Spain taps the ECB for funds and EU advances to Nationhood

Apologies for this late composition, I was watching the Open Golf from St Andrews most of today.

The DT reports Spain calling on the ECB for a trifling 126.3 bn € last month, a 45% jump on the May figure. Nobody wants to lend to Spain so the ECB fulfils its central bank role of lender of last resort. It cannot go on indefinitely hence the urgency to get the Euro banks signed off with a clean bill of health after the non stressful stress tests. I and the markets shall be interested to see who fails these tests!

Reuters reports, 'The test scenario will assume a 3 percentage point deviation of the EU's gross domestic product from the EC's forecasts over a two-year horizon. It will also assume a "sovereign risk shock" in which some government bond prices would be marked down further from the depressed levels of early May. The size of such haircuts has not been officially announced and conflicting reports about them suggest national regulators may not be applying them consistently. A banking source told Reuters on Tuesday that the haircut on Greek sovereign bonds was 23 percent off "current market prices'.

I am not clear how the GDP part of the tests works. It was not in any stress test I ever saw. What about falls in equities or property? Far more relevant I would have thought.

Reuters also reports, "The outcome of the tests will be published on July 23, with results for some subsidiaries of large banking groups coming about two weeks later.
It is not clear where the results will be published and whether they will be released in one lot or piecemeal by national regulators."

All very vague and unlikely to satisfy the markets. Who fixes the failing banks by lending to them. Only the Gertmans have a national fund to do this. The ECB better keep printing the Euros.

Meanwhile on the political front the EU goes from strength to strength and has been accorded nation status and a seat at the UN.

Mr Farage said: "This is the thin end of the wedge. How long before David Cameron concedes our seat at the UN Security Council?" 

For the record and Mr Septic Tank I agree with Mr Farage on this one but if he really believes his statement why did he encourage via Lord Pearson UKIPers to vote for Tory MPs?