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Spain wins restructuring of bank deal
By Peter Spiegel and Joshua Chaffin in Brussels

"Eurozone leaders agreed to radically restructure Spain’s €100bn bank recapitalisation plan, allowing EU bailout funds to eventually be injected directly into teetering Spanish financial institutions, meaning Madrid can sweep the burden of the bailouts off its sovereign books.

"Instead of the hodgepodge of 17 different bank supervisors, there will now only be one for all eurozone banks, a major step towards a so-called “banking union” that is arguably the most significant change to the single currency area since it was created." http://www.ft.com/cms/s/0/5513d3d4-c19f-....

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Spain, seniority, and survivor bias
Posted by Joseph Cotterill on Jun 28 23:51.

Update (0445am UK time) — Well, well, well… eurozone leaders did indeed promise not to subordinate Spanish bondholders at the summit, as we assumed they would below. Seniority was “renounced” in the case of Spain. http://ftalphaville.ft.com/blog/2012/06/....

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Brussels, 29 June 2012

EURO AREA SUMMIT STATEMENT

- 29 June 2012 –

• We affirm that it is imperative to break the vicious circle between banks and sovereigns. The
Commission will present Proposals on the basis of Article 127(6) for a single supervisory
mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency
by the end of 2012. When an effective single supervisory mechanism is established,
involving the ECB, for banks in the euro area the ESM could, following a regular decision,
have the possibility to recapitalize banks directly. This would rely on appropriate
conditionality, including compliance with state aid rules, which should be institution specific,
sector-specific or economy-wide and would be formalised in a Memorandum of
Understanding. The Eurogroup will examine the situation of the Irish financial sector with
the view of further improving the sustainability of the well-performing adjustment
programme. Similar cases will be treated equally.

• We urge the rapid conclusion of the Memorandum of Understanding attached to the
financial support to Spain for recapitalisation of its banking sector. We reaffirm that the
financial assistance will be provided by the EFSF until the ESM becomes available, and that
it will then be transferred to the ESM, without gaining seniority status.

• We affirm our strong commitment to do what is necessary to ensure the financial stability of
the euro area, in particular by using the existing EFSF/ESM instruments in a flexible and
efficient manner in order to stabilise markets for Member States respecting their Country
Specific Recommendations and their other commitments including their respective
timelines, under the European Semester, the Stability and Growth Pact and the
Macroeconomic Imbalances Procedure. These conditions should be reflected in a
Memorandum of Understanding. We welcome that the ECB has agreed to serve as an agent
to EFSF/ESM in conducting market operations in an effective and efficient manner.

• We task the Eurogroup to implement these decisions by 9 July 2012. http://www.consilium.europa.eu/uedocs/cm....

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On Thursday night, Italy and Spain plunged an EU summit into disarray by threatening to block “everything” unless Germany and other eurozone countries backed their demands for help.

Mario Monti, the Italian Prime Minister, celebrated the agreement, reached in the early hours of Friday, as a “very important deal for the future of the EU and the eurozone. The German people must work harder so that we don't have to”.