"In order to break the vicious circle between banks and sovereigns, technical discussions on the future FSM direct bank recapitalisation instrument will also start in September so that ESM could, following a regular decision, have the possibility to recapitalise banks directly once an effective single supervisory mechanism is established."
Such concluded the Europegroup of Ministers of Finance in the night of 9/10 July, in execution of the mandate given to them in the Euro-area Summit Declaration of 28 June 2012. Text of the Declaration is attached.
Comments on the agreement reflect the confusion surrounding the text of the Declaration and the outcome of the Eurogroup nine hour long meeting. According to some of them, this development of the ESM is what the struggling states need. Others call it a descent into farce.
Still, the expansion of the ESM, paving the way for the bailout mechanism to purchase government bonds in the future, shall have to wait for the outcome of technical discussions not to begin before September. Is that what Italy and Spain asked for?