The future of Spain’s banking system is being debated by German politicians this afternoon.
Last month, 26 members of Angela Merkel’s Bavarian Christian Social Union coalition voted against the proposed creation of the European Stability Mechanism, to bail out banks in struggling economies such as Spain.
Reuters was earlier today predicting that Merkel would win this afternoon’s vote on the bank rescue, quoting coalition member Stefan Mueller, as saying “I cannot rule out the possibility that some colleagues will not back the measures but my impression is that the numbers [not backing measures] have not increased.”
He said last month’s rebellion was over the question of liability which he believed had now been “cleared up”.
The German deputy finance minister Steffen Kampeter, reiterated this morning that the Spanish state remains liable for the bail out money.
This refusal to let Madrid ‘off the hook’ as far as sovereign liability is concerned saw Spain’s borrowing costs jump to record highs at auction today.
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