Euro emergency fund bank deal not all it's cracked up to be

At last week's summit of EU finance ministers, it was thought that a plan had been agreed to that allowed the EU's emergency fund to loan directly to banks, rather than having the cash flow through the government, thus adding to the sovereign debt of the member. Stocks took off after that agreement, and bond yeilds dropped for Italy and Spain. But it turns out what was thought to be the parameters of the deal were not quite what they appeared to be. Wall Street Journal: Euro-zone countries would still have to guarantee the loans their banks receive from the region's permanent bailout fund, the European Stability Mechanism, even if it directly recapitalizes them, a senior European Union official with direct knowledge of the situation said. The remarks Friday cast doubt on what was seen as a breakthrough at a euro-zone leaders' meeting last week, where it was decided that once a central euro-zone bank supervisor was in place, the ESM would be able to directly recapitalize...(Read Full Post)