A total bailout of Spain will not be announced in the next few days, but will be before the end of the year. Politicians will misrepresent Spain’s true fiscal and economic condition as long as they can, but the numbers eventually will carry the day.
Spain is in the midst of a depression, and budget deficits increase during depressions. The economic and fiscal numbers are worse than what the finance ministry is reporting and probably even gloomier than the realistic projections from outside the mainstream media. If people knew the true extent of Spain’s woes, there would be a panic complete with tanking markets and a bank run, not jog.
Despite all of these red flags practically screaming for a bailout, an anonymous eurocrat is stating that a bailout is not imminent because Spain cannot reach its deficit reduction targets. However, if Spain could reduce its budget deficit without assistance, it wouldn’t need a bailout in the first place.
The budget deficit target is merely a ploy. If the Germans and the rest of the Northern tier were serious about assisting Spain and the periphery, they would use achievable conditions.
Spain and Greece are in depressions. This situation is causing huge budget deficits. The more they cut, the more they owe.
The Germans are setting the rules, so the game is rigged. Of course, Germany does not want to flush its money down the drain, so there have to be conditions to the bailout, but they have to be reasonable and achievable. A budget deficit target during a depression is neither.
The eurozone could propose to both Spain and Greece a set of conditions that are simple to monitor and implement. For example, they could propose a dramatic raise of the retirement age and an across the board cut in Spain’s total budget in exchange for cash. If these conditions were met, aid would flow regardless of whether or not the cuts resulted in the country meeting a target.
Germany does not want this. The use of a goal that is impossible to achieve allows it to keep demanding additional concessions while it does as little as possible to maintain the status quo.
Behind closed doors, Germany is attempting to use the crisis to force a closer political union among the EU states. This is its true objective and that’s why the bailout conditions are never achievable.
Meanwhile, people act like this has never happened before. Spaniards need only look east to Greece to see their future: endless austerity demands that cause a deepening recession with just enough drips of aid to keep the farce going.
In the interest of self-preservation, Rajoy’s government will lie as long as possible, but people are beginning to catch on:
“There is a rising fear that the 2013 budget and the stress tests may have been some sort of window dressing to get European assistance.”
It’s not surprising that people are questioning the sham stress tests and the optimistic budget assumption. What is surprising is that it took them this long to spot the duplicity.
Even the EU, which has lied its way through the crisis, doubts Spain’s rosy forecast:
Olli Rehn, the European commissioner in charge of policing budget rules, told Spanish officials their plans to reduce the shortfall to 4.5 percent of gross domestic product next year are based on excessively optimistic assumptions about economic growth.
The Spanish reaction would be funny, if its situation were not so serious:
The macroeconomic assumptions underlying the budget shouldn’t be a source of uncertainty and lack of credibility,” Deputy Finance Minister Fernando Jimenez Latorre argued when he took his turn in front of the committee today.
Latorre said a larger-than-expected contraction next year won’t affect Spain’s ability to meet its budget commitments. Spain is still analyzing the possibility of asking for a bailout even though the procedures involved are “complex,” he added.
Basically, what Latorre is saying is that we’ve been lying the whole time, why are you bringing this up now? Everything will be fine.
The EU’s new stance is keeping in line with its paymaster’s prevarications. Germany wants to hold onto to its money, and enforcing ridiculous conditions is a way to do it while maintaining a certain crisis homeostasis.
Merkel wants a political union. If she could pull this off, she would be one of the founding fathers of the United States of Europe. She is using this crisis to push the eurozone closer towards this aim. This is the real reason for the dilatory tactics on all of the steps that would help solve the crisis.
A banking union or a fiscal union will not happen until there is a political union. I can understand why Germany would want this in exchange for its money. I can also understand why the distressed countries of Europe would not want a closer political union with a domineering, imperious Germany.
Merkel will keep the status quo going as long as possible, but the situation will reach a point of no return sooner or later. Eventually, someone will kick the can off the road.