Reuters – Exclusive : Euro Zone Considering Bond Insurance For Spain – Sources – 4 October 2012

(Lucas: Every last scam or scheme that is not yet sold to us is tried out before the inevitable will happen. Pull the plug.)

By Julien Toyer and Paul Taylor

MADRID/PARIS | Thu Oct 4, 2012 9:40am EDT

(Reuters) – The euro zone is considering aiding Spain by providing insurance for investors who buy government bonds in a move designed to maintain Spanish access to capital markets and minimize the cost to European taxpayers, European sources said.

One senior European source said the plan could cost about 50 billion euros ($64.5 billion) for a year. It would enable Spain to cover its full funding needs and trigger potentially unlimited European Central bank buying of short-term Spanish bonds in the secondary market.

If the gamble succeeds, it would achieve two important aims. Spain would be rescued without draining Europe’s entire bailout fund and there would be no contagion to Italy.

Under the scheme, which officials say is under consideration in Madrid, Paris, Berlin and Rome, the euro zone’s new permanent rescue fund (ESM) would guarantee the first 20 to 30 percent of each new bond issued by Spain.

The sources spoke on condition of anonymity because they were not authorized to talk about the discussions.

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