Greek Socialists Rage over Spain Bailout

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De Guindos’ announcement didn’t sit well with the Spanish people. A hashtag on Twitter sprouted that expressed the feelings of many in Spain: #rajoycobarde (Rajoy coward). While leaving Guindos to face the press, Rajoy jetted off to Gdansk, Poland to watch the Spanish national soccer team play in the European championships. A recent poll shows Rajoy’s approval dropping to 37% while unhappiness with his government’s policies approaches 65%.

The bailout will throw up a firewall for Spanish banks ahead of the Greek elections on June 17 which may bring to power a government unwilling to carry on with the austerity measures demanded by the EU, the European Central Bank, and the International Monetary Fund, which negotiated a $172 billion bailout of Greece last spring. That eventuality would lead to a cutoff in aid and an almost certain Greek default — a turn of events that would drive Athens off the euro and back on the drachma with consequences that would almost certainly threaten the stability of the Spanish banking sector.

Prime Minister Mariano Rajoy tried to put the best face on the humiliation. He refused to use the term “bailout” when discussing the bank rescue during his news conference on Sunday, saying “Europe is offering Spanish banks a credit line that they will have to pay back.…There is no macroeconomic conditionality for the country, but for the banks that receive it.” In fact, he denied any such thing as a bailout was occurring, adding, “If we hadn’t done what we’ve done in the last five months, we would have been discussing yesterday a bailout for the Kingdom of Spain,” he said.

Elsewhere, the bailout was making waves with other nations who received EU cash in return for harsh austerity measures. In Ireland, opposition finance spokesman Michael McGrath criticized his government for having failed to negotiate better conditions on their bailout, saying it needed “to start fighting Ireland’s corner in a more vigorous and forceful way.” Sinn Fein’s finance spokesman Pearse Doherty said “Many Irish people looking at the deal this morning will be asking themselves why is there one set of conditions for us and another for Spain.”

But real trouble is brewing in Greece where the radical socialist Alexis Tsipras, leader of the far-left SYRIZA coalition, is seeking to make political hay out of the generous terms given to Spain. Tsipras, who is telling voters they can ignore austerity demands by the EU and still remain in the euro zone, said, “The developments in Spain confirm the position we adopted from the start – that the crisis is a pan-European problem, and the way it has been handled so far has been socially catastrophic and completely ineffectual.” Even the pro-bailout parties have been forced by political necessity to promise to renegotiate some of the harsher terms of the agreement. Not surprisingly, spokesmen for the EU, the ECB, and the IMF have all rejected that notion.

Early Monday, world markets reacted favorably to the Spanish bank bailout, easing fears of a fiscal crisis that would spread to other countries and cause a meltdown similar to the one that brought about the Great Recession in 2008. But the rally may be shortlived. With Greece on the edge of political chaos, fears of what might happen if Athens is forced to leave the euro zone could ratchet up the tension once again and endanger the shaky financial system along the entire southern periphery of the EU.

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  • guest

    The PIIGS will need to be off the euro. How can different economies work the same? Someone will be creating a welfare state. They should consider being on their own currencies like Denmark, and Britain. The Euro was a stupid idea.

    • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

      As long as Germany is there to pay the bill, those sucking off of them will keep spending.

  • http://libertyandculture.blogspot.com/ Jason P

    The Spanish government did over spend on welfare. It’s mistake is to bailout the banks. This is how it’s running up its debt.

    It should let its banks fail. They gave mortgages with no down payments, created a bubble, and are now suffering from the crash. Let new and better banks take over. Now that they are in a monetary union there is no reason that German and Dutch banks can take Spanish deposits and give out loans. Of course, the Spanish government can’t get foreign banks to back reckless lending … but that’s the solution.

    • http://libertyandculture.blogspot.com/ JasonPappas

      Damn, you can't edit your posts anymore? See corrected version below:

      • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

        Jason you can edit. When you are signed in you can edit until someone response to it.

        When you post as a guest you don't have that option.

  • http://libertyandculture.blogspot.com/ Jason P

    The Spanish government didn’t over spend on welfare. Its mistake is bailing out the banks. This is how it’s running up its debt.

    It should let its banks fail. They gave mortgages with no down payments, created a bubble, and are now suffering from the crash. Let new and better banks take over. Now that they are in a monetary union there is no reason that German and Dutch banks can take Spanish deposits and give out loans. Of course, the Spanish government can’t get foreign banks to back reckless lending … but that’s the solution.

    • Larry

      You're right it didn't overspend on welfare, it beggared its economy on the green boondoggle. Each of the PIIGS countries has a different problem.
      Greece's is the fact that it's "citizens" have spent decades voting themselves bread and circuses, but not paying the taxes to pay for them.
      Italy's is that the only industry south of Rome is organized crime, and that half of the place hasn't returned a cent since unification.
      Ireland's is a massive glut of cheap credit for pie in the sky ideas.
      Portugal's is just plain Govt incompetence.
      Spain's is the great green economic destruction.

      Different problems, different solutions, same end result.

      They will all eventually run out of Germany's money.

      • http://libertyandculture.blogspot.com/ JasonPappas

        That's exactly right … variations on a theme. One hopes that Germany "shrugs" and just says nein.

      • ebonystone

        Back in the '90's, I was on vacation, traveling across southern Germany by train. The other passenger in the compartment was a German civil-service employee, and we had a bit of a talk about the problems with the re-unification with east Germany. He said that it was taking longer, and costing more (a lot more!) to rebuild east Germany than had been predicted. He said his taxes were about $150/month higher to pay for the reconstruction. But he felt it was worth it. I often wonder how he feels about his taxes paying to bail out Greece and Spain (and others yet to come). At least the east Germans were kinfolk, more or less.

  • H&R_ Barack

    …..The rage in Spain falls mainly upon the pay-ing………

  • aharris

    Keep and eye on Europe and be prepared. Of course, the answer is never less government and more individual responsibility, it's always more of someone else's money until there isn't any. When Europe runs out of their own, how soon will they be knocking on our door and blaming up for their problems?

  • tagalog

    The European nanny states are going down. What will replace them? Fascists? Monarchies?

    • esatire

      Monarchies can be nice. Fashionable parties, large shiny hats, public beheadings… all the good stuff :)

      • tagalog

        Until they start making those interlocking defensive treaties. And building those goose-stepping armies.

        • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

          They can't afford the tall leather boots. They might need to settle for pretty tinfoil hats.

  • NAHALKIDES

    Apparently, people never learn. One more bailout just makes the eventual collapse that much worse. Spain was apparently not required to make any cuts in spending or remove any government regulations – now Greece will feel justified in demanding the same sweet deal.

    • http://libertyandculture.blogspot.com/ JasonPappas

      The Irish are envious of the terms given Spain and want to re-negotiate their bailout to lessen the austerity. Everyone wants a bailout by the hardworking people of Germany.

  • abutom1128

    IRELAND IS DROPPING THE EURO AND GOING BACK TO THE POTATO. HAS ANYBODY GOT FIVE FRENCH FRIES FOR A SPUD. NEW IRISH FAST FOOD CHAIN OPENING IN NEW YORK. POTATOS TO GO. WE DELIVER. http://WWW.MEDIACRAPMATTERS.US

  • mrbean

    Ahhhh I guess Socialism doesn't work again….and again….and again. But the die-hard leftists will never admit it no matter how over whelming the evidence is.