The “men in black” coming to Spain after bank rescue

For as much as Prime Minister Mariano Rajoy tried to present the European “loan” to sort out Spain’s ailing banking sector as a triumph, the “men in black” -- as Finance Minister Cristóbal Montoro described them last week -- will be coming to Spain after all.

European Commission sources on Sunday described Rajoy’s presentation of what is likely to be a 100-billion-euro bailout to clean up Spain’s banks as a “domestic political” maneuver, and insisted that the loan will be “strictly linked to fulfilling the European Stability and Growth Pact, no matter what the government says.”

Economy Minister Luis de Guindos had said over the weekend that there was “no conditionality” on the new “credit line” being prepared by Brussels.

But as the spokesman for the European commissioner for economic and monetary affairs, Amadeu Altafaj, on Monday pointed out, the increase in Spain’s indebtedness will have implications for its commitments to reining its public deficit and bringing it back within the ceiling of three percent of GDP by 2014. “Every euro that goes to debt that is growing is a euro that does not go to productive spending,” the spokesman said.

Altafaj told Spanish state broadcaster RTVE that the interest rate on the loan is likely to be between three and four percent.

The point that asking for the loan implies a certain loss of sovereignty for Spain was also made clear by German Finance Minister Wolfgang Schäuble, who said the troika of the European Commission, the European Central Bank and the IMF, the “men in black” referred to by Montoro, will oversee the restructuring of Spain’s banks. “There will be a troika,” Schäuble said in remarks to German state broadcaster Deutschlandfunk. “They will exercise close control of the program to ensure it is complied with.”

In more graphic terms, the EU commissioner for competition, Spaniard Joaquín Almunia, said “of course there will be conditions” imposed in exchange for the loan. “Whoever gives money doesn’t do so for free,” he added.

But the clearest indication that the bailout is, as Alfredo Pérez Rubalcaba, the leader of the main opposition Socialist Party said not a “present from the Three Kings” came from the markets. After an initial decline of some 30 basis points in Spain’s risk premium, it shot back up again to close at 520 basis points. The blue-chip Ibex 35 index also saw sharp early gains of about six percent evaporate as it closed down 0.54 percent.