Guest post. Translated from the French by Tim Gupwell

The European Finance Ministers managed during the course of the night to finalize a minimal agreement, which needs, as usual, to be examined in detail due to its grey areas. They put together a set of nominations to the ECB and the ESM based upon the provisional re-appointment of Jean-Claude Juncker at its head, in the absence of any other solution. Then they reached a “tentative agreement” (another way of saying a broad outline) with regard to the particular case of Spain which needs to be wrapped up for adoption on the 20th July.

An additional year will be given to Spain to reduce its deficit and get back on track, which confirms that things are in the process of getting out of hand, and which depends on the new austerity measures that Mariano Rajoy is going to announce this week. These are said to include an increase in VAT, reduced social security payments, reductions in unemployment benefits and a revision of the methods used to calculate retirement benefits. A preview of the program has already been presented by the Spanish Finance Minister, Luis de Guindos.

An installment of 30 billion Euros has been drawn from the 100 billion package that had been previously announced so that the Financial Stability Fund can help out the banks on a case by case basis. The only conditions attached – which do however need to be laid out in more detail – are to be restricted to the financial sector, since, without ever having had to be formally requested, budgetary cuts have already been carried out by the Government; a nice little concession.

These first payments, which are expected to be made before the end of the month, will be transferred via the Government and recorded in its deficit, which puts into proper perspective the extra year granted to reduce the deficit ….. A smoke screen obscures the question of whether state guarantees will or will not be needed for future ESM interventions. While this condition cannot be formally applied to the set of measures being drawn up, it is clear that it will be the state itself which will reimburse the aid, which basically amounts to the same thing. This latter, having refused the creation of a bad bank to house the depreciated assets of those banks which are benefitting from European aid, are likely to set up a structure which has exactly the same goal, without the name, and which effectively obliges the state to bear the burden of any further losses incurred.

After all of these measures, the link between public and private debt is just as tightly-knit as before – quite the contrary of what had been hoped for!

The other unresolved issues, Greece, Cyprus, and the design of the banking Union, will have to wait. Either until the next meeting on the 20th July, which already has a saturated agenda, either – with regard to the last point – until the month of September, on the condition that the European Commission can supply for this date a detailed report…. The subject is described as very complicated by Wolfgang Schäuble, which is normally a pretext for putting something on hold.

And what about the fate of Italy in all this, where the situation continues to rapidly deteriorate? This particular case is being kept aside for new improvisations at some future date.