Reuters is reporting that German and European leadership are already exploring ways to bail out Spain and its banking system, despite resistance from Madrid.That could be the cause between a sharp market rally today, despite some dismal comments about the EU economy and little action from European Central Bank President Mario Draghi earlier today.
Sources familiar with discussions in Berlin and Brussels said intensive contingency planning was already under way for EU aid to Spain. Lawyers were examining the fine print of European treaties to see how Madrid could get money from the euro zone’s rescue funds without the stigma of a full economic adjustment program, they said…
Sources in Berlin said the German Finance Ministry believes the euro zone’s permanent rescue fund, the 500-billion-euro ($625 billion) European Stability Mechanism, due to enter into force next month, could lend directly to Spain’s FROB bank rescue fund. EU lawyers are not convinced this would be legal.
According to the report, Germany and other European leaders wanted to avoid subjecting Spain to the embarrassment and strict rules that would be associated with a formal IMF program. If the aforementioned plan worked, it could also sidestep approvals from some of the more euro-sceptic countries like Finland and the Netherlands.
An IMF report on Spanish banks is due out Monday, leading some to speculate that there could be talks between European leaders over the weekend.
REMEMBER: 14 Reasons Spain Is Turning Into A Disaster >
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