The Eurogroup and the informal Ecofin meetings, which begin today in Cyprus are in the center of market attention on Friday. The Eurogroup will focus the situation of the EU countries which have applied for EU bailout and especially on the conditions which will be attached to the aid for Spain. Moreover, Greek Finance Minister Yiannis Stournaras will present the package of budget cuts prepared by the Greek government, which is currently assessed bt Troika inspectors.
The Ecofin meeting, which will be chaired by Cypriot Minister of Finance Vassos Sharly will concentrate on the recent developments in the EU banking sector.
ECB and IMF preparing Spanish 300 billion euro bailout
The Dutch economic newspaper Het Financieele Dagblad reported on Friday morning that the ECB and the IMF are working together on a 300 billion bailout for Spain, which would have a three year time-frame. The rescue package is supposed to be discussed during the Eurogr meeting which kicks off today in Cyprus.
According to sources which the newspaper does not name, the IMF is establishing the conditions for the aid package, while the ECB is supposed to pave the way for the new program to purchase government bonds. The ECB's intention is for the IMF to guarantee that Spain fulfills the required debt reduction conditions.
The negotiations will be led by ECB president Mario Dragh, the IMF highest officials Christine Lagarde and David Lipton, as well as the ECB Governing Council member Jörg Asmussen. They will commence today at the meeting of Eurozone finance ministers in Nicosia. The Dutch finance minister Jan Kees de Jager has already stated that conditions will be attached to the aid for Spain.
IMF official considers third bailout package for Greece unavoidable
The Euro slid on Thursday on the news that in the opinion of the International Monetary Fund official Thanos Catsambas Greece will need a third international bailout program.
"Greece will require additional financing, which may take the form either of official-sector involvement or of additional loans, hopefully on more favorable terms," Mr Catsambas said, insisting that the EU and the ECB should take care of procuring the funds as Greece is not able to do that alone.
Troika inspectors, who are at present in Athens, are looking into Greece's situation to determine whether the next, 31 billion euro tranche of the second bailout can be released, but the final decision is supposed to be taken in November. In case the money is not disbursed on time and Greece runs out of cash, it might be facing an exit from the Eurozone, which in Mr Catsambas's opinion would be "an undesirable eventuality that will set the country back many decades."
Fitch puts Catalonia's debt rating on Rating Watch Negative
Fitch rating agency announced on Thursday its decision to place the Autonomous Community of Catalonia's 'BBB-' credit rating on Rating Watch Negative (RWN). This action was prompted by the lack of certainty whether the distressed region can receive aid on time from the Fondo de Liquidez Autonomico (Regional Liquidity Fund, FLA).
Catalonia requested 5 billion euros from the fund, but the money hasn't been made available yet. In case of further delays the Autonomous Community will ask the Spanish central government for a bridge loan, in order to cover its short-term needs.
In the opinion of Fitch however “there is still uncertainty as to whether this loan will be granted and if this is the case, (...), the region does not have any viable alternatives to cover its funding needs.”