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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.
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.