It could have been other papers
The developments are rather alarming:
* The VAT takings the first 5 months of the year are down 10% compared to last year.
* The budgeted annual deficit has already been reached during these said 5 months.
The problem is that such drops call for immediate action. However conscientious the Spanish government has behaved since January – reforms and tax increases – such measures take time. And time is what Spain has been given by the EU.
Long term instruments such as pension reforms they take time.
The Euro-zone Finance Ministers have decided to advance Spain 30 bio. EUR in loans with an average maturity of 12½ years to recapitalize the banks at the end of the month of June 2012.
“This is an important decision that has been possible due to the very intensive work of the team from the European Commission, the ECB, the European banking authority, the IMF and the EFSE – in good cooperation with the Spanish authorities”, said the Economic and Monetary EU Commissioner Olli Rehn.
Now that is significant, as Olli Rehn is Finnish and Finland has emphasized that they will rather leave the Euro than be liable for other nations debt.
” The Finnish Commissioner also explained that there will conditions for banks both the individually and the financial sector collectively – and in parallel Spain:”Spain will comply totally” with the demands under the procedure for the excessive deficit. ”
Well that has been the stumbling block for such loans – the direct liability of Spain! Pity the point wasn’t elaborated upon….. But some sort of arrangement has been arrived at.
Indubitably the situation calls for immediate and determined action and Spain is in no position to vacillate on conditions:
* The economy is in a tailspin just ahead of the important tourist season.
* The Spanish 10 year bond is over 7% – which is in effect a denial of credit.
* Spanish banks have suffered a drain on deposits in the first quarter of 2012 of 100 bio. EUR – no wonder there is a shortage of pennies in the till.
On the other hand: As everybody that is anybody has been over the books they start to believe the Spaniards are approaching a reasonably comprehensive version of the truth:
If the banks draw the Spanish economy into the abyss there is no chance of Spain ever being in a position to pay her debt. Any further tightening of the screw and the economy’s ability to generate repayment is going to diminish.
Truly a case of defaulters power.