THE ECONOMIST on the Spanish bailout: "The €100 billion pledged to help Spain was meant to rescue the banks and calm the euro zone. Instead it has added to the drama."

Make sure you read it if you want to know what's going on, because it's superbly explained -- except one thing: when it says "The money seems likely to come from the new European Stability Mechanism (ESM), which will be a preferred creditor; that would make Spanish bonds a bit more risky for other creditors." This is not true.

As my friend Bidatzi showed, while it's correct that the funds from the ESM do have seniority, there's one exception established in the treaty (pdf) that creates it:

In the event of ESM financial assistance in the form of ESM loans following a European financial assistance programme existing at the time of the signature of this Treaty, the ESM will enjoy the same seniority as all other loans and obligations of the beneficiary ESM Member, with the exception of the IMF loans.

That means that if Spain taps at least a small amount of funds from the current EFSF, any money coming afterwards from the ESM would be on equal footing, in terms of seniority, as all other obligations. It's amazing that so many people who should know better are blowing this.