Wasn’t the whole point of the accord forged at the EU summit in June to break the nexus between sovereign debt and banks.
Last night’s statement from the finance ministers of Germany, the Netherlands and Finland that “legacy assets” should be under the responsibility of national authorities put that connection back in focus. Europe will break the banking sovereign debt nexus someday, just not before the ESM is up and running, it would appear from these comments. That means Spain’s sovereign debt asset to rise at it retains the bad assets held by domestic banks.
That’s largely why Spanish yields have surged 25 bp this morning to 6.02%.