Spanish banks are looking for an infusion of about €100 billion. That may not seem like an extraordinary amount in the U.S., but it is in Europe. The decision will be made this week, but the European Central Bank (ECB) is signaling a willingness to keep the liquidity flowing. They announced a cut in the rating thresholds needed to qualify for help. They also amended the eligibility requirements for some asset-backed securities. Basically, they will accept loan packages that carry a lower credit rating than was previously deemed acceptable. Selling these loans to the ECB will give the Spanish Banks cash now, and the ECB hopes to make a profit on the loans as they mature.
The ECB is doing this despite vocal opposition from the Bundesbank. The Germans remain critical of the plan and insist that stricter austerity and compliance mechanisms be evident before the money flows. I understand their concern, but it does not seem to me that the Spanish have abandoned austerity; they just seem to be taking a slower path than Germany (and others) might like. Nevertheless, they are heading in the right direction and a little patience seems warranted.
This is part of a reasoned, though expensive, way out of the European crisis. My hope is that ideological differences will not cause a gridlock that leads to systemic failure. I applaud their creativity and hope they have the tenacity to match it in the face of political opposition.