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Reuters just reported that Spanish Economy Minister Luis de Guindos and German Finance Minister Wolfgang Schaeuble talked about a €300 billion ($366 billion) sovereign bailout on Tuesday.According to a eurozone source, Schaueble was not amenable to the idea, insisting that the European Stability Mechanism—Europe’s future bailout fund—must go online before any bailout was considered.
The ESM is expected to go into effect later this year, adding firepower to the current bailout fund, the EFSF.
Economy Minister Luis de Guindos brought up the issue with German counterpart Wolfgang Schaeuble in a meeting in Berlin last Tuesday as Spain’s borrowing costs soared past 7.6 per cent, the source said.
If needed, the money would come on top of the 100 billion euros already agreed to prop up Spain’s banking sector, stretching the euro zone’s resources to breaking point, and Schaeuble told de Guindos he was unwilling to consider a rescue before the currency bloc’s ESM bailout fund comes on line later this year.
“De Guindos was talking about 300 billion euros for a full program, but Germany was not comfortable with the idea of a bailout now,” the official told Reuters.
“Nothing will happen until the ESM is online. Once it is operational we will see what the borrowing costs for Spain are and maybe we will return to the question,” the official said.
Investors have worried that Spain’s high borrowing costs have made the country’s debt unsustainable. Yields on 10-year bonds rose above 7.6 per cent earlier this week.