Monday, 4 June 2012

Spain is in 'total emergency’, the EU in total denial

After a Spanish exit from the euro, there would be nothing left to exit from.

Greece on brink of collapse - Spain is in 'total emergency’, the EU in total denial
Greece in turmoil: but its significance has shrinked in comparison to the possibility of a spectacular crash in Spain, the fourth largest economy in the EU Photo: AFP/GETTY
I’ve never actually heard the term “total emergency” before, at least not in the context of global economics. It sounds like the title of a disaster movie. When it is uttered in sober tones by the elder statesman of an advanced democracy to describe his country’s financial condition, the effect is rather startling.
The man who delivered this apocalyptic judgment, former Spanish prime minister Felipe González, being a socialist, might be expected to detest austerity programmes that require cuts to government spending. But there seemed to be few disinterested observers of Spain’s economy prepared to quibble with his assessment.
Forget Grexit. Greece’s teeny, tiny economy is a footnote now. As is Ireland’s decision – which seemed more like a sigh of resignation than a plebiscite – to engage in however much self-flagellation the EU gods insist on, for however long it takes. What might have seemed dramatic a week or so ago has now shrivelled in importance by comparison to the realistic possibility of a spectacular crash in the fourth largest economy in the EU. Spexit (and Spanic) are lodged in the lexicon, and have become part of the psychological reality that moves markets. The equivalent of more than £55 billion was withdrawn and transported out of Spain last month – and that was before the country’s largest bank was nationalised. No one seems to be kidding himself that the collapse of the Spanish economy could be somehow weathered and overcome, as the default of Greece might be.

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