Thursday 13 May 2010

No one expects the Spanish requisition

So Greece has been bailed out temporarily, more general strikes are planned by the 1/3rd of the population getting their news from an alternate universe, and now the EU is trying its best to contain other Eurozone sovereign debtors by pushing through spending cuts in a preemptive bid to stave off more speculation. In a short-lived flourish of "shock and awe" Keynsianism, the markets soared on the news of "le Tarp" but retracted significantly within the next 24 hours after investors and economists had a chance to read the fine print below the eye-watering sum of $1,000,000,000,000 give or take a penny.

Now, as Zapatero is forced to reign in the Spanish spending machine by outside actors, he is forced to eat his hat and go back on promises not to cut wages made just a few short weeks ago. But that has been one of the major stories of the past 2 years. Across the globe, elected leaders have just not been able to look past the next election to tell their electorate a sobering truth; we have spent way too much money. We have been led to believe that the government coffers behave like a Las Vegas fruit machine that comes up triple cherry every time; pull the handle, hold out your hands, and collect your prize. Ding, Ding, Ding. Everybody wins the jackpot and takes home free money. So, we've been lied to. Few of us expect anything bordering on honesty from our elected officials, so this probably shouldn't be front page news anytime soon.

This brings us to some of the most recent statements made regarding Spain whose unemployment stands at a little over 20% and may be the next to find access to the markets cut off. After refusing to even utter the word crisis until 1/5th of the Spanish found themselves out of work, Zapatero still insists that now is not the time to question his leadership because "Pessimism cannot create jobs." Neither can Tarp style stimulus packages but apparently they only watch MSNBC and can be forgiven. While constantly claiming that Greece would continue to draw money from the markets, the Eurocrats managed to lose all legitimacy in the eyes of investors; why then is everyone asserting that a Greek default is not possible, and Spain will not have liquidity turned off like Greece when both scenarios look increasingly likely. Germany's thumb twiddling could have ended the Euro, but even after it was obviously necessary to intervene, the Germans continued to dither. This casts suspicion on new proclamations saying that a Greek default is impossible. Spain's continued access to the markets is also far from certain and saying anything else looks highly suspect.

So, we get to watch the same movie again, this one set in the Iberian Peninsula. I guess it's true; No one in Brussels expects the Spanish requisition. I'm not sure exactly why.

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