Following an emergency conference call with eurozone financial leaders on Saturday, Spain's Finance Minister Luis de Guindos announced that the nation would be the fourth member of the Eurozone to request a bailout package to save its failing economy. Definitive numbers for a possible deal were not yet available, but reports indicate that the package could be as large as €100 billion, roughly $125 billion.
The Spanish acceptance of aid for its banks is a big embarrassment for Prime Minister Mariano Rajoy, according to a report in the Associated Press, which noted that just 10 days ago Rajoy had said the banking sector would not need a bailout.
"The [Spanish] crisis is a pan-European problem and that the way it has been dealt with until now has been completely ineffective and socially disastrous." --Alexis Tsipras, Greece's Syriza party
The Spanish bailout -- unlike those given to Portugal, Ireland, and Greece -- is not expected to come with tough new conditions attached. That, however, is largely because the Spanish economy is already being hit by tough austerity measures demanded by Brussels, a reality not lost on those critical of the manner in which the major European nations have responded to the financial crisis that has ravaged Europe since 2008.
"Developments in Spain confirm the position that we have maintained from the start," Alexis Tsipras, leader of the ascendant Greek lefitst party, Syriza, told the Avgi daily in an interview which will appear on Sunday.
"Namely, that the crisis is a pan-European problem and that the way it has been dealt with until now has been completely ineffective and socially disastrous," the 37-year-old said.
"If Spain falls, the euro falls," The Guardian reports a Spanish government insider as saying. "There is not enough money at the IMF and in the European rescue funds to bail out the Spanish state." Such sentiments reflect on the idea -- supported by many -- that greater fiscal unity is needed if the Eurozone is to survive its current crisis.
And Hamish McRae, writing in The Independent, notes that the European bailouts have followed an all-too-familiar script. "First, they say their economy and banking systems are sound. Ministers attack the financial markets for not lending at an acceptable rate. They produce fiscal targets that fail to be met. Then, after weeks of saying they don't need help, they capitulate, but try to explain that it was all the fault of someone else."
"The focus will now inevitably shift to the eurozone's third largest economy, Italy, which has an even larger national debt than Germany," said McRae.
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Euro zone finance ministers agreed on Saturday to lend Spain up to 100 billion euros ($125 billion) to shore up its teetering banks and Madrid said it would specify precisely how much it needs once independent audits report in just over a week.
After a 2-1/2-hour conference call of the 17 finance ministers, which several sources described as heated, the Eurogroup and Madrid said the amount of the bailout would be sufficiently large to banish any doubts.
"The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total," a Eurogroup statement said.
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Agence France-Presse: Spain shows austerity has failed: Greek leftist
"Developments in Spain confirm the position that we have maintained from the start," Alexis Tsipras from the Syriza party told the Avgi daily in an interview to be published on Sunday.
"Namely, that the crisis is a pan-European problem and that the way it has been dealt with until now has been completely ineffective and socially disastrous," the 37-year-old said. [...]
Syriza, which opposes the steep austerity cuts promised by Greece in return for its two bailouts, came second in elections in Greece on May 6. Fresh elections were called after no coalition could be formed.
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The Guardian: Spaniards resigned to bleak future as austerity bites
Public austerity began to bite two years ago, when Socialist prime minister José Luis Rodríguez Zapatero suddenly performed a U-turn on his expansion of the welfare state. Labor laws were loosened, civil service salaries cut and the pension age shifted backwards.
Under the People's party (PP) of Mariano Rajoy, which took over in December, the intensity of austerity has risen. Health and education cutbacks are now part of a relentless drive towards deficit-cutting. Labor reform, meanwhile, is helping drive down wages.
Improved productivity and the fact that, after years of importing goods and cheap loans to feed an insatiable wave of consumption, Spain will soon be exporting more than it imports are signs that the drive towards internal devaluation is, slowly, working. But this comes at the terrible price of almost 6 million people unemployed.
In many ways, indeed, Spain is behaving like a model pupil of German chancellor Angela Merkel – and Rajoy is a genuine believer in austerity and budget-balancing. Yet the only concession Spain has received so far from Europe is a slight relaxation of its deficit targets, from the impossible aim of cutting it by two thirds in two years to the still difficult aim of doing this over three years.
Rajoy has finally concluded that Spain's main problem is the euro. Badly structured and with a malfunctioning central bank that always favors the big states of the center, it is still a half-baked project. Either that is fixed, or the euro is doomed.
The government strategy has been to turn Spain's weakness into strength. Spain is too big a problem. If it is allowed to fall, Rajoy's ministers warn, Spain will bring the euro down with it.
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