In the much anticipated Spanish regional election, PM Mariano Rajoy received mixed poll results. While the long-held centre-right Peoples won regional elections in Galicia by absolute majority, the Basque country voted for a nationalist-led government. Both outcomes came as expected by the Spanish press.
The outcome should be positive for Rajoy's economic reform plan. However, the Basque country results implies further tension in the region, as the nationalist-oriented leader may see in recent Catalonia's calls for independence an inspiration to also fuel the same actions in the near future. According to Spanish paper El Pais: "With this victory, the Prime Minister recoves ground to manage a possible imminent rescue and to move forward with measures targeting pensions and further cuts."
Greece getting close to a deal - Reuters
In Europe, Reuters is reporting that the Troika deal is 90% complete, according to the Greek Finance Minister, and that the Greek Prime Minister expects his nation to receive the next tranche of loans by the end of November; the November timeline is key, given that Greece will reportedly run out of adequate reserves by the 16th of that month.
Little progress made at EU summit
The two-day EU summit held in Brussels ended on Friday after the European leaders agreed on a more definite timetable for setting up the Single Supervisory Mechanism. Its legal framework is supposed to be ready by the end of the year and the single banking regulator should be made operational in the course of 2013. Nevertheless, it cannot be said that much progress has been done on the path to a full banking union in the Eurozone, as major differences still remain as far as the scope of the mechanism is concerned.
The conclusions of the summit meeting have been published on the European Council website.
Spain's region Asturias asks the government for 261.7 millions
The Spanish region of Principado de Asturias would request EUR 261.7 million to the "Fondo de Liquidez Autonómico" (FLA) according to Asturias' finance official Dolores Carcedo.
Early this morning another Spanish autonomous region, the Balearic Islands, announced on Friday that it is planning to request aid of 355 million euros from the the Spanish Government's Liquidity Fund for the Autonomous Communities (FLA).
Asturias become the seventh Spanish region to ask for bailout after Catalonia, Murcia, Valencia, Castile-La Mancha, Andalusia and Balearic Islands.
Merkel: No retrospective recapitalization for Spanish banks
German Chancellor Angela Merkel said during the last day of the EU summit in Brussels that Spanish banks could not count on back-dated recapitalization via the ESM.
“If recapitalization is possible, it will only be possible for the future so I think that when the banking supervisor is in place we won't have any more problems with the Spanish banks, at least I hope not," the German Chancellor told reporters during a press conference.
Merkel added that distressed lenders could be directly recapitalized through the ESM as soon as a fund which banks pay into had been established.
Rajoy: Still no decision on Spanish bailout
During the second day of the EU summit Spanish President Mariano Rajoy said that he still hasn't made a decision on the bailout. He added that he has no intention of acting under pressure and assured that if it was necessary to request aid it would be done in due course.
Referring to the general strike, which will be held on November 14, Rajoy said that it would not help to solve the economic problems nor improve Spain's image in the markets.
Meanwhile, another Spanish autonomous region, the Balearic Islands, announced on Friday that it is planning to request aid of 355 million euros from the the Spanish Government's Liquidity Fund for the Autonomous Communities (FLA).
Framework for banking union by end of 2012
European Union leaders agreed on a legal roadmap to establish a single bank supervisor for the union. The first day of talks in the EU summit in Brussels saw leaders closing in positions on a deal aimed at completing the legal framework by the end of the year, with implementation in the course of 2013.
EU Economic and Monetary Affairs Commissioner Olli Rehn commented, cited by Reuters, that reaching such deal is key "to break the vicious circle between sovereigns and banks".
Framework for banking union should be concluded by end of 2012, with completion by early 2014, and is to cover 6,000 banks, according to a French official, adding that there is potential for direct bank recapitalization from bailout funds in 2013. However, the German counterparts denied that bank recapitalization can take place in early 2013.
The European Council, on the official 'European Council conclusions on completing EMU' statement, "invited the legislators to proceed with work on proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of agreeing on the legislative framework by 1 January 2013. Work on the operational implementation will take place in the course of 2013."
From German government source cited by Reuters:
"Direct recapitalization of banks in first qtr of 2013 is ‘very unlikely’ as can only begin once an effective single banking supervisor is in place. ECB will be responsible for systemically important banks, but will oversee other banks if necessary. There will be a mix of supervision between ECB and national supervisors."
Merkel said bank supervision must be working before direct recapitalization. Meanwhile, Hollande said EU summit confirms June decision on bank union. It was also reported that Spain’s bailout needs weren’t discussed at summit.
Frictions between Germany and France on how to go about the banking supervisor authority had been a troubling sticking point, with German Chancellor Angela Merkel demanding stronger authority to veto national budgets that breach EU rules, while French President Francois Hollande had been more supportive of moving towards a European banking union.