Guest post. Translated from the French by Tim Gupwell
Events are moving fast. We were expecting it of Greece, but Spain is overtaking it. Yesterday evening, a human tidal wave invaded Spanish town streets, which these days have become virtually permanent places of mini-demonstrations at midday or after work. Today, at the very moment when the Eurogroup ministers were adopting the bail-out plan for the Spanish banks, the bond rate had edged up to 7.20% and the Madrid Stock Market plunged more than 5%. Instead of falling as had been predicted, the government has announced that the official unemployment rate is going to reach 24.6% by the end of 2012. A bona fide rescue package will soon be required, something the Bundesbank and the Members of the Bundestag have been advocating, seeing an opportunity to carry out yet another brilliant demonstration, associated with another round of austerity measures. Time will tell soon tell us which one will be first.
Italy is likely to be the next domino to fall. Major stock values fell by around 5% on the Milan stock market, since the Italian banks are saturated with debt securities whose value is gradually falling as bond rates increase in line with Spain’s. The Spanish scenario is repeating itself due to the increasingly interconnected links between public and private debt which have developed over recent months. Italy may not have the colossal property bubble, but it has a public debt situation that is just as bad.
The CGIL, the national trade union federation, has announced a general strike for September, on the date when a 2% increase in VAT, along with other austerity measures, is due to enter into force. As Mario Monti’s Government increases taxes and creates new ones to compensate for the state’s shrinking fiscal receipts, a shadow economy is rapidly developing in a multitude of forms in an effort to avoid paying them. The province of Sicily is on the verge of bankruptcy and the Mayor of Palermo, Leoluca Orlando, the spokesman for the left-wing party, Italy of Values) has warned that “because of an explosive mix of despair felt by many families and the stranglehold of organized crime, a civil war could even break out”.
Meanwhile, the Greek Coalition Government is feverishly searching for the ten billion Euros in savings it needs in order to demonstrate its good credentials and receive over the coming weeks the vitally needed funds to avoid default. Tightening the screws a little more, the ECB has just announced that it will no longer accept Greek debt securities as collateral.
Finally, contradicting those explanations which seek to see in the flawed construction of the Eurozone the reason behind the European crisis, the British public finances continue to deteriorate, in spite of, or rather because of, the austerity plan being operated. In what has now become a classic of the genre, the fiscal revenues are tumbling and social security payments are increasing. Rather than being reduced, the public debt is growing exponentially, and attempting to pass the buck, David Cameron and George Osborne, are both blaming the Eurocrisis.
What are the European authorities doing about all this? They are maintaining an absolute silence.