14 juin 2012 par Paul Jorion
And now? What are we going to do? Now that Spain has lost access to capital markets for its debt?
True, the downgrading yesterday evening of Spain’s rating by three notches by Moody’s, from an A3 to Baa3 has not helped matters. But after all, it hasn’t taught us anything that we didn’t already know last weekend: with a 10 year sovereign debt rate stuck around the level of 6.75% (*), the game was up anyway when it comes to financing its debt on the capital markets.
The cause of all this? The additional 100 billion euros obtained by Spain from the European funds, and for which the nation itself is directly liable, European regulations forbidding direct bail-outs from its institutions.
Have you noticed that the European regulations are packed with suicidal clauses, the implications of which we are still discovering today, in emergency situations? Some people, convinced of the unlimited power of the human will, will explain to you that this is deliberate: foreseen long ago for the setting in motion, one day, of the Great Secret Plan. A more down-to-earth explanation is that it is the result of human inventions which natural selection has not yet had the time to sort out.
But didn’t the Americans succeed, managing to found a great nation with lots of little bits?! True, but that is indeed the point: in that particular instance, the method of trial and error was used on a grand scale – the United States of today has had to endure a vicious civil war to clear things up somewhat. And some of the scars are still fresh.
Already, keeping the Greeks in the family is very hard. Add to that Portugal, plus Ireland, plus Cyprus (today, at the end of the morning). Nevertheless, Spain – and this was said from the start, right after the initial alert at the beginning of 2010 – is too big a morsel to swallow for the Euro zone to rest intact: it is just not possible. Not to mention Italy, also very pale, on a chair in the corridor of the clinic.
On the 5th April 2010– already two years ago! – I had explained it in an article for the Monde-Economie entitled “The red line”: “There will soon be national unity governments, when it becomes evident to everyone that no single party is able to get to grips with the irresolvable problems being posed; subsequently this will be followed by a Committee of Public Safety when it becomes clear that even working together they understand nothing; and – if God takes pity on us – this will be followed finally by a new National Resistance Council, at the moment when it will be necessary, beyond the differences considered irreconcilable today, to launch an ultimate attempt to save what can still be saved.”
M. Hollande has not yet reached this stage, convinced as he is, that if what France needs is growth, the Greek temperament is far better suited to aggressive austerity measures. What he wishes for the Greeks is for Pasok and New Democracy to come out victorious in the Greek elections. And he hasn’t hesitated to tell them. Without doubt, this would be a miniature reproduction of the ill-matched Franco-German couple which is currently offered to us. The winning formula seems, to him, to be that of the union of a right-wing Socialist party with a Liberal party, both of them convinced that mothballing the welfare state is a much more urgent priority than reining in the world of finance
It is to be noted that the Americans are in much the same state of mind. Yesterday, Jamie Dimon, the boss of J .P. Morgan Chase was being grilled by the Banking Committee of the American Senate. He was asked how his bank had managed, by inadvertence, to lose between 3 and 10 billion dollars. The Republican Party Senators used up all their allocated speaking time to maintain – wanting Mr. Dimon to confirm it enthusiastically – that at the moment the greatest worry is that of an over-regulation of the financial sector. This is how it is at certain periods, you can take my word for it: programmed suicide is to be found everywhere. And I am sparing you the most comical examples.
Finally, let’s wager that people in Brussels are working hard at the moment to find solutions, that further cunning plans are being concocted in order to be put into practice in 2014 or 2018. Why are these miracle solutions always being delayed, it would not be an exaggeration to say, indefinitely? All in good time. Except that today, on the 14th June 2012, this is what is missing the most – time that is.
(*) 6.974% at 10:51