EU Referendum


Eurocrash: Spanish "rescue" may signal end game


04/06/2012



Spain 229-juf.jpg

As the net closes on a bankrupt Spain, Ambrose is assessing the odds of the country having to go for a bail-out.

"A bail-out would not be the apocalypse," says José María Beneyto, foreign affairs spokesman in Spain's parliament. "You have to live with it. We have got to escape this or we'll go mad worrying about bonds spreads".

On top of that, Cyprus is edging closer to a bail-out after President Demetris Christofias said his country had been engulfed by large exposure to Greece. "I don't want to absolutely exclude it", he says. The Cypriot banking system is nine times the country's GDP, with assets of €157bn (£127bn). It has been called the "Iceland" of the South.

With Spanish premier Mariano Rajoy calling for an EU "fiscal authority" and use of the European Stability Mechanism (ESM) to recapitalise banks, Ambrose also picks up the "master plan" for the future of the EU.

However, Ambrose is concentrating very much on the immediate crisis, citing Gary Jenkins from Swordfish, who says half-measures are no longer enough. "We may be approaching the endgame where either the eurozone or the ECB takes action to stem the bleeding or the whole thing collapses," he adds.

Soros, apparently, is giving it three months, suggesting Greece might leave the euro in the autumn, which is where we were last February. The "colleagues", it thus seems, are engaged in a deadly race against time – as to whether they keep the euro going long enough for them to be able to have anything left to save when it comes to drafting a new treaty.

Personally, I don't think Ambrose and others (and especially Soros) have fully taken on board the implications of the EU "master plan". In a separate piece, Ambrose writes that "Germany can break the logjam at any time by agreeing to fiscal union, debt-pooling and full mobilization of the ECB, with all that this implies for its democracy". 

The answer from Chancellor Angela Merkel over the weekend, he adds, was: "under no circumstances", in which case we should prepare for the consequences. But, according to Welt, this is precisely what is being considered by the quartet, the solution being crafted at a European level. 

From behind the scenes, there could be ready to emerge a game changer, although not necessarily for the better. The implications for the sovereignty and the democratic status of the participating countries is dire. And if this is the only thing on offer, some may refuse. It may thus signal that the end game is indeed close.

COMMENT THREAD