Pressure mounts for euro ministers

Borrowing rates for Spain and Italy rose, with the Spanish 10-year rate surging back above the danger level of 7,0 percent, amid scepticism that the meeting would make much progress.
The first issue of business is what to do to help Spain’s stricken banks after a so-called “breakthrough” at the June 28-29 EU summit promised Spanish banks direct funding soon — but that is dependent on setting up a new EU bank regulator.

The summit agreed that the new regulator would supervise the banks overall, keeping them in line, and also make it easier for the bloc’s new bailout fund, the European Stability Mechanism, to help states in trouble.
After an initially euphoric response at the separation of bank debt from national debt, markets turned negative again yesterday.

They pushed Spanish long-term borrowing costs above 7,0 percent, the level which forced Greece, Ireland, Portugal into massive EU-IMF bailout deals.
Italy too was also under pressure as European stock markets opened weaker following losses in Asian trade earlier yesterday.
On Saturday, Spanish Prime Minister Mariano Rajoy announced that he would take additional steps soon to cut the public deficit and called for quick progress on the summit agreements.

“What will really determine their success is that they turn into concrete realities, in a supple, quick and effective way,” Rajoy said, adding: “Europe must fulfill the accords as swiftly as possible.”

French Finance Minister Pierre Moscovici said that yesterday’s meeting would “translate into action” the summit decisions but added that there would be another gathering “in July, on July 20 I think.”

Moscovici, who met Italian Prime Minister Mario Monti on Sunday, said “one has to go further” to help the Spanish banks and “move quickly” on tighter banking regulations to speed up bailouts to struggling lenders.

German Finance Minister Wolfgang Schaeuble, however, played down the prospects that Spain would get help for its banks anytime soon, insisting on the quid pro quo of tighter overall regulation first.

“Before direct aid is given to the banks, there must be a common banking supervisor,” El Pais quoted Schaeuble as saying. “But this body will not start functioning this year. That is not very realistic,” he added. — AFP.