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In the statement of the last European Council conclusions there is a paragraph that brings into force the agreement for the European Central Bank to intervene in extreme cases of the sovereign debt crisis.
This is no euphemism: it is written down in black on white in a paper that Rajoy carries in his briefcase as if it were a moral safe-conduct pass. It’s why the Prime Minister mulls over the financial indices with some perplexity and never ceases wondering in private at what he considers a flagrant breach on the part of the EU.
His anger is more than remarkable; he has the feeling that the European institutions do not take themselves too seriously. Perhaps now, with the premium and the bond rate on the verge of melt-down, he may already have grasped that the problem may not lie so much in the Community’s lack of seriousness as it does in an undeclared but firm intention to force the bailout of a state.
Draghi’s impassivity
The impassivity of Mario Draghi can only be strategic; beneath the gestures and even the official decisions there seems to be a taxation plan afoot that condemns Spain to a formal intervention under the threat of putting a stop to the payments.
If on Monday the ECB does not cool down the markets by a massive purchase [the prime rate today hit 6.40 percent, its highest, and there has been no announcement that the ECB will buy up Spanish bonds] it will be because Merkel has given the thumbs down in private while holding it up in public, defending before the Bundestag the need to shore up our financial system.
Delayed by their initial mistakes, the Spanish cabinet has somehow carried out its part of the deal; it has improvised – yes, improvised – an extremely hard adjustment that has filled the streets with protests; it has alienated its own electoral base with further tax increases and has drafted an even more stringent budget for 2013.
Prime-minister has 48 hours
But for nothing. Markets have been free to do as they please, scuppering all expectations, and no one in Frankfurt has moved a muscle to put a stop to the punishment. The distrust is much more profound: it has spread not just to the government, but to the state. To the entire country.
There are reasons, of course, for that visceral distrust. The over-indebted economy, governmental resistance to pruning the bureaucracy, the mutiny of the autonomous regions against the need to reduce the deficit, the technical bankruptcy of some communities, the white flag raised in Valencia, and the huge and intact apparatus of regional and local authorities. And the civil unrest that reveals a society incapable of grasping the seriousness of the emergency.
But all that was already there when the European Council, the Eurogroup, Ecofin and all the other leaders signed the commitment to act through the only possible instrument of monetary policy. It was a quid pro quo that the contracting party to the other half of the deal has, with cold impassivity, failed to honour. That silence may echo loudly this weekend in the garden solitude of La Moncloa; the prime-minister has 48 hours to see if they have abandoned him – abandoned us.
Finances
Three months to hold on
"Spain has enough cash to hold out for three months," headlinedLa Vanguardia on July 22, reporting the words of an anonymous minister. While the cost of debt appears untenable, with rates well in excess of seven percent, the daily margin qualifies this buffer as —
… “a modest cushion” for getting through the “cursed 50 days." It’s what has been called in Italy the grace period [until September 12] that the German Constitutional Court has given itself to decide whether expanding the powers of the new European Stability Mechanism (ESM) to allow it to buy bonds of countries in difficulty does not violate the Constitution of the Federal Republic or encroach on the legislative competences of the Bundestag. Until then, we must weather the storm in which the markets, wagering increasingly on a Spanish default and the collapse of the euro, have left Spain. [...] How long can this situation go on?
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