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The EU shoots for soft bailout

Olli Rehn, European Commissioner for Economic and Monetary Affairs and the Euro and vice-president of the EC, and Benoit Coeuré from the European Central Bank (ECB) executive committee agreed on Friday on a plan to provide Spain with a line of credit through the European Stability Mechanism.

The ECB will take action after the signing of an agreement outlining the conditions of this new bailout strategy that Spain would use for the first time. The EU, which ceded to pressures from Germany, is also ready to go forward with the plan.

Germany prefers a soft bailout because it would create fewer problems for Merkel in her re-election campaign. At the same time, the strategy will be less advantageous for the Spanish government even though it would have the same effect on public opinion.

Now it is up to Rajoy to decide what bailout package he wants to adopt before the risk premium shoots up again.

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