Euro crisis, playing for keeps

Posted on Friday, 1st June 2012 @ 07:12 PM by Text Size A | A | A

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Euro 2008. The boys of Spain beat Germany one-nil, and were crowned new champions of the old continent. What a game! What a fete! Must have been the last spring Madrid felt like Madrid. Triumph coalesced with youth into hope, painting the future bright. Experts predicted, Spain was on the road to world stage football glory in South Africa. A month later, rumours of a global crisis would catch the Spanish capital offside. By the next spring, unemployment was on the surge and Spain´s pivotal construction sector was grinding to a halt. Today, four brutal years later, Spain is again in the spotlight, Madrid the amphitheatre where the euro end game is being played out.

Don´t ever underestimate Madrid. There is madness in Madrid´s method. Or vice versa. Berlin may have easily subdued Athens, Lisbon and Dublin, but cracking Madrid won´t be such child´s play. Madrid is rock hard proud; it is clannish and it is crazy. Madrid does not let insiders in. Madrid was the first city to rise up against Napoleon´s troops and it was the last city to fall in the Spanish civil war, enduring a three-year siege. Popular sentiment is any fresh uprising will spark in Madrid, site of the major Democracy Now/15M demonstrations last spring/summer.

Financial Times writers Miles Johnson and Patrick Jenkins write this week that Madrid is playing a game of chicken with Berlin, seeking to force its hand on the question of recapitalizing banks via the European Stability Mechanism, an idea which Germany is firmly resisting.  Madrid insists it will accept no bailouts; it feels Spaniards would never forgive it. Spain´s government has pressed ahead with labour and finance reforms, has cut budget deficits, but is keenly aware that with growing unemployment, tempers are on the boil.

Spain cannot sustain cutback goals, not without attendant civil unrest. Youth unemployment hovers at fifty percent and on the day of the last national strike in April, protests became fiery and violent in Madrid and Barcelona. A bailout would bring profound budget cuts and delay economic recovery. Yet it is equally unfortunate and unfair that the taxpayers of Germany are being called upon to pay for past Spanish indiscretions.

Whether Madrid is playing chicken, football or is practising the ancient art of tauromaquia, this past week the sport became costly for Europe. Since the European Central Bank (Germany) won´t become a lender of last resort, as Madrid is demanding, Madrid flew a Spanish kite, hinting it would be injecting billions of sovereign bonds into its crashing Bankia, which could then be swapped for cash at the ECB’s three-month refinancing window. The markets reacted with expected hostility; stocks, gold, Brent and crude oil fell and Spain´s borrowing costs climbed to record highs. As the euro tumbled to a multi-year low, investors and economists questioned if the Mariano Rajoy government was calling plays on the trot.

Within a blink, the Financial Times was reporting that the ECB had thrown down the red card, rejecting the Bankia bond bailout plan, out of hand. Spain´s borrowing costs spiraled out of control. Spain´s Minister of Finance right away countered: the ECB had not put a spoke in plans for Bankia, as Spain had presented no firm proposal to Europe, and planned to raise the money the usual way, in the marketplace. Spain was doing its best, Madrid stated, but effort was needed from Europe if the EU was to survive. By mid morning, a market-appeasing release floated down from the European Commission: Spain should be granted an extra year to get its budget deficit down if it presented a clear plan for 2013 and 2014. Brussels was also backing Madrid´s recommendations for refinancing cash-strapped banks. Distraught spectators watched the political ball dribbled up and down the pitch. Was Spain inching closer to the goal?

Life mirrors sport at all turns. Reverse that. Spain is the wild card at the centre stage in the euro crisis, while its football side is hoping to pull off a magical second Euro Cup win and a third consecutive major football victory. Fitness concerns and injuries make the team more vulnerable and experts say powerhouses Germany and the Netherlands are looking as strong as ever.  In Euro 2008, defending champions Greece were roundly and soundly beaten, earning neither money nor points. Two years later, Greece the country would be as defeated.

Greece though, is a second division nation, contributing little to Europe´s GDP. Spain, which hopes to keep its Euro 2008 title, is considered too big to fail, off the field, and it is using its size and might to strong arm Brussels and Berlin into making concessionary noises unheard in Athens, Lisbon or Dublin. The message from Madrid: save us on our terms or lose the union; if Spain falls, the team will go down with it. Euro 2012, the economic/political game, has entered the sudden death round.

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