Will Merkel grant ‘austerity model’ Ireland retroactive bank recap mutualisation?

A key sticking point in the European policy debates over the banking sector concerns bank recapitalisation. As one would expect, the countries in crisis that have experienced a property bust like Spain and Ireland, would like to strip away some of the loss socialisation that is taking place as government takes on the debts of the financial sector. Germany has not allowed this to occur.

In fact, Germany completely backtracked on the June deal to bailout Spanish banks. Initially, the talk was of a EuroTARP which severed the link between sovereign and financial sector distress. But, as Merkel began to face heavy criticism at home for doing this deal, she walked back this talk and forced Spanish PM Rajoy into a humiliating defeat that would narrow Spain's options down the line. Immediately ...


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