Saturday 21 April 2018

Germans push weaker states towards exits

JUST when it seemed as if the eurozone crisis was on the mend, things took another turn for the worse.

Spain is in the middle of its worst crisis since its civil war, while the statement by the finance ministers of Germany, Holland and Finland seems to have knocked any hope that this country might secure a deal on its €64bn bank debt firmly on the head.

The severity of Spain's predicament has still not been fully grasped by most people outside Espana. About 25 per cent are out of work, rising to 50 per cent among under-25s. Last week saw riots as protests against Spain's austerity programme turned violent.

Prime Minister Mariano Rajoy is still resisting pressure to apply for a formal bailout while the Catalan regional government has called regional elections (which may become a proxy for an independence referendum) for November 25. This Catalan push for greater autonomy has encouraged assorted retired military officers to threaten a re-run of the civil war should unity be threatened.

Nasty, nasty, nasty.

Things are not quite so bad in Ireland, but they are still terrible. Tuesday's joint statement by the finance ministers of Germany, Holland and Finland, the eurozone's 'Triple-A Troika', in which they appeared to rule out using the ESM to fund legacy (ie, Irish) bank losses, tears up last June's agreement by EU leaders that Ireland could expect a new deal on its bank debt.

The finance ministers went on to say that bank recapitalisation should first be funded by national sources rather than ESM, effectively putting paid to Spanish hopes.

So what were the three finance ministers playing at? Tuesday's statement makes a nonsense of last June's deal. Could it be that, like climbers on a cliff, they have decided to cut the rope connecting them to the other, weaker, climbers and save their own skins instead?

Sunday Indo Business

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