The Euro SPV

The irreplaceable Wolfgang Munchau wrote today that he had never seen European policymakers as terrified as they are right now. The grip of the eurocrisis is fast becoming a stranglehold.

The most recent "news" regarding what those policymakers are planning comes from Steve Liesman of CNBC. I don't have the link but I do have the CNBC press release:

WHEN: TODAY, MONDAY, SEPTEMBER 26TH

WHERE: CNBC’S “STREET SIGNS”

Following is the unofficial transcript of breaking news from CNBC’s Steve Liesman. All references must be sourced to CNBC.


LIESMAN: MANDY, THANKS VERY MUCH. CNBC HAS LEARNED FROM A TOP EUROPEAN FINANCIAL OFFICIAL ABOUT A DETAILED PLAN THAT IS CURRENTLY IN THE WORKS ON LEVERING THE MONEY FROM THE EUROPEAN FINANCIAL STABILITY FACILITY. THE PLAN WOULD USE AS WE UNDERSTAND IT SOME OF THE EFS MONEY TO SHORE UP BANK CAPITAL VERY SIMILAR TO A TARP. NOW THE VERY NEW PART THAT WE ARE HEARING IS THAT THE PLAN WOULD ALSO USE SOME OF THIS MONEY AS SEED MONEY FOR A EUROPEAN INVESTMENT BANK THE EIB IS A BANK THAT IS OWNED BY THE MEMBER EUROPEAN GOVERNMENTS THAT DOES RECONSTRUCTION PROJECTS. NOW UNDER THE PLAN THE EIB WOULD FORM A SPECIAL PURPOSE VEHICLE AN SPV THIS WOULD ISSUE BONDS AND PURCHASE SOVEREIGN DEBT WITH THE BONDS IT USED SO IT WOULD TAKE THE CAPITAL FROM THE EFSF LEVER IT UP THESE BONDS COULD ALSO BE USED AS COLATERAL AT THE ECB. OUR UNDERSTANDING IS THE PLANS FOR LEVERING THE EFSF ALREADY WELL ADVANCED. HERE’S THE PLAN LET ME GO THROUGH IT ONE MORE TIME SOME EFSF MONEY WOULD BE USED TO SHORE UP BANK CAPITAL, ALSO SOME OF THAT MONEY WOULD BE USED TO GO TO THE EIB THE EUROPEAN INVESTMENT BANK THE EIB WOULD FORM A SPECIAL PURPOSE VEHICLE THIS SPV WOULD ISSUE BONDS THOSE BONDS COULD BE USED TO PURCHASE EUROPEAN SOVEREIGN DEBT AND THE BONDS ISSUED BY THE EIB COULD BE USED AS COLLATERAL AT THE ECB. OUR UNDERSTANDING IS AN ANNOUNCEMENT OF THESE PLANS CONFIDENTIAL KEPT UNDER WRAPS IS AWAITING APPROVAL OF THE EFSF BY THE EURO GOVERNMENTS GERMANY HAS A MAJOR VOTE ON THIS SEPTEMBER 29TH I BELIEVE IN THE LOWER HOUSE OF PARLIAMENT SO MANDY THOSE ARE A FEW DETAILS OF THIS PLAN WHICH WE UNDERSTAND IS BEING KEPT CONFIDENTIAL AS THE WAIT APPROVAL FROM THE EFSF.


I don't know about you, but they lost me at "the EIB" becomes an "SPV."