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Spain's rushed bank bailout betrays the fear of our rulers

by Joseph Choonara

The government of Spain—the fourth biggest eurozone economy—has turned to the European Union for a bailout estimated at up to £81 billion.

This follows bailouts for Greece, Ireland and Portugal.

The deal came as the Spanish government finally acknowledged that it could not rescue its troubled banking system without external help. The exorbitant interest rates it must now pay to borrow money effectively shut it out of global financial markets.

The money offered to Spain will do nothing to ease conditions for the country’s 25 percent unemployed people. It won’t help the

millions who have seen their wages or benefits cut. It is a lifeline for the banks and a means of buying time for the eurozone.

But the problems in Spain and elsewhere will resurface. Last weekend’s emergency deal shows the deep roots of the economic crisis.

In 2008, as the US subprime mortgage crisis spread, Spanish economists and politicians boasted about their banks’ low level of exposure to the bad debts.

The Santander bank even went on a spending spree, taking over some of Britain’s ailing lenders.

But Spanish banks were exposed to a domestic bubble based on construction and property and sustained by cheap credit. This bubble has burst—and left them with bad debt and unsold property.

Credit fuelled much growth across the world in recent decades.

If the system was booming, profits could be used to repay the resulting debts. But it hasn’t—and the burden of debt has grown.

There is no sign of recovery. The latest jobs figures for the US were much weaker than expected. Growth in China is slowing and Europe remains in the mire.

The global elite fear that the Spanish bank bailout is a prelude to a bailout of the Spanish state.

The bank bailout will be added to the country’s national debt, making this more likely.

If Spain’s government goes bust, the International Monetary Fund and Europe’s rescue fund won’t have the money to pick up the tab.

The deep-rooted problems have left Europe’s rulers floundering with no clear consensus on what to do.

The only thing they agree on is the need to attack the public sector and the working class.

Urgency

But even this “policy” is beginning to unravel. Most of the austerity measures favoured by the European elite have already been imposed on Spain. Yet the crisis continues—and austerity is now coming under sustained attack from below.

The urgency with which the Spanish bailout was stitched together reflects our rulers’ fears about Sunday’s Greek elections.

Politicians who reject the existing bailout there were expected to poll strongly.

Mass struggles that are driving the election of anti-austerity politicians are now another fear for our rulers.


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News
Tue 12 Jun 2012, 19:45 BST
Issue No. 2307
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