Mario
Draghi's Diabolic Spiral
Raul
Ilargi Miller
2
August, 2012
Mario
Draghi did a press conference today. "Everyone" was eagerly
awaiting it, and nobody seemed to understand it makes no difference
what he says. At least, that is, from the point of view of saving the
euro, or Spain, or Italy, or the eurozone. Draghi let slip a dumb
remark last week at what was essentially no more than an Olympic
cocktail party, and now he's supposed to make it all come true. But
he didn't say anything of substance then or now, because he doesn't
have anything of substance to offer.
Unfortunately
(well, for the European people), though, there are still financial
markets out there demanding Blooper Mario hand over more European
taxpayer money. What he'll try to do (and what will be another
grossly expensive failure) is to save the banks, and to do that at
the cost of impoverishing the people of Europe even further. The
markets will say he disappointed. For the good of the people of Spain
and all of Europe, Draghi should be sacked, ASAP, but the banks may
want him to stay on a bit longer; he might deliver a few hundred
billion more. So he'll stay. For now. Until the people hit the
streets. Again.
But
alright, let's see if we can approach things in a different way for a
change. Instead of me analyzing what's going on, I'll provide you
with a flood of data and numbers and stories, and you then can, after
reading it all, create a "feeling" for what is happening, a
mental picture, and reach your own conclusion on what the odds are
for a solution for Spain and the eurozone at large. And I'll shut up.
Or try at least.
Here's
your key: It's the people, stupid! Not the
economy; it‘s only the economy if that economy can actually be
resurrected. The future of Spain, and Europe, will be decided in
streets and kitchens and living rooms, not in bank vaults and
boardrooms. You can only squeeze the people so far. That's not some
political statement, nothing to do with socialism or anti-capitalism,
it's just a basic fact. Apparently it's going to take a brush with
reality for many loud-mouthed pundits and politicians to figure that
one out. So be it.
By
the way, Spain sold 10-year debt this morning at 6.647%. It'll be a
matter of weeks this way. (UPDATE: 10 year yield is back up
over 7%.)
To
get off to a good start, I'll lead off with what Sven Böll, Michael
Sauga and Anne Seith wrote for Der Spiegel about Draghi's (in)famous
"I'll do whatever it takes" remarks:
It
was an illustrious meeting that British Prime Minister David Cameron
was hosting on the evening before the opening of the Olympic Games in
London. Prince Charles joked with International Monetary Fund
Managing Director Christine Lagarde, while top chef Tom Aikens served
up Scottish salmon and Yorkshire goat cheese. The heads of global
corporations like Google enthusiastically applauded the videotaped
appearances of English celebrities, from Victoria Beckham to Richard
Branson.
It
was meant to be a day of glamour, but then Mario Draghi, the
president of the European Central Bank (ECB), made a seemingly
trivial remark -- but one that ensured that the 200 prominent guests
were swiftly brought back to gloomy reality. His organization, he
promised, would do "whatever it takes to preserve the euro."
The
audience treated the remark as just another platitude coming from a
politician. But international financial traders understood it as an
announcement that the ECB was about to buy up Italian and Spanish
government bonds in a big way. So they did what they always do when
central banks suggest they might soon be firing up the money-printing
presses: They clicked on the "buy" button.
Stock
and bond prices shot up within minutes, and the yields on some
southern European debt securities saw a considerable drop. Newspapers
and online news services called it an act of liberation, and market
speculators quickly concluded that the ECB was apparently prepared to
provide them with what one banker called "excellent gains in
share prices" in the coming months.
Go
markets go! I'm left wondering if perhaps Mario had been drinking
when he said it. And if that drink could spell the end of his career.
Next
up, Angela Monaghan discusses a report by the Open Europe think tank.
I don't want to influence your thinking process, but the title does
sort of give it away:
A
full-blown sovereign bail-out of Spain would be economically and
politically impossible and cost up to €650 billion, an in-depth
study has warned.
Leading
think-tank Open Europe made the estimate based on the assumption the
Spanish government would be forced out of the markets for three years
because of its unsustainable borrowing costs, as happened in Greece,
Ireland and Portugal.
Between
now and mid-2015, Spain has funding needs of €542 billion, with its
banks requiring up to €100 billion on top of this. The Spanish
regions possibly require another €20 billion, according to the
study. A Greek-style bail-out for Spain would bleed dry the
eurozone's €500 billion rescue fund, making an alternative solution
essential.
Fears
that Spain will need a sovereign bail-out mounted last week after the
government's borrowing costs hit fresh highs and Catalonia followed
Murcia and Valencia as a region which may be forced to turn to Madrid
for assistance to meet its debt obligations.
"The
regions will not make or break Spain financially, but their bail-out
requests show how politically difficult it will be for Spain to rein
in spending and reform," said Raoul Ruparel, head of economic
research at Open Europe."The current bank rescue plan is clearly
insufficient, while a full bail-out – which could be in the region
of €650 billion – is impossible."
Open
Europe said the most likely scenario would involve a loan of around
€155 billion and more liquidity provision from the European Central
Bank in Frankfurt. "However, even that could, at best, only buy
Spain six months to a year," said Mr Ruparel. [..]
Mario
Draghi, the ECB president, vowed on Thursday to do "whatever it
takes" to save the euro. "Believe me, it will be enough,"
he added, triggering market expectation of further policy
intervention, although some analysts said it was more words without
action.
Open
Europe said that seven of Spain's 17 regions have "unattainable"
deficit reduction targets this year, as they are expected to achieve
cuts worth more than 2.5pc of their gross domestic product.
The
think tank said Britain might come under pressure to contribute to a
Spanish bail-out because of the extent of UK bank exposure to Spain.
