Wer falsche Signale gibt, muss sich nicht wundern, wenn die Märkte nervös werden. So passiert nach einem sehr zweifelhaften statement des niederländischen Finanzministers über die Grenzen des EFSF: sofort liessen die Märkte portugiesische und irische Anleihen links liegen, nicht gerade was die PIGS eigentlich brauchen. Inzwischen glauben die Märkte sowieso, dass die EUwith disappointment to yet another European meeting that seems to postpone crisis resolution to neverday. A final deal on the EFSF is likely at the summit on March 24-25, and the stress tests may not be published until July, Reuters quotes sources from the Hungarian presidency.
On stress tests
Ministers also agreed that the stress tests should account for liquidity as well as solvency, but much remains to be agreed, both on the method, and how much data are made public. The stress tests should be conducted end of May, and published in July – later than the European Commission had envisaged. This suggests that the disagreement about the tests remains substantial.
El Pais has some further details. The EU is considering an increase in the 6% tier one requirements that were imposed last year. The paper writes that an increase to 7% would trigger a recapitalisation of almost half of all Spanish banks. If raised to 8%, the vast majority of Spanish banks would need new capital. There seems to be disagreement between the banking sector and the Spanish government about how much money would be needed to cover the capital shortfall. The paper also said the planned liquidity tests could be made separately, and might not be made public.
There was also a discussion about reducing the EFSF interest rates.
(We are seeing a familiar pattern. When the markets panic about bond auctions, the EU gets bounced into action. A week without market panic, and you get the old complacency back.)
Reuters Breakingviews on the tests
Reuters Breakingviews said Europe's bank stress tests were at last “inching towards credibility” because they will take account of liquidity risks and the possibility of a sovereign default. But the article also made the point that for the tests to be truly effective, governments must have the resources to recapitalise banks that fail. Ireland was clearly not in a position to do that last year, while Spain and Belgium also have bloated financial sectors and limited resources. They may have to turn to the euro zone's bailout fund.