Spain faces a bond rollover of €28 Billion in October and is rightfully scared about 2-year bond rates of 6.5%.
El Economista notes the Spanish economy minister is at a meeting in Berlin to discuss Government Request for a Credit Line to Save the Year and forestall an imminent financial collapse.
This is a heavily Mish-modified translation from the article ….
Luis de Guindos will meet with Wolfgang Schäuble to negotiate measures noting the ECB is already 19 weeks without buying debt.
Eeconomy minister, Luis de Guindos, now travels to Germany for talks with German Finance Minister, Wolfgang Schäuble. The appointment is key because Spain is running out of time. With the 10-year bond about 7.5% and the risk premium on the 632 basis points, Guindos nevertheless insisted that Spain will not have to ransom all for a full sovereign bailout.
Instead, he asks for the European Central Bank (ECB) to resume purchases of Spanish bonds in the market.
Guindos believes Mario Draghi is not the problem. Rather, bond purchases have stopped primarily because Germany is opposed. To mutate this position and to convince Schauble to give permission to his emissaries at the ECB, Jörg Asmussen, and Jens Weidmann, Luis de Guindos traveled to Germany
Analysts are unanimous: An imminent financial collapse is at stake. If pressure on Spanish bonds continues and Treasury loses its access to the bond market, Spain cannot cope with the massive debt maturity that awaits him in October, close to the 28 billion euros. Amounts may be even greater if Spain has to funnel money to the regions requesting the help of special liquidity fund.
Therefore, sources close to the government have admitted they are considering other alternatives. For example, the negotiation of a temporary line of credit with which to address the maturity of its debt, and perhaps even financial assistance for Spain’s regional governments.
This option is based on a premise well known in the eurozone, of buying time. A credit line would serve to dampen fears today, waiting for the agreements reached at the June summit, including the implementation of a single banking supervisor and an operational Stability Mechanism.
For starters, when it comes to these bailouts, there is no such thing as “temporary”. Regardless, I believe Germany will reject the request, thereby forcing Spain into a full sovereign bailout.
Mike “Mish” Shedlock
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