Monday, 11 June 2012
Spain: What's The Difference?
So Spain has been "rescued" by the European Bank, but the question is why no austerity package? The experts tell us that the difference is that the debt in Spain was that of its banks while that in Greece was sovereign debt caused by government overspending. Essentially, therefore, Spain was able to tell the European that they could save Spain's banks or not as they pleased, but that the government was not going to accept pauperising its own citizens further in order to facilitate a deal. The rest of Europe was handed a stark choice - bail out the Spanish banks or watch the Eurozone collapse completely. The truth is that the Spanish government chose not to borrow the huge amounts of cash that were coursing through the Spanish banks until 2008 whereas the Greek government did in order to subsidise the living standards of its citizens. There is no doubt that the Greeks were reckless and are now paying for it in spades. But the Greeks have a choice as to what they can do about it. They can leave the Euro, re-issue the Drachma and devalue like crazy to reduce their debt and give themselves a fighting chance of recovery. That they have chosen not to do so shows that they prefer to cling to the Euro's apron strings rather than face the uncertainty of going it alone. But, at the end of the day, what has all this support for Greek and Spanish banks actually achieved? Essentially taxpayers money has been pumped into the banking system to fill the black hole in liquidity caused by their reckless gambling on the property bubble. By shoring-up the banks governments have managed to keep property prices artificially inflated but this cannot solve the paradox of millions of empty properties on one hand and millions of essentially homeless people on the other. What our leaders are doing is not a solution it is an attempt to continue the problem and, worse yet, to breath more life into it. Not only are ordinary people being forced to pay for the mistakes of the banking system they are also being effectively barred from any reward for doing so. Our money is being used to save the banks but our children will still not be able to buy a home of their own, while rents continue to rise to feed the insatiable greed of a minority. All in this together? Don't make me laugh.