When the transfer takes place to the European Stability Mechanism the new loans will not be given seniority, giving extra security to Spain’s creditors.
That seems to be the crux of the matter.
The new bonds do not subordinate the old, they rank pari passu. That means the ESM is on the hook for them.
What\’s going to be interesting therefore is the rate at which the ESM can borrow in the markets. For, at least I think I\’m right here, the ESM is being funded by jointly guaranteed bonds. Not by the ECB printing money, but by borrowing.
At which point, the greatly interesting thing becomes: at what rate can the ESM borrow?