Why Spain Might Not Be Forced Into An ESM Program In Q1 After All - Barclays

Quote of the day:

"Even if Spain does not quickly ask for ESM assistance, we doubt this will unsettle the markets much. To a large extent, the reduced impact of the euro crisis and the current equilibrium are due to the ECB curtailing the tail risks of the crisis (with the 3y LTROs first and then the OMT program). Meanwhile, other factors have played, and will continue to play, a role in the evolution of the eurozone crisis:

• The roots of and potential solutions to the crisis, as well as the modus operandi of European authorities (involving seemingly endless back-and-forth negotiations) are better understood now than before, and markets have become increasingly de-sensitised to headlines.

• There has been substantial progress in addressing some of the imbalances that have dogged the periphery.

• Already, a significant amount of  forced liquidations in peripheral assets has occurred. 

• While a large proportion of those who have liquidated may not come back to these markets any time soon (because of rating or credit limitations, the investor bases have semipermanently shrunk), the selling pressure has abated, if not reversed. 

All these factors also help to explain why Spain might not be forced into an ESM program in Q1 of this year after all."

Laurent Fransolet and Cagdas Aksu - Barclays Capital 

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