As part of the reuters story out about 45 min ago about parties supportive of Merkel in Germany proposing allowing the ESM to inject money directly into troubled banks instead of thru individual countries first, there also seemed to have been a discussion on whether the ESM bond purchases would be pari passu to other bond holders instead of senior to them. This important distinction will determine whether non official (not ECB, ESM, etc…) bondholders will be scared off or not if the ESM takes the place of the ECB securities market purchase program and buys bonds in the secondary market. The article did say though that Merkel and Schaeuble were not in favor of the move and the discussion thus goes round and round as German will not write any blank checks. Watch also for discussions on whether the ESM will conduct any primary market purchases which would be direct financing of country budgets, another German no no.
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