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Oct 11, 2012, 08.43 AM IST
Michael Michaelides of RBS explains to CNBC-TV18 that the increased likelihood of Spain asking for ECB aid, Greece being allowed the next tranche of aid and the US polls will occur simultaneously by the first week of November.
Michael Michaelides of RBS explains to CNBC-TV18 that the increased likelihood of Spain asking for ECB aid, Greece being allowed the next tranche of aid and the US polls will occur simultaneously by the first week of November. Michaelides adds that the European markets have already priced-in the intervention of Draghi to assist the Spanish bond market.
Below is an edited transcript of the analysis on CNBC-TV18.
Q: Are you worried about increasing reports of trouble brewing in Greece, the IMF adopting a very tough stance and its financial stability report revealing a few rather worrying indicators? What is your view on Spain? Do you see the country asking for bailout in the near-term?
A: I think on the Greece situation, the interpretation of Angela Merkel's visit is actually positive. We view this as an indication of political support from some of the core countries that the next bailout tranche to Greece will most likely be paid.
With regards to Spain, in terms of bailout, the critical point is that it needs to ask for the bailout via the Outright Monetary Transactions (OMT) or ECB bond-buying. We do not think it will come before the crucial EU leader summit on October 18-19 and also in terms of the consideration that Spain has regional elections on October 18 and then the crucial Catalan elections on November 25.
I think most likely we will see the request for help being forced by the market will be forthcoming from Madrid after their regional elections on October 18. So there will probably be some political indication at the end of the month and the terms ending voting in other parliaments of Europe will take place in November with regards to the Spanish request to help.
Q: Are you expecting Spain to ask for a bailout after the regional elections?
A: Definitely not before the EU leaders' summit and probably after that it's increasingly likely they will ask for help. One of the main obstacles for them to ask for help is the growing opposition from Berlin on the request for further help after having approved an aid programme for Spanish banks.
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