America's economy is much weaker than reported. Europe is in serious crisis. Greece is bankrupt. Only its obituary remains to be written. Portugal and Ireland aren't far behind. So is Italy. Spain is the latest shoe to drop. It's been deteriorating badly for years.
It's the fifth EU country to seek bailout help. On what terms isn't clear. Some reports claim no stringent ones. Others disagree. The devil is always in the details. So far they lack clarity.
Spain's Economy Minister, Luis de Guindos, said draconian conditions aren't demanded. According to German Finance Minister Wolfgang Schauble, "troika" medicine accompanies the deal.
Bailouts, of course, never work. At best they buy time. They also assure greater trouble. Burdensome debt gets more onerous and harder to repay. Solving a debt crisis by adding more assures failure.
Spain is deeply troubled. Its major banks are insolvent. With unemployment around 25%, Prime Minister Mariano Rajoy admitted things are bad and getting worse. He expects protracted recession. He understated its severity.
At the same time, on May 28, he said "there will be no Spanish banking rescue." How do you say egg on his face in Spanish?
Madrid's debt burden and borrowing costs are unsustainable. Both sovereign and private sectors are troubled. Rajoy describes the deal as a non-sovereign loan to Spanish banks. How does he explain more egg on his face?
It'll come through the Fund for Orderly Bank Restructuring (FROB). In June 2009, Spain established it to bail out and restructure its troubled banks. Its own documentation says funds disbursed have "explicit, unconditional and irrevocable guarantee of the Kingdom of Spain."