Spain hasn’t fully taken care of its struggling banking system, but a potential solution is already eyed by Ireland, who got a bailout (austerity included) due to its banks. Ireland, which is marked as a potential victim from the Greek exit of the euro, could demand changes to a bigger domino: Spain. Spain and Ireland followed almost the same path Ireland and Spain have a similar general story with 8 similarities. Both partied on the low interest rates of the ECB in the middle of the previous decade. Both had a boom in real estate, that was followed by a bust. Both have problematic banking systems, that aren’t the world’s most transparent ones when coming to acknowledge losses. Ireland took over its banks, nationalized them and found itself with huge debt. The EU and the IMF “bailed out” Ireland, together with some help from the severe austerity measures imposed on the Irish people. Many in Ireland already want to “bail out of the bailout“, as EU funds are transferred to Ireland, which transfers them to banks, which transfers them to European banks. Three Options for Spain Going Irish: Spain didn’t go fully “Irish”. Spain has nationalized some banks, and this puts pressure on the sovereign. Spain’s bond yields are around 6.20%, with spreads to German bunds close to 5%. Going Icelandic: Another option, that Spanish demonstrators call for, is the Icelandic option: letting the banks fall. But this isn’t on the cards. New -Letting the EU Save the Banks: The permanent European bailout mechanism, ESM is due to get into full gear during the summer. This “firewall” can’t borrow to banks at the moments, only sovereigns. Spain wants it to borrow to banks, as saying – you want to save them – Do It Yourself. The ESM option receives support also from the IMF: Christine Lagarde, the managing director, said it loud and clear. Ireland’s finance minister Michael Noonan now eyes this option as well, saying the Ireland will watch with “great interest” the developments on Spanish banks. Ireland would certainly enjoy some debt reduction in the form of a direct EU bailout for banks, not involving the Irish sovereign and providing some relief from austerity. Austerity Backlash This adds to the austerity backlash that the German led policy is suffering from – a backlash led by the new French president FranÃ§ios Hollande, and also seen in the rising popularity of the anti – bailout Greek parties towards a second round of elections. If the Irish bailout program comes into question, it will add more pressure on the pressured euro. For more on the common currency, see the euro usd forecast. Yohay Elam Yohay Elam Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts. Yohay's Google Profile View All Post By Yohay Elam Forex News Today: Daily Trading News share Read Next USD/CAD Climbs to 3 Month High on Global Greek Contagion Yohay Elam 10 years Spain hasn't fully taken care of its struggling banking system, but a potential solution is already eyed by Ireland, who got a bailout (austerity included) due to its banks. Ireland, which is marked as a potential victim from the Greek exit of the euro, could demand changes to a bigger domino: Spain. Spain and Ireland followed almost the same path Ireland and Spain have a similar general story with 8 similarities. Both partied on the low interest rates of the ECB in the middle of the previous decade. Both had a boom in real estate, that was followed by a… Top Forex Brokers All Brokers Sponsored Brokers Broker Benefits Min Deposit Score Visit Broker 1 $100T&Cs Apply 0% Commission and No stamp DutyRegulated by US,UK & International StockCopy Successfull Traders 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.2 T&Cs Apply 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.3 Recommended Broker $100T&Cs Apply No deposit or withdrawal feesTrade major forex pairs such as EUR/USD with leverage up to 30:1 and tight spreads of 0.9 pips Low $100 minimum deposit to open a trading account 9 Visit Site FreeBets ReviewsYour capital is at risk.4 T&Cs Apply Visit Site FreeBets ReviewsYour capital is at risk.5 Recommended Broker $0T&Cs Apply Trade gold, silver, and platinum directly against major currenciesUp to 1:500 leverage for forex trading24/5 customer service by phone and email 9 Visit Site FreeBets ReviewsYour capital is at risk.