“Germany’s position is excessively unclear”

So is it just a matter of time for Spain to require a rescue?

We think so. It's possible that someone hoped that it wouldn't be necessary with lower credit costs and tighter spreads after the announcement of help by the European Central Bank, but we must bear in mind that it was always meant to be a short-lived reaction. The truth is that the ECB promises are just promises, so far. protection and credit costs are again up, in the region of the 6 percent.

Is Rajoy dealing with the rescue option in the right way? Does he really need to wait until the deficit figures come in?

He is under huge pressure. Up to August, the Spanish deficit reached 4.77 percent against a 4.5 percent target for the whole year. That casts a question mark over the ability of the government to achieve its goals. Furthermore, because targets haven't been reached, conditions to receive financial help from Brussels will be tough.

What's your guess about when and how the rescue package will be finally put in place?

It's hard to know… perhaps when the premium risk surpasses the 500 basis points level? We do not know, but it is sure that Spain cannot stand alone for much longer. President Rajoy has repeatedly said that it all depends on the conditions that would be imposed on the country.

Is president Rajoy right in fearing a possible rejection from voters?

The political cost of asking for a bailout is high, and governments in Greece, Italy, and others, have fallen out of favour. In Spain, though, change would make less sense because this is a 'new' government already. Being under a bailout programme, in any case, is not good for any political party in office.

Would you say Germany is helping Spain's interests?

The problem with Germany is that it's position is not clear at all, and it doesn't help either that the German political elites are divided and making declarations that oppose different messages…

It is true that there appears to have been a change in the official discourse and, whereas a few months ago there was talk about austerity only, now growth has become part of the discussion. But the euro rescue fund is still being dissected in Germany and the chance that incompatibilities with the German constitution is discovered is quite real.

Then, Germany was joined by the Netherlands and Finland to refuse that banks can be recapitalised directly by the bailout fund. This has unsettled the markets with more uncertainty. Germany is contributing very little right now to market confidence recovery.

Will the future 'bad bank' attract foreign investors' interest?

We haven't quite got foreign investors back into buying Spanish debt, so I'm afraid a U-turn is going to take some time. Spain will be trusted again when it complies with Brussels' conditionality.

What about the Oliver Wyman banking test, will this improve the outlook for the financial system?

There is a probability that this happens, yes. Once the actual capital needs of banks are known, new corporate operations could spark. For the moment, we only have rumours about capital deficits being lower than suspected but entities to restructure suffering a worse impact because market prices have dropped. The banking industry will not be a tranquil place during the next months.

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