday agreed to ask the EU’s highest court, the European Court of Justice, to rule on whether the ESM and the treaty establishing it was legal under existing EU treaties and laws.