Has the Spanish bank bailout set a precedent for all other insolvent EMU member countries to follow? Of course. The only question is when is the stigmata of demanding a bailout (which Europe now has no choice but to grant courtesy of set precedent, be it via ESM or otherwise) less relevant than national pride, than preserving one's banking sector, and preferably preempting the kinds of bank runs that pushed Spain to demand a bailout in the first place. For one small Eurozone member country the answer may be if not now, then very soon. Slovenia's Dnevnik asks a simple question: "How serious is the situation of Slovenian Finance - are we on the way of Spain [6]?" The answer, in not so many words: very likely yes.
From the google translated article [6]- highlighted section most relevant
Although at the last auction of short-term debt during the Slovenian buyers again dominated by domestic financial institutions, full of liquid assets of the European Central Bank (ECB), were required average yields are relatively high, recalls Primoz Cencelj of KD Funds.... In exchange for 60.373 million, the government should provide a 0.9 percent annual return, which is 0.1 percentage points more than the auction just over a month ago. Perhaps even more concern is that Slovenia had offered to investors for 0.05 per cent higher rate than at the end of May Spain, which are currently both sentenced to issue short-term debt securities.
Just the Spanish case most striking, as it reflects the growing number of parallels with Slovenia. They offer themselves as the question whether Slovenia is on track to follow Spain and Europe ask for recapitalization of banks. "Despite the similarities between the two economies, Slovenia is still quite far from the Spanish scenario," said economist Igor Masten, who estimates that the delay in the Spanish economy worse, while weak compared to the material condition of the Spaniards over-indebtedness of Slovenian companies. Here, the similarities do not end because the two sectors, the total Grants of high exposure to real estate sector, the crisis has so brutally crushed. Banks' balance sheets in the Iberian peninsula and on the sunny side of the Alps are therefore imbued with bad investments and desperately needed injection of fresh capital. The Slovenian banks should be around 4 billion euros of bad loans, which represents about 8 percent of total assets. On the hair-like figures are from Spain, where they take up bad assets of investment banks 8.37 percent or more than 150 billion euros. The Spanish Government had therefore been to seek financial support in Europe, while Slovenia will have, at the probable lack of interest of foreign investors' funds to recapitalize banks to provide itself.
But time is no longer in abundance, although the government to purchase Co Co bonds, at least temporarily solve the equity problems of NLB. This is a problem in the banking sector will not be removed, similarly as in Spain, the real problems of the information in the financial market does not lie in the largest bank. Threats to Asia to greater capital hole, the unofficial information is exposed by Nova KBM and Abanka as well as some smaller banks in domestic ownership, which can be fatal effect on the banking system and compels the country to seek assistance from the European Fund for the Permanent Protection euro (ESM). "It may not even be helpful," says Cencelj, which estimates that around 3.5 billion euros, at least for some time solve the banking problems. Search resources in the financial markets would be on the other hand, are much more expensive, because the required yield on ten-year bonds Slovenian stay in the area between 5.5 and six per cent.