A bit like a blockbuster, Spain may change the ending
SPAIN'S banking crisis is like watching the Hollywood version of your favourite book. You recognise the outlines of the plot but the pace is much faster and the director may change the final chapter to ensure a happy ending.
As some of Spain's banks crash, the big question is whether the Spanish will be forced to take the same medicine as Ireland or whether some other solution will be found. Yesterday the authorities in Madrid announced that Spanish banks will have to set aside an underwhelming €30bn to cover losses on their real-estate loans.
Exactly how much will come from the State has not yet been revealed, but economy minister Luis De Guindos hinted it would be below the €15bn mark.
What remains to be seen, though, is where the 'public' element of the cash will come from. If the €15bn proves optimistic and rises to a number that's beyond Spain's reach, one solution would be for them to turn to the international authorities and request for a bailout like ours. Another solution would be for Madrid to go to the IMF and seek a bank bailout.
A third solution would be force the various European bailout funds to change their rules and step into save Spain's banks.
The alternatives to an Irish-style bailout are possible because Spain is big enough to force Europe to alter the rules and because Spain has avoided some of the policy mistakes made here.
Bankia, Spain's answer to Anglo, has not been nationalised, although the government has taken a 45pc stake.
Spain has also taken care to ensure that the entire system is not underpinned by a reckless guarantee.
Most importantly of all, Spain's problems with bad loans appear to be smaller than ours despite some appalling mistakes that have led to ghost towns in some areas as well as the more familiar ghost estates.
This gives the government of Prime Minister Mariano Rajoy far more room for manoeuvre than Brian Cowen had.
Spain might just be able to apply to the IMF for a loan to bailout her banks; allowing the government to avoid the political humiliation of applying for help from Europe and taking orders from Berlin.
Even if this is not possible, Spain may be able to use its political influence to force the European authorities to allow the EFSF or ESM rescue funds to inject money directly into her ailing banks.
This may suit everybody. It would enable governments in Europe to pretend that Spain has not been directly bailed out -- something that might appeal to governments in the north where voters are tired to bailing out the south.
This outcome would also probably be the best one for Ireland because it enable Enda Kenny to argue with a fair amount of justice that Ireland's bailout (which was necessary to save our banks rather than the economy) should also be renegotiated.
Mr Kenny is already making this argument in Brussels but with a notable lack of success. The good news in a very messy situation is that Spain's problems, although immensely dangerous for Europe, may end up helping Ireland's case assuming the euro survives.