Markets love bailouts, but the story behind today’s story paints a concerning picture. From the Wall Street Journal:
The European department of the International Monetary Fund has started discussing contingency plans for a rescue loan to Spain in the event that the country fails to find the funds needed to bail out its third-largest bank by assets, Bankia SA, people involved in the handling of the Spanish crisis said Thursday.
A major issue in any bailout of Spain, which could end up being bigger than those already agreed for Greece, Ireland and Portugal, would be the size of the contributions made by the IMF and the EU and where those funds would come from.
“A bailout loan could stretch the resources of both the IMF and the euro zone to breaking point and raise serious questions about the purpose of the euro,” another of the people said.
“Neither the IMF, nor the euro zone, can shoulder this bill with three other euro-zone bailouts in progress. The money is simply not there,” a second person said.
The full WSJ story is here.