Tuesday, June 12, 2012


Finally the day has come. It was foreseeable for so long. It was negated for as long as it was foreseeable. Both Spanish government and banks repeated and repeated over and over again "we have the safest and healthiest banks in Europe", "there is no risk", "we will not need any bail-out money", ... Yesterday it was finally official: Spain took €100 billion in bailout money.

It is always the same pattern. We have seen it at least 3 times in the last 3 years: Iceland, Ireland, Greece, ... 1) denial and refusal, misinformation and lies by governments and banks, 2) accepting the bailout, 3) shifting the debts and risks from the private sector to the public sector, 4) as the rescue and bailout money runs out quickly soon we repeat with step (1).

What was slightly different in the bailout of Spain is the time the euphoria lasted. Usually once the rescue funds are injected there is a month or so of euphoria and (false) optimism. Not so with the Spanish bailout. Just 24 hours later there were mostly negative press. Mainstream media like the WSJ reported in its article "Bulls Retreat on Spain Bailout Plan": ..., bailout doesn't help Spain repair its tattered economy, ... Spain's capital injections entail a transfer of risk from the private to the public sector, ... Spain is likely to need more external help going forward. The Huffington Post put it even more bluntly: Spain Bank Bailout 'Not Going To Work'. Same at the Guardian "Hurried Spanish banking bailout fails to calm market nerves".

Next up for bailout: Italy. Just watch and see steps 1 through 4 being executed there.