Under Rajoy, seen here in May, the Spanish government had to concede control of its banks in order to secure relief from Eurozone relief mechanisms. (Courtesy Creative Commons/ European People's Party)
Despite Prime Minister Mariano Rajoy's claim of "victory"
following Spain's acceptance of $125 billion
in aid for its banks on Saturday, many in the financial sector are worried a broader, larger bailout will be required to rescue the government itself. Spain's aid from Eurozone bailout vehicles comes with strings attached. Not only will the Spanish government be on the hook to repay the massive loan, it must hand over control of its banks to international and European authorities, who may require the institutions to shed assets or drop unfavorable lenders. On the upside, the bailout allowed Spain to cobble together funds at a lower rate than otherwise possible. But because the funds will be provided by the European Stability Mechanism, the ESM must be repaid before any other holders of Spanish debt. This makes financing already-risky Spanish debt even less attractive, effectively making it more difficult for Spain to secure financing.
Read the entire story at the Wall Street Journal.
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