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Spain: The Latest Shoe to Drop

By       Message Stephen Lendman     Permalink
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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."

It's on the hook. More accurately, its taxpayers bear the burden as in all other troubled economies. According to Reuters :

"EU and German officials said Spain faces supervision by international lenders...." Their statement directly "contradict(s)" Rajoy. He insists it's a no strings deal.

According to Copenhagen-based Saxo Bank economist Steen Jakobsen:

"The EU is selling this as a 'great victory,' but when you look at the details, this is a loan, and we don't know yet where the money will be coming from. At the end of the day, it will increase Spain's debt-to-GDP ratio no matter what they say."

Previous bailouts failed. So will this one. Schaeuble and EU Competition Commissioner Joaquin Almunia said "troika" officials will oversee the deal. "Of course, there will be conditions," said Almunia. "Whoever gives money never gives it away for free."

Schaeuble added:

"The Spanish state is taking the loans, Spain will be responsible for them....There will likewise be a troika. There will of course be supervision to ensure that the program is being complied with, but this refers only to the restructuring of the banks."

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It's just a matter of time before sovereign Spain needs bailout help. Its economy teeters on collapse. Understating the severity doesn't change things. 

Spain looks increasingly like Greece 2.0.

Italian Industry Minister Corrado Passera tried hard to conceal that his nation may be next. It's also burdened with financing 22% of Spain's bailout. Talk about the blind leading others visually impaired.

China's Vice Finance Minister Zhu Ghuangyao criticized the Spanish deal. He called it a short-term fix. He said more decisive action is needed to safeguard longer term stability. It's sorely lacking in all bailout deals. 

Moreover, by agreeing to terms, Spain subordinated its bondholders. They include its own banks. Madrid incurs a greater debt burden. It sacrificed sovereignty for ready cash. Spaniards face greater austerity. Cyprus just asked for urgent aid. Its banks are deeply troubled.

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Its Finance Minister Vassos Shiarly described an "exceptionally urgent" situation requiring end of month resolution. Contagion is spreading. Five troubled economies assure greater woes for themselves and others to come. They can't all bail out each other. A bad ending looks assured.

European Financial Stability Facility (EFSF) funds are earmarked for Spain's banks. The European Stability Mechanism (ESM) is also supposed to help. Germany's parliament hasn't  ratified it, so it's yet to be set up.

Finland wants collateral for EFSF funds. Spaniards demand jobs and attention paid to other popular needs. They've gotten neither so far and won't. They'll suffer greater hardships ahead.

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I was born in 1934, am a retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

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