Eurogroup 'may decide Spain bank rescue July 20'

European policy makers signalled flexibility on the application of an unprecedented bank tax in Cyprus, seeking to overcome outrage that threatens to derail the nation’s bailout. European shares and the euro fell.

The Financial Times reports Eurozone delays Athens rescue funds Eurozone members have delayed approval of more than half of the €130bn bail-out for Greece after deeming that Athens has yet to meet all the terms set as the price of a second rescue. However, finance ministers from the 17-country currency bloc meeting in Brussels signed off on funds to underpin a €206bn debt swap to cut the value of the Greek bonds held by private investors.

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EMU officials in Brussels want to see specific details on how Spain will reduce its budget deficit to 3% of GDP in 2013. Given the 2011 deficit was 8.5%, EMU officials do not believe Spain, nor should anyone else. The targets will not be met. Moreover, some in Brussels accuse Spain of artificially inflating the 2011 deficit so as to better meet its interim target. Those are contradictory accusations actually. If the deficit is artificially inflated, it should be easier to make the targets.

After forcing Greece into more austerity measures, the next tranche of emergency loans to Greece (most of which will ultimately do a round trip back to Brussels) is now delayed because the path Greece is on is still not sustainable. Greece still requires additional funding of around €32 billion. Germany has said no and the ECB has said no.

A few days ago Spain was purportedly going to need another €30 billion to €70 billion to recapitalize Spanish banks. I suggested the amount would be at least triple that and it did not take long to do so. Yahoo! Finance reports Spanish bailout could reach 100 billion euros A bailout for Spain's teetering banks, once requested by Madrid, could amount to as much as 100 billion euros, two senior EU sources told Reuters on Saturday.

The once taboo subject of a Greek departure from the eurozone cracked in the past couple of weeks, primarily with threats to Greece. Today the exit discussion dam broke wide open as Eurozone tells members to make contingencies for "Grexit" Euro zone officials have told members of the currency area to prepare contingency plans in case Greece decides to quit the bloc, an eventuality which Germany's central bank said would be "manageable".