Global stock markets may be cheering the bailout of Spain's banking system this morning, but there are so many unanswered questions and speculation about what's next that the euphoria is already fading, observers say. That's showing up in both bond and stock markets.
Spain asked the rest of Europe for a rescue of up to €100 billion for its banks on the weekend. But it's a short-term fix for the troubled euro-zone, if it can be deemed a fix at all, because it doesn't address the underlying problems in the monetary union. Nor, of course, did the previous bailouts of Greece, Ireland and Portugal.
Among the questions are who shares the burden, and just how much is Spain will be hobbled when it comes to talks over its debt troubles. Remember, in Spain it's a banking crisis at this point.
"And where is the growth coming from to make the problems go away?" queried one expet.
"The Spanish bailout doesn't solve Europe's woes ... but maybe it allows the rest of the world to focus on something else."
There are many other questions, as well. From which bailout fund will the money come? How much will be involved in the final rescue? What will the ratings agencies say? And what terms will be attached to the funds?
"The IMF’s report on Friday concluded Spanish banks would need at least €37 billion," another observer said, adding that the maximum of €100 billion is seen as credible.
As for the ratings agencies, he added, "the loans will add directly to the Spanish government’s liabilities and so increase the debt-to-GDP ratio by around 10%, leaving further downgrades likely."
There's also speculation of how this might feed in to coming Greek elections. Spain has not been tied down by harsh demands attached to the bailout money, unlike Athens, where the austerity measures tied to its loans have sparked outrage across the country and given anti-austerity parties a tremendous boost.
Still another expert agreed on the potential fallout, and warned that Spain is by no means clear. Its economy is in the tank, and unemployment is the highest among the 17 countries that share the currency.
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