Weekly Eurozone Watch: Conditionality

Key Data Points
German 10-year bund 3 bps higher;
France 10-year 14 bps tighter to the Bund;
Italy 42 bps wider;
Spain 8 bps wider;
Portugal 36 tighter;
Ireland 20 bps tighter;
Greece 144 bps tighter;
Large Eurozone banks up 3-7 percent;
Euro$ up 0.10 percent;


Volatile week.  Spreads spiked and equities sold hard after the ECB disappointed Thursday then rebounded Friday when Spain’s Rajoy made noises the country may officially ask for help.   The key to Europe now are the political constraints on conditionality, i.e, more austerity,  and German opposition to ECB monetization of “bad” sovereign debt.   Watch Italy and Monti’s political support.

Here’s the WSJ on Rajoy’s comments,

At the Spanish prime minister’s traditional mid-year press conference, Mr. Rajoy declined to say if Spain plans to ask for support from the European Financial Stability Facility, the euro zone’s temporary rescue fund, saying he wants to wait for more information on the ECB’s plans. “Then, depending on the circumstances, we will make one decision or another,” Mr. Rajoy said. “I have not made a decision,” he added.

Stay tuned.

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