Spain to take care of its own problems
AFP PHOTO/ PIERRE-PHILIPPE MARCOU
With the troika of the EU-ECB-IMF giving the green light to Portugal for the successful application of its rehabilitation programme, Spain remains the dark part of the Eurozone's current problems, with the exemption of course of the Greek 'enigma'.
But, lets take one thing at a time.
The European Commission published a memo on the successful results of the Portuguese multi-annual rehabilitation programme, which provides for €87 billion soft loans for the country's economy, but contains also a Draconian fiscal austerity chapter, aiming at reducing the government deficits to acceptable levels, some time after 2013.
According to the relevant Commission press release, “Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) visited Lisbon during May 22-June 4 for the fourth quarterly review of Portugal’s economic programme. The programme remains on track amidst continued challenges. The authorities are implementing the reform policies broadly as planned and external adjustment is proceeding faster than expected. At the same time, rising unemployment has emerged as a pressing concern. The need to combine fiscal consolidation with deleveraging private balance sheets while restoring external cost competitiveness remains a difficult balancing act. But the authorities are determined to stay the course of adjustment and reform. Broad-based political support and social consensus is a key contribution to a successful adjustment”.
Underhandedly, political consensus is a condition 'sine qua non', for the successful application of the rehabilitation plans to all three Eurozone programme countries, Greece, Portugal and Ireland.
While in the last two countries this political condition is met, and consequently Portugal and Ireland are applying, with differing degrees of success, their fiscal consolidation plans, in the case of Greece the situation is best described as a politico-economic 'enigma', ahead of the legislative election of 17 June in this ailing country.
Coming to Spain, however, despite the strong Rajoy governance, the country constitutes a much bigger problem than Greece or Portugal. The reason is size.
To this effect, the Spanish minister of Budget, Cristobal Montoro, on 5 June, said in an interview, that he considers a bailout of his country, 'technically impossible'. He went on to explain that this is because Spain is the fourth largest Eurozone economy. Obviously, he was addressing this observation to his compatriots, given that many analysts and opposition politicians in this country demand, that the European Union comes to the rescue of Spain as it does with Portugal, Ireland and Greece.
They fail to observe, however, that all those three economies and their obligations taken together, do not reach the size of the Spanish problem. Consequently, the natural conclusion is that Spain has to save itself, without external help. And this is exactly what the Madrid government tells to the country's citizens directly or indirectly. All that do not mean however that Spain is not asking Brussels, Paris and Berlin for help. Madrid however has agreed that Spain must not be seen getting help from outside, because such a development will automatically cut off the country from the capital markets, obliging the European Union to run for help. It is exactly this, that both sides want to avoid.
Montoro though had also good news to tell. He assured everybody that the country's regional governments have managed to draft plans to zero their fiscal deficits soon. It appears that this prospect is too important, because Madrid has agreed to recapitalise Bankia with €23.5 billion, and would be quite impossible to rescue the regions at the same time. The Spanish budget minister concluded that his country has to apply the programme agreed with the EU partners, because there is no other way for the country to survive economically, than staying in Eurozone. Unfortunately no Greek politicians are so adamant like their Spanish, Portuguese and Irish counterparts. from new europe on line
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