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Sign up for our free newsletter to receive weekly news from BONDWorld For professional investors and advisers only<\/strong><\/p>\n However, it is early days yet to say whether the euro area has finally stepped out along the path towards a more active management of the crisis.<\/p>\n The ongoing European Council seems capable of taking decisions aimed at also tackling the crisis currently under way, contrary to generally pessimistic expectations. Let\u2019s round up the situation so far, although it should be said that information is as yet incomplete and the picture is subject to change:<\/p>\n 1. The President of the Union confirmed that the rules for the activation of the EFSF and ESM will be changed, in order to allow their use \u201cto reassure markets and get again some stability around some of the sovereign bonds of our member states\u201d. Details will be defined at the Eurogroup meeting of 9 July. Mention was made of a \u201cflexible\u201d and \u201cefficient\u201d use of the funds: the latter expression could imply a preference for purchases on the primary market. Ex-post conditionality at least should be eliminated, adopting the terms of the existing stability pact, and the procedures for excessive deficit, at least for countries that are already meeting these obligations. The mechanism should be based on purchases of the debt of countries applying for activation of the programme by signing the MoU committing them to respect conditions. No indications are provided on other important aspects, such as whether interventions will be on the primary or secondary markets, if mechanisms will be put in place to afford the ESM greater financial leverage (such as access to Eurosystem refinancing), and\/or whether paid-in capital will be stepped up to increase fire power. Also, statements diverge with regards to monitorino arrangements.<\/p>\n 2. European funds may directly recapitalise banks, with no need for funds to first be inserted in the balance sheets of states, once the ECB will have obtained supervisory powers over banks. Initially, however, the mechanism will be the one already in place, which implies an increase in the public debt of the beneficiary member state. The innovation could have a strong impact also on the other countries already assisted by European programmes, such as Ireland and Portugal.<\/p>\n 3. The ESM will not require status as senior lender over other creditors, at least for what concerns the recapitalisation plan for Spanish banks, that will be activated by the EFSF. This is the first acknowledgement that the request for seniority may compromise the chances of support programmes proving successful, although enthusiasm is cooled by the fact that it will not necessarily be applied to other programmes, including those aimed at supporting government bond markets.<\/p>\n 4. An agreement has been reached on the platform for greater integration. In particular, on the issue of banking union the European Commission will promptly present its proposal for the establishment of a European supervisory authority, probably as part of the ECB. The first report on integration is due in October 2012, with a view to implementing the proposal on EU-wide banking supervision by the end of the year.<\/p>\n It is early days yet to say whether the euro area has finally stepped out along the path towards a more active management of the crisis. <\/strong>Several sources claim that Italy and Spain threatened to veto the entire package of measures if Germany, Holland and Finland did not abandon their attempt to restrict discussion to governance reform measures and to the growth package, delaying once again the definition of immediate support measures. This is a signal that, unfortunately, today\u2019s news cannot be interpreted as the beginning of a virtuous process of stabilisation of the euro area markets.<\/p>\n <\/p>\n Appendix Analyst Certification<\/strong> Important Disclosures<\/strong> Source: BONDWorld – Intesa Sanpaolo \u2013 Research Department<\/p>\n","protected":false},"excerpt":{"rendered":" Initial news from the European Council outline the prospect of more important decisions being taken than expected on the eve of the meeting: removal of the ESM\u2019s seniority lender status as pertains to the recapitalisation of Spanish banks, swift implementation of European banking supervision, direct recapitalisation of banks, possibility to resort to the EFSF\/ESM to […]<\/p>\n","protected":false},"author":2,"featured_media":3455,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1059","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1059","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1059"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1059\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3455"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1059"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1059"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1059"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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