Colm McCarthy: A 'Yes' vote is the least bad option
A rejection of the fiscal treaty in the upcoming referendum will make a grim situation worse, says Colm McCarthy
The escalating problems in the Spanish banking system look like a replay of what happened in Ireland, with the solvency of the state brought into question through excessive willingness to bail out bank creditors.
If it is European Central Bank policy that bank creditors should be paid in all circumstances, there will need to be eurozone resources available to meet that obligation, or the solvency of more states will be threatened.
The current unsustainable arrangement where banking losses are transferred on to the balance sheets of over-borrowed governments is a moral hazard regime: it removes all market discipline on banks.