Guest post. Translated from the French by Tim Gupwell
As already highlighted the Spanish government is already benefitting from a de facto rescue plan under another name. To save appearances, the new austerity measures put forward for vote in parliament have not been the object of a memorandum jointly signed with those providing the funds, as had previously been the case for other countries. In fact, the announcement of these measures came the day before that of the banking bail-out!
One major difference with the preceding rescue plans can be observed: the entirety of the 100 billion Euros loans provided – whose planned repayment schedule is staggered until June 2013 – is destined for the banks. The State will merely pass on the funds, something which has not prevented the Government from imposing austerity measures on the Spanish, even though the two things are not strictly connected.
Continue reading WELL SPOTTED, BRAVO!, by François Leclerc
Guest post. Translated from the French by Tim Gupwell.
“There is a first assessment, then a second, a third, a fourth…..It’s the worst possible way of doing things because everybody ends up doing the right thing but at the highest possible cost and price”. Who was it speaking so harshly yesterday of banking losses and of the policies of the European leaders? Answer: The ECB president, Mario Draghi, in the course of a hearing before the European parliament.
With his colleagues from the governing council, he drove home this same point, supporting the creation of the “European banking union” proposed by the Commission, starting with the constitution of a deposit guarantee fund. He was supported by the governor of the Bank of Italy, Ignazio Visco, who is getting ready to lead the charge. Rising Spanish bond rates have driven Italian rates higher; according to sources, the recession is estimated to be between -1.4% and -1.7% for this year, and the official unemployment rate exceeds 10%.
At one moment or another it becomes necessary to face up to reality, and this moment has arrived, manifesting itself in the massive outflows of capital from Spain, calculated by the Bank of Spain at 66.2 billion Euros (according to the latest available figures) for the month of March alone. The withdrawal of deposits is not a fantasy taking the form of long queues at cash machines (which could always occur): it is people with capital and businesses which are fleeing the country.
Added to the collapse of an entire swathe of the Spanish banking system, this phenomenon has suddenly come to dominate the public debt crisis and its corollary the fiscal discipline pact which had aimed to resolve it. Sidestepping the issue, Angela Merkel has declared that the Spanish situation is not the result of the strategy of austerity that she has advocated, but the outcome of the burst property bubble which occurred before its implementation. As if the former did not feed the latter.
Continue reading THE TOWERING MOUNTAIN, SWAYING FROM SIDE TO SIDE, by François Leclerc