ESM BANK RECAPS: more “nein, nein, nein”. Yesterday’s meeting of the German, Finnish and Dutch Finance Ministers seemed to unpick many of the agreements from the June 28/29 Summit. They said the direct ESM bank re-caps could only be used once the ECB as a single supervisor had been both set up and “its effectiveness has been determined” (previously it only needed to be set up – this drags out the timeline).
They also said that in their view ESM monies could only be used for new bank problems emerging on the ECB’s supervisory watch rather than “legacy assets” which “should be under the responsibility of the national authorities” (a message that we heard repeatedly in Berlin last week). So that would mean Spain would keep the €60-100bn for bank re-caps on its books (Ireland and Greece too).
Finally, they said direct bank re-caps should only occur as a “last resort” once private and public capital options had been exhausted.
It could be argued that this is simply the position of 3 countries who will eventually be shouted down again by a combo of France/Spain/Italy. This once again highlights that the politicians are frittering away Mr Draghi’s bought time.