27th Oct 2021

EU monitors heading to Madrid, despite 'Men in Black' claims

  • Markets' euphoria about the Spanish bail-out lasted less than a day (Photo: guysie)

Spain's €100 billion bail-out will be accompanied by EU-IMF supervision of banking reforms, EU and German officials said on Monday (11 June) - contradicting Madrid's claims that no "men in black" will come to the country as they did to Greece, Ireland and Portugal.

"We will work with the European Central Bank, the European Banking Authority and the International Monetary Fund [IMF] on conditionality. But no new conditions on fiscal policy or on structural reforms are needed," economics commissioner Olli Rehn told MEPs in Strasbourg on Monday evening.

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Earlier that day, his spokesman said it was not important what the supervision is called - "troika ... men in black ... quartet" - but that Spain's banking reform will be under scrutiny in return for receiving the up to €100 billion loan from its eurozone partners.

Spanish Prime Minister Mariano Rajoy on Sunday claimed he had secured a no-strings-attached rescue from the eurozone. He said it had "nothing to do" with the procedures imposed on Greece, Ireland and Portugal.

One week ago, the Spanish finance minister used more colourful language, saying that no "men in black" will come to Madrid to supervise reforms, referring to a science fiction film of the same name about scary US agents.

German finance minister Wolfgang Schauble on Monday poured cold water on his claims.

"Of course there will be a troika," he said in an interview with Deutschlandfunk radio. The term "troika" has become the umbrella word for EU-IMF experts checking whether reforms are being implemented in bailed-out countries.

"But this only refers to the restructuring of the banking sector. That's the difference. While Portugal and Ireland and also Greece are under macro-economic adaptation programmes ... Spain does not need that," Schauble explained.

The other difference is that Spain's bail-out will be funded by the eurozone only. The Washington-based IMF will only provide "expertise" in monitoring the banking reforms.

Rehn said the bail-out will help "contain contagion to the rest of Europe and improve credit conditions hampering the Spanish economy."

But after a short-lived rally, markets on Monday dipped and the borrowing costs of Italy and Spain rose again, signalling that investors do not believe the Spanish rescue will work.

Meanwhile, fresh data in Rome shows the economy is worsening, with recession accelerating in the last three quarters.

"I do not want to speculate," Rehn said in Strasbourg when asked if Italy will be next in line for a bail-out.

Ireland and Greece

Disgruntled politicians in Ireland and Greece have called for a sweetening of their own bail-out terms after Spain secured what to them seems to be a better deal.

Both the Conservative and the radical-left Syriza party leader in Greece said the Spanish bail-out proved a better deal could be negotiated from Europe. Syriza has been campaigning on cancelling the bail-out altogether if it wins the upcoming general elections on Sunday.

"Many Irish people looking at the deal today will be asking themselves why is there one set of conditions for us and another for Spain," said Pearse Doherty, the finance spokesman of the opposition Sinn Fein party.

The Irish government responded that Madrid got "exactly the same" deal as Dublin two years ago, even though the details of the rescue - such as the final size of the loan and its interest rate - are yet to be determined.

Italy denies need for bail-out

Italy's Mario Monti has said his country does not need a bail-out, even though its borrowing costs have soared amid contagion from Spain.

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