He writes that ongoing concerns on how the OMT plan will play out “could result in “further sovereign spread widening over Germany.” He sees the focus remaining on Spain, the country next in line to require ECB support, but notes that they appear reluctant to take the next step and make a formal request. He feels that “That suggests to us that the conditions being discussed behind closed doors, even under a precautionary credit line program, are too onerous to entice Spain into a formal request.”
He believes that the “foot-dragging in essence highlights the major risk to the smooth operation of OMT. Spain is not compelled to request aid given the favorable market response to the announcement of the OMT plan and surely highlights the risk that Spain, when under a program that brings favorable market conditions, will not fully adhere to the conditions set out.”
The Bundesbank’s Weidmann has again spoken out against the OMT plan and Halpenny believes that it may well be in the conditions set under OMT that Germany is having an influence in order to ensure its limited use. He finishes by looking at the BOE minutes from the 6th August meeting which will be released this morning and show the voting pattern within the MPC which may offer some indication as future actions.