More on the Spanish not-a-rescue

10 Jun 2012 by Jim Fickett.

We got a great quote-of-the-day from Spain's finance minister, Luis de Guindos, in the Financial Times' first announcement of the latest agreement (an EU loan of up to 100 billion euros to Spain's bank rescue fund):

“What is being requested is financial assistance. It has nothing to do with a rescue,” Mr de Guindos said.

The way in which this is true does matter, at least for saving face. Because the bailout is intended specifically for the financial sector,

bailout rules give EU authorities a strong hand over the ongoing reform of Spain’s financial sector but allow it to impose only “light” conditions on the government itself, allowing Madrid to avoid the intrusive EU-monitored austerity programmes now under way in Greece, Ireland and Portugal.

The pretense that the problem is only in the banks not only helps Spain save face, but also helps the EU convince investors that they needn't panic over euro-denominated debt in general (especially that of Spain and Italy).

However given that the ECB's recent liquidity provisions were used by Spanish banks to hoover up more government debt, that an IMF analysis released on Friday suggests Spanish banks need to investigate real-world property prices, and that a Barclay's analysis suggests the latest not-a-rescue might not be big enough, I doubt we have heard the last of Spain's debt problems.