Prime Minister Mariano Rajoy yesterday unexpectedly announced the 10 billion-euro package, less than two weeks after unveiling the most austere budget in more than three decades. Rajoy is targeting basic public services for the first time since his election in December in a bid to convince investors he can bring order to the nation’s finances.What role pure speculation plays at a given moment is hard for most of us to know on any given day. But the record of eurozone and non-eurozone EU countries the last several years have shown clearly that a country's commitment to balanced budgets, that sacred devotion of the Great God Free Market, is not what is driving bonds rates and investors' risk evaluations. It's the investors' expectations of whether the country's economy is healthy enough to be able to pay back its loans.
"There are growing fears that the Spanish economy is caught in a pernicious circle," Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e- mailed response to questions. "The weakness of government finances, the fragility of banks and worries about the scale of the recession all feed on each other."
Spain’s 10-year borrowing costs have jumped more than one percentage point since March 2, when Rajoy announced that Spain will miss its 2012 budget-deficit goal approved by the European Union. Spain overshot last year’s target and the nation is battling its second recession since 2009.
Spain, like Greece and Italy and other countries currently in debt trouble and operating under German Chancellor Angela Merkel's austerity economics, is caught in a gruesome circle. The worse their economy gets, the more expensive their borrowing becomes. Then the EU (read: Angela Merkel) insists that the country impose more extreme austerity economics, which makes the economy worse, which makes their borrowing costs go up, and so on.
The One Percent is making use of this depression to push deregulation, reduction of government services, shrinking of labor unions, and rolling back workers rights. The result is the reduction in living standards of the majority of the population in countries like Spain and Greece, high unemployment, increasing poverty and all the evil results that go with those things.
And it all threatens to erode democratic governance. Hungary is now operating with an authoritarian regime, which the EU is only feebly protesting. It's hard to imagine that Hungary at this moment is still in compliance with the basic democracy requirements for EU membership. Greece and Italy are operating under Post Democracy governments imposed by Angie to act as debt collectors for the country's creditors. But democratic institutions are at least still in place and competitive elections can still take place. To what extent the dominant parties are all in hock to corporate and financial interests and the toxic neoliberal/austerity economics that support is another question.
Paul Krugman has being saying for a while that, for all the problems Greece alone has caused, it's Spain that is the real danger point for the unraveling of the euro and whatever consequences flow from that. Benoit and Sills report:
"As a result of Spain’s challenges, sentiment towards its sovereign bonds is now the bellwether for Europe’s debt crisis," Mansoor Mohi-uddin, chief currency strategist at UBS AG (UBSN), wrote in an e-mailed note on April 7. "If investor appetite wanes, then currency markets will start to price in either ECB rate cuts to help restore sentiment, or Madrid requires external assistance from its European Union partners."And in Greece, the crisis continues there, too:
Ferry workers strike, disrupting holidays Athens News 04/10/2012
Angry workers' bin Laden chant Athens News 04/07/2012
Dimitris Yannopoulos, Report warns against more pay cuts 04/06/2012:
The fragility of the current economic situation was highlighted at the presentation of this year’s first-quarterly report on the Greek economy by the Foundation for Industrial and Economic Research (IOBE) on April 2.Riots erupt in Greece after 'martyr' shoots himself over debt crisis Daily Mail 04/05/2012
The country’s leading private sector think-tank predicted that the economy would contract for the fifth consecutive year, reaching “at least 5 percent” after last year’s slump of 6.8 percent, with unemployment reaching 21 percent and consumption plummeting 7 percent.
Economy shrinkage to hamper reform efforts, report shows Athens News 04/02/2012. Who could have guessed that Angienomics would have produced such a result? Except for anyone who had actually been following the results.
George Gilson, Danny the Green takes Athens Athens News 03/30/2012:
Both Athens and the European Union are to blame for Greece’s economic catastrophe, Eurodeputy Daniel Cohn-Bendit told a Greek audience on a visit to Athens on March 27. ...Tags: eu, european union, greece, spain
Cohn-Bendit and Greens co-chair Rebecca Harms came to Athens at the invitation of the Ecologists-Greens (EcoGreens), in the hopes of giving the small party an international boost ahead of national elections. Some recent polls indicate that EcoGreens may for the first time pass the three-percent threshold needed to enter parliament.
It was no surprise, then, that Cohn-Bendit blasted the record of successive Pasok and New Democracy governments, while deriding the nepotism that has allowed members of a few political families to come to power over the past decades. "We believe that the EcoGreens can contribute to the creation of a new Greece, which you need," the MEP [Member of the European Parliament] declared.