Why Spain May Still Need To Tap The EFSF To Bail Out Its Banking System


Photo: Wikimedia Commons

Spain may need to tap the European Financial Stability Facility (EFSF) in order to bailout its troubled regional banks, or cajas, according to Barclays Capital Chief European Economist Julian Callow, who was speaking at the Bloomberg European Debt Crisis conference.The reason why, according to Callow, is that the Spanish government isn’t in the fiscal position to raise enough money for the bailout.

Spain recently announced support measures for its banks worth €20 billion, on the low end of what markets anticipated. Expectations were as high as €80 billion for the bailout.

At the moment, the EFSF is not allowed to fund banking sector bailouts. But this weekend, Jurgen Stark of the ECB, suggested that could become law.

If that’s the case, that would explain why Spain has refused to go too big on the bailout right now, knowing that it may be able to take loans from the EFSF at a lower yield in the future.

Check Out The Complete Guide To The Oncoming Spanish Debt Crisis That Everyone Is Terrified Of >

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.