The recent €100 billion bailout of Spain’s banks will leave Europe’s financial rescue fund without enough money to bail out another big economy, an international banking group warned on Sunday.
“[A]fter committing €100 billion for the Spanish saving banks, the Eurogroup’s rescue funds, as currently authorized and structured, will have sufficient funds to help a small economy like Cyprus, but hardly enough to deal with any large country,” the Institute of International Finance wrote in report to its members…
Euro area policymakers have made “conflicting statements” about the size of their so-called financial firewall, according to the IIF.
The estimates have ranged from €500 billion to €800 billion. But the group said that “in reality” the European Stability Mechanism will have only €16 billion in “paid-in capital” in the first three months after it launches in July.