The private sector will not suffer losses another time due to bailouts. The proposal that German chancellor Angela Merkel and French president Nicolas Sarkozy have put together will have an immediate effect on the Spanish banking sector that will end up skirting the impact of the initial devaluation predicted for sovereign debt.
According to data collected by elEconomista at the end of October, the largest 5 banks in Spain will foot the bill for some 4.83 billion euros. The figure will dissolve quickly after Merkel and Sarkozy finalize their agreement.
Even though Elena Salgado estimated that the sovereign debt losses would end up around 2% of bank balances, the Merkozy agreement will free them from being subject to penalties for ties to the market.
The agreement will also benefit the rest of the big European banks, particularly those in France and German.
In the case of the leading lenders, only BNP Paribas and Credit Agricole will avoid the brunt of the negative impact, which was originally predicted to be 6.24 billion euros. And in Germany, Duetsche and Commerzbank could be impacted by 4.35 billion euros.
The success of Merkel and Sarkozy?s agreement will ultimately depend on the ability of the banks to provision for defaults on sovereign debt totaling nearly 22 billion euros.
