DJ: ESM could recapitalize banks, home state would retain liability

An unnamed senior EU official is quoted by DJ saying the ESM could be allowed to directly recapitalize banks but that the home state would retain the liability. The official goes on to say that the aid wouldn’t contribute to the home country’s debt levels.

Begs the question: why not just lend to the home state and let them do the recapitalizing. You’re not going to fool the market by calling it ‘direct’. Or by saying it’s a ‘liability’ not a debt — it’s the same thing unless the ESM is on the hook, not the home country.