Animal Farm rears its European head, where we learn that some bailout agreements are more subordinated than others. Bloomberg brings us the details of the just completed collateral deal between Finland and Spain, which has terms identical to that of Greece, where there was absolutely no debate about whether bailout loans were senior to public and private sector debt. Following this deal the semantics of the ESM subordination, implied or explicit, should also end.
- Collateral deal bilateral between Finland, Spain, Finnish Finance Minister Jutta Urpilainen spoke to reporters.
- Deal structured as Greek collateral was
- Other countries not asking for collateral - YET!
- Collateral to come from deposit guarantee fund
- Negative pledges mean deal can’t be directly with state
So courtesy of bullet point 4 we learn that Finland is right in seniority as Spanish depositors. And one Spanish bonds pass 7%, then 8% and so on, every other country will seek the negative pledges we discussed back in January, and demand exactly the same conditions as were just granted to Finland. It is just a matter of time.