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Spain is Bailed Out, and What That Means for Energy

by Dr. Kent Moors | published June 11th, 2012

Over the weekend, Madrid finally conveyed just how much it needs from eurozone officials in terms of a bailout.

Of course, the final amount will not be known until a third-party assessment of the Spanish banking system is completed.

But we can estimate that it will be at least 100 billion euros ($125 billion USD), and possibly as much as 150 billion euros. Spain will be the fourth country to receive European Union support – lining up after Greece, Portugal, and Ireland – and push the combined bailout totals to more than 500 billion euros.

It is now obvious that the Spanish banking system cannot survive much longer on its own. Interbank fund availability has ceased, and the nation would soon effectively cut all credit availability altogether.

According to continental media reports, based on the ever-present “unnamed sources close to the decision,” it was a contentious round of negotiations. Seventeen finance ministers on a single conference call Saturday negotiated the agreement.

This reminds me of my undergraduate days and the creative ways we had to save money in Europe. Then, the old analog telephone systems would allow many people to call the same number, be placed on the same “busy signal,” and then talk to each other for free. The problem was, the more callers, the more difficult is was to say or hear anything.

And none of us was a finance minister or had a central government pressuring us from above.

In the current European example of cellular conferencing, there two major stumbling blocks appeared. One was a continuing German reluctance to commit additional funding and a stronger opposition to EU-supported Eurobonds. The other was the position of the International Monetary Fund (IMF) in all of this.

As it turns out, the IMF will have a secondary role…