Austria’s Finance Minister Maria Fekter said she was reluctant to discuss imposing losses on senior bondholders for Spanish banks because it risked rattling financial markets.
“Regarding a private-sector involvement, I am basically very hesitant as we could massively irritate the market with this,” Fekter told reporters in Vienna today, saying it was too early to comment on conditionality for Spain’s bailout.
The cost of insuring against default on senior bank bonds rose yesterday after the European Central Bank was said to drop its opposition to holders of the securities taking losses in bailouts. The ECB backed imposing losses on senior bondholders of the most troubled Spanish banks at a July 9 meeting, a position rejected by euro-area finance ministers, according to two officials with knowledge of the ECB’s thinking who spoke on condition of anonymity as the talks were confidential.
Euro-area finance ministers plan to put the finishing touches on Spain’s bailout package on July 20.
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