By TraderVox.com
Tradervox.com (Dublin) – Reports coming from Spain indicate that ECB and German Government have offered to help Spain in lowering sovereign bond yields if the government establishes new cuts. According to reports by El Economista, German and ECB officials want Spain to commit to lowering bond yields before they can agree to help the country. This would mean that the nation would bypass full bailout if this were to be the case. The proposal is to establish new cuts in the health and education sector. Investors are looking to see whether the move to commit to new cuts will spur the European Central Bank President Mario Draghi to act, as he promised last week.
In their recent meetings, the Spanish Finance Minister Luis de Guindos and his German counterpart Wolfgang Schauble agreed that the Spanish borrowing costs are unjustified; however, the European Central Bank and Spanish Finance Ministry has refused to comment on the matter but credible sources claim that this is a matter that has been talked about. Whether this is the move Draghi was talking about or not, it is yet to be seen this week when ECB makes its Rate Decision.
Analysts have said that such a move would rule out a full bailout, which Spanish government has already denied exploring. Further, analysts have noted that establishing cuts in the health and education sectors, which are governed by autonomous regions, will cause tensions and we are yet to see how that will play itself out. However, German acceptance will quell most of Spanish public’s fears.
Whether a commitment to new cuts is a prerequisite for ECB help and German acceptance to the bond buys is something analysts are still looking at. However, it must be remembered that last year, Trichet, the former ECB President sent recommendation to Spain and Italy and after Italy announced new measures, ECB bought the nations bonds. Italy retreated from its commitment which forced the ECB to terminate the program. With these issues in focus, and Germany still opposed to direct bond buying and offering ESM a banking license, there is a high chance that Draghi and ECB might disappointment in the coming press conference. The market eagerly awaits for ECB decision and the Spanish report adds to confidence in Draghi’s words.
Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management.
Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox
