Photo: AP/Emilio Morenatti
Two important events are taking place in Europe today: European finance ministers will raise the size of bailout funding and Spain will unveil a new austerity budget.With Europe back in the news and renewed concerns that countries like Spain and Italy might not be able to handle the heat, both of these events could prove market-moving.
In Brussels, eurozone finance ministers will discuss raising the size of bailout funding—and it’s all about the number.
Three options appear to be on the table right now:
- €700 billion: Allowing the European Stability Mechanism’s €500 billion to run alongside funding already devoted to Greece, Portugal, and Ireland from the European Financial Stability Facility (about €200 billion), starting this summer.
- €940 billion: Making unused (about €240 billion) as well as used EFSF funding available until mid-2013, as well as activating the ESM this summer.
- €940 billion: Making both unused and used EFSF funding available indefinitely even as the ESM goes into effect.
The bigger the plan, the more resistant Germany becomes. We could see the Germans acquiesce to one of those €940 billion options under pressure from the rest of Europe.
Spanish prime minister Mariano Rajoy is expected to announce the harshest austerity measures in 30 years at about 8 AM EST today.
This budget not only has to convince European leaders that the country is making progress towards the sustainable spending goals set forth by those international organisations. It has to be palatable to the general Spanish public, which engaged in major protests yesterday, some of which turned violent.