Markets may have been calmed by the announcement of the EU’s bailout plans last weekend, but the proposal to raise up to €440 billion of additional funding through the capital markets has led to a flurry of activity and speculation among EC officials, sovereign borrowers, rating agencies and investment bankers.
Details on how the money will be raised, when and by what entity are remarkably scarce.
“We really have no idea what is going on,” says the head of borrowing at one large European SSA.
Among the known unknowns surrounding the plan are: where the special purpose vehicle that issues bonds will be incorporated; what the SPV’s rating will be; who will be in charge of the borrowing programme and manage its liquidity; whether the SPV will issue in advance or on an ad-hoc basis, as and when funding is needed; and whether any issuance will be guaranteed jointly and severally by all EU nations, or each eurozone country will take a pro-rata share of the guarantees.
Euro-area ministers are set to meet on Friday this week to try to put more meat on the bones of the plan, which envisages buying distressed bonds of EU countries threatened by default.