As predicted, Spain yesterday formally asked for a huge bailout to rescue its banking system. Most sources seem to agree that the sum will be about €100bn and will go directly to the banks, rather than, say, job creation. Meanwhile Spanish families who, hit by redundancies and public sector pay cuts, find trouble paying their mortgages, still get evicted without the debt being erased.
Spain's ruling PP seems utterly perplexed by everything. PM Rajoy, almost totally invisible since he won last year's elections, is determined to push the message that the bailout comes 'no strings attached'. Never mind that we already have seriously nasty conditions of 'austerity' imposed on us by the PP and the PSOE opposition, my understanding is that the Spanish state will take on the responsibility of paying the interest on this €100bn loan. In effect, Spain goes from a situation where public spending was absolutely fine in 2007, within EU guidelines, and so on… to the situation we have now where services, pay, investment, etc have all been slashed and still the government ends up with a growing deficit thanks to the banks.
The alternative is to allow the banks to collapse. This would be an instantly shocking blow to the Spanish economy and I'm not sure how much protection could be given to personal savings. But it would wipe the slate clean and allow us to start again. The first thing to do then would be to call in the bean counters and investigate fraud and mismanagement in every Spanish bank. Then, arrest and jail time for any banking or government official found to have acted illegally.
But the most important action that's lacking is a total reform of the financial sector and the general economic reforms that this would imply. The idea that we might have to miss out on exaggerated profit lines and the phenomenal instability they always bring, should the financial sector up sticks and leave the Eurozone, suits me fine. They can all go and jump in the sea, as far as I'm concerned.