Mañana works both ways. Spain has procrastinated over calling for a sovereign bailout. But investors are learning that the real meaning of mañana – especially with regard to the bank rescue Spain needs – is not so much tomorrow as some time in the future. How frustrating for Spain that full implementation of EU leaders' agreement to create a single banking supervisor under the aegis of the European Central Bank – a key precondition of a direct bailout of Spanish banks – could take a year. For now, any amount Madrid borrows for the required €60-billion ($77.7-billion) capital injection will add to its sovereign debt pile. Still, last week's agreement marks progress – even if Germany is resisting a decision on when the €500-billion European Stability Mechanism cash can be drawn down.
But even if the legal framework is in place by year-end, as European Council president Herman Van Rompuy says, much more will have to be agreed before the euro zone's bank-sovereign loop can be broken. The initial framework might have been enough for Spain to receive its money but Berlin insists that the supervisor has to be "effective" before any ESM payment. Achieving that could easily take a year, given the German election along the way. But Berlin is not the only obstacle. Supervisors need rules. But the EU has yet to settle its iteration of Basel III reforms, CRD IV, which the U.K. is resisting. Non-euro zone EU members have to decide whether their banks operate inside the ECB supervisory tent – or risk a two-speed market outside. And single bank resolution and deposit guarantee schemes will also be needed. Above all, the single supervisor must be accountable to all EU member nations.
While investors should welcome EU steps to harmonise supervision and limit the scope for national regulatory forbearance, they are unlikely to tolerate for too much longer EU policy makers' mañana attitude to Spain, or vice versa.