Germany Responds To (Re)newed Spanish Request For Cash: Please Do, But No Backdoor Bailout
Just as we noted minutes earlier, following the Spanish (re)submission its (still rumored) bank bailout application, the ball was in Germany's court. And sure enough, Germany has just come out with the token response, which was the worst possible outcome for the insolvent country, which may force it pull the unofficial bailout request for the second time. From MarketNews: "The German government on Friday reaffirmed that the European bailout funds were ready to support Spain, if Madrid applies for aid and accepts the conditions tied to it. “The decision is up to Spain. If it makes it, then the European instruments for it are ready,” government spokesman Steffen Seibert said at a regular press conference here. “Then everything will run under the usual procedure: a state makes a request, it will be liable and it accepts the conditions tied to it.” Seibert declined to comment on rumours of a possible Eurogroup teleconference this weekend to consider an aid request from Spain that might be forthcoming."
Translated: the framework is in place. As in, no new bailout instruments are being contemplated.
Notice something here: no use of the word FROB anywhere. What is the FROB? Why the Spanish Fund for Orderly Bank Restructuring or bank bailout fund, which as a reminder, is what was rumored on Wednesday by Reuters and the FT as the loophole that Germany had agreed to fund in order to bypass funding Spain at the sovereign level with debt Spain can't afford to incur. In other words: the reason for the biggest market ramp of 2012... has just been found to be non-existant.
Gotta love Europe.
And with this disappointing German preannouncement to the Spanish pre-rumor of a bailout pre-demand, it is very likely that the entire "Spanish-rescue" weekend script, as explained moments ago, has just been scuttled.