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Friday, 28 September 2012

What is Spain Up To?

Spain has already inflicted huge economic sanctions on its citizens: 25% unemployment [at least], reduced pensions and increased age of retirement, underfunded schools and hospitals, bankrupt local authorities, tens of thousands of incomplete and unsold dwellings, increased taxes ... and the catalogue could go on and on. While the banks have borrowed from EU institutions and from foreign banks even in recent days, the markets are betting against the Spanish state being able to submit formally to the conditions that would be applied to a formal 'bailout' by the European Union, the European Central Bank and the International Monetary Fund. Since it is generally understood that the conditions on any formal baliout would be very harsh, why should the Spanish government not have done what the Greeks did: take the bailout as soon as possible, and blame the Germans [and the rest of the EU]  for the harsh treayment meted out to the population?

Simplistically, Prime Minister Rajoy is asserted to be over-endowed with Spanish pride; which makes him exceedingly reluctant to submit to mere north Europeans. More realistically, he has hoped to be able to avoid a bailout altogether. Meanwhile, his government has demonstrated that the Spanish state is sufficiently robust to be able to enforce very hard economic policies. Most importantly he has emphasised and demonstrated the huge difference between the Spanish situation, and the popular response to it, and that of Greece. Spain has presented strong evidence against the domino theory.

Greece will some day fairly soon be forced to withdraw from the euro; but that need not precipitate a gaderene rush by specluators to force Portugal, Sapin or Italy also to fail to manage their economy withon the eurozone.

Whenever Spain now applies for a bailout, on conditions that it will partially be able to dictate, that will not be a signal for the progressive withdrawal of all the weaker southern states from the euro. Spain has not just bought time for itself to get agreed terms; it has ensured that the gulf between Greece and the rest has become consolidated. Yes, there are demonstrations verging on the riotous in Spain; dismay affects most of the population some of the time, and some of the population all of the time; but there is not yet the degree of hopelessness and despair that now characterises the vast majority of Greeks.

The whole situation is classically tragic, but redemption for Greece is vastly different - and much more painful to achieve - than is the possibility to turn the Spanish economy round within the eurozone.

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