EU bubble waiting to burst!

So the inevitable has happened. Spanish banks need a bailout. This has sent shock waves through the entire EU as Spanish Treasury Minister Cristobal Montoro admitted that Spain ‘does not have the door to the markets open’.

In layman terms it means that the country, like Ireland and Greece, cannot borrow money on the bond markets due to the cost of the current rates.

Spain is a casualty of the ‘property bubble’ which like Ireland has finally caught up on Madrid’s banks.

The country has to recapitalise its troubled banks but right now it can’t without additional finance. And here’s the dilemma! Without access to the markets, Spain has to rely on the EU to bail it out.

Although it did manage to raise some capital in the market late this week Spain’s status was reduced to one point below ‘Junk’ level!

Intense negotiations were going on this week with German and EU policymakers about how to recapitalise Madrid’s banks. An independent audit is currently in progress so no decision will be taken before that report is complete later this month.

Germany is alarmed, and one Irish TD, Labour’s Michael McNamara, is quoted as saying: ’Ireland has shouldered its share of the burden and it is now time for Germany to do the same’.

Many here now think that Germany has to step in and that if it does, some financial concessions to Ireland’s €64bn bailout as well as delivering on the austerity package have to be considered. If this does not happen then Ireland needs to think long and hard about leaving the Euro.

Germany is sticking to its guns. So has the ‘bailout’ finally become the ‘sell out’ which will effectively seal the fate of the once ‘mighty’ Euro?

One country seems to be dominating the ‘poker’ table right now – Germany. Although countries such as Ireland, Greece, Italy and Spain have been caught by their respective ‘greed’ and banking indiscipline in the past, Ireland certainly has shown its absolute willingness to shoulder the pain and take the necessary steps to stabilise its economy and the Euro.

Because of this Germany needs to give us some slack. Most commentators doubt this will happen.