The following two articles/excerpts are by Ambrose Evans-Pritchard writing in The Telegraph. The second one Europe's Betrayal, was extensively commented on by Zero Hedge in Ambrose Evans-Pritchard's Contrition.
Spain's crisis flares again as AAA club scuppers bank rescue deal
By Ambrose Evans-Pritchard, International Business Editor
Spain's debt crisis has returned with a vengeance after Germany, Holland and Finland reneged on a crucial summit deal and scuppered hopes of direct eurozone help for Spanish banks.
Yields on 10-year Spanish bonds punched back above the danger line of 6pc and spreads over German Bunds reached 450 basis points, intensifying pressure on Madrid as it continues to resist a sovereign bail-out.
The alliance of hardline creditors said the European Stability Mechanism (ESM) – or bail-out fund – could not be used to cover “legacy assets” from past banking crises, even after the eurozone’s banking supervisor starts work next year.
This prevents the ESM from recapitalising Spain’s crippled banks directly under a €100bn (£79bn) loan package agreed with Madrid in June. The burden will fall entirely on the Spanish state
[…]
The ECB says it will not buy Spanish bonds until the country requests an ESM rescue and signs a “memorandum” giving up fiscal sovereignty. Mr Rajoy said he will decide when he learns the exact terms, but talks have become a political minefield.
Madrid is gambling that a reform package and a tough Budget to be unveiled this week will suffice without further conditions.
Yet the German and Finnish parliaments must vote on each ESM rescue. They are certain to demand tougher terms. Spain in turn has issued thinly-veiled threats to bring down the euro temple on Germany’s head if pushed too far. German bank exposure to Spain is €145bn….
Europe's betrayal of Spain
We discover – yet again, you might say – that Germany, Holland, and Finland will not stand behind their solemn pledge of solidarity when push comes to shove.
Spain’s premier Mariano Rajoy has been betrayed. Nobody should be entirely surprised if he and the Spanish arch-nationalists in his circle offer a condign riposte, and bring down the entire temple on the heads of the creditor powers.
He bit the bullet and agreed to the highly intrusive terms of a €100bn eurozone rescue for the Spanish banking system on a specific understanding: that the ESM bail-out fund would ultimately take over the burden by recapitalising Spain’s banks directly.
This deal has been breached. Can we believe anything that the Chancellor of Germany, the prime minister of Holland, and the prime minister of Finland say from now on? The EMU rescue edifice is built on sand.
You might say Mr Rajoy had no choice. But he did. There were those whispering in his ear that Spain should instead retake control over its own monetary, exchange, and sovereign policy levers, and break out of its debt-deflation trap.
