The German, Finn and Dutch finance ministers have joined forces in dampening any hope to transfer banking shortcomings to the rescue fund. Only fresh liabilities stemming once the banking union is set up would be eligible. In other words, Spanish and Irish impaired assets will be exclusively cleaned up out of national budget and debt.
Such an ugly prospect has propelled risk premium to levels in place before the 9-S bold European Central Bank board move.
Berlin is also stepping down from its firm commitment to anchor a sweeping debt buying mechanism. While publicly endorsing Draghi’s proposal it is trying to water down its direct financial involvement. Floating the idea of a huge leverage mechanism or warning Spain to refrain from cashing rescue money, pursues an all too clear aim: avoiding to foot the bill.
These developments cast a serious doubt on German willingness to fully engage its public finances in saving the Euro. It appears as betting on a virtual rescue firewall to do the trick.
But the ECB bazooka will fail to impress the markets should they feel it is hampered by an acute ammunition shortage.
Acts should swiftly follow promises. Otherwise the Euro ring-fencing scheme might collapse. The ECB package was indeed meant to provide a helping hand both toSpain and Italy. But it also targeted sheltering the common currency from a slide intwo of its main economies, thus dragging Euroland into utter disaster.
Lose any hope to survive should any big troubled country be forced to default. The ensuing shock-wave would topple the seemingly safe harbour economies around Europe. Those adamantly opposed now to spend some money in redressing the Euro might lose everything should it blow up.