"UK banking sector exposure to Spain totals €70 billion –
the fifth highest in the EU – while Spanish bank exposure to the UK
stands at €343 billion.
Meanwhile,
the Spanish economy continues to deteriorate, write Jonathan House,
Ilan Brat and David Román for the Wall Street Journal. And that of
course means that all the negotiations and the calculations will need
to be redone.
The
central government in Madrid said it had a budget deficit equal to
4.04% of gross domestic product in the first half, up from 2.2% a
year earlier, as tax revenue remained weak and Madrid moved to extend
emergency support to the country's financially ailing regional and
municipal governments.
Separately,
Spain's two most populous regions, Catalonia and Andalusia, declined
to participate in a meeting of regional finance chiefs with Spanish
Budget Minister Cristóbal Montoro in protest over strict budget
targets Madrid imposed on them.
The
regional resistance highlights the political and social costs of
Spain's push to slash an overall budget deficit—including the
central, regional and municipal governments—that reached nearly 9%
of GDP last year.
Citing
severe liquidity strains, Catalonia's government has delayed July
payments for social-service providers, including hospitals and
retirement homes. As many as 100,000 employees could suffer payment
delays as a result, local media say. Spanish regions are responsible
for over a third of spending in the highly decentralized country,
including politically sensitive areas such as health and education.
Nonetheless,
in a new sign of waning investor confidence, data from the Bank of
Spain showed a new surge in capital flight from the country's economy
and financial system.
Net
outflows reached €41.3 billion ($50.6 billion) in May, compared
with a net outflow of €9.6 billion in the corresponding month last
year. Portfolio investment, which includes investments in public and
private debt instruments, also posted an outflow of €9.2 billion,
driven primarily by foreigners taking that investment money out of
Spain.
Spanish
families and companies also pulled some of their deposits out of
Spain, removing €1.8 billion, while €606 million from foreign
companies and families flowed into the country, the Bank of Spain
said.
These
deepening fiscal problems have thrust Spain to the forefront of the
euro-zone debt crisis. The government of Prime Minister Mariano Rajoy
in June asked the European Union for up to €100 billion ($123
billion) in aid to help clean up its ailing banks, and the
government's spiraling borrowing costs have fueled speculation it too
will need a bailout.
In
July, the government negotiated new budget-deficit targets with the
EU that will give Spain an additional year to narrow its deficit to
the 3%-of-GDP limit for EU countries. Spain has agreed to lower its
budget deficit to 6.3% of GDP this year, to 4.5% of GDP in 2013 and
to 2.8% of GDP in 2014.
Some
analysts worry the new target is already at risk, given the central
government's deteriorating finances and its difficulty in bringing
the country's regions to heel.
Spain's
economy continues to deteriorate. Unemployment figures for the second
quarter of 2012, released last week, showed the jobless rate reached
a record high of 24.6%, the highest in the developed world, and the
government recently warned that the country's economic contraction
would drag through next year. Seasonally adjusted retail sales, an
indicator of consumer confidence, fell 5.2% on the year in June,
compared with a 4.9% yearly drop in May, Spain's National Statistics
Institute said Tuesday.
Persistent
concerns about Spain's economic troubles are spurring capital flight.
From January to May, net capital outflows amounted to €164.9
billion, 44% more than the €114.6 billion in outflows during the
whole of 2011, according to the Bank of Spain.
But
the most interesting developments are the ones taking place inside
Spain, the ones directly affecting the Spanish population. For one
thing, most of the Spanish regions are utterly broke. All the talk
about saving the banking system, what does it mean when the people
sink ever deeper into the swamp? Poorer people means less tax revenue
means more budgets cuts means poorer people. Saving banks is not
going to break that cycle. It's almost too simple, isn't it?
First,
Nick Meo for the Telegraph:
Spain's
regions spent billions competing with each other to build prestige
projects when the economy was good. Now the young are being crushed
by the debt burden, which promises to cause a Greek-style disaster
which many Spaniards are starting to blame on Europe.
On
the way to the docks in Valencia, past rows of dreary blocks of
flats, is a fabulously expensive opera house built to get the Spanish
city noticed, no matter the price. The building, centrepiece of the
City of Arts and Sciences cultural complex, is the kind of experiment
in contemporary architecture on which Spanish cities spent billions
of euros during the giddy decade to 2008 - when the property bubble
burst and the economy crashed.
An
arresting, glimmering white building that looks as if it could have
just flown in from outer space, surrounded by pools of cool blue
water, it was supposed to rival the Guggenheim Museum in Bilbao or
the cityscape of Barcelona, up the coast to the north. It seemed
expensive at the time. But it is only now that Valencia understands
the true price of architect Santiago Calatrava's bold vision. The
city, Spain's third biggest, is so mired in debt that last week it
had to turn to Madrid for a €2 billion bailout - setting a
precedent for other Spanish regions.
Within
days Murcia region had followed suit and much larger Catalonia, which
is €42 billion in debt, is likely to do so shortly. Between them,
Spain's 17 regions owe an estimated €140 billion. The dawning
realisation of what this could mean for Madrid's own debt problem has
driven Spanish borrowing charges to a dangerous new high, and raised
new fears about the entire country's need for an EU bailout.
In
Valencia, the recession means that hospital wards are closing, local
taxes are rising, and half of Valencia's young people are out of
work. "Of course the City of Arts and Sciences was built during
the golden age when Spain was supposedly a strong country," said
Josep Rodriguez, 29. "We know now that wasn't true. Everything
was a big bubble."
He
is about to lose his job in public radio along with three quarters of
his colleagues, victims of sweeping cutbacks by the regional
government. "For our generation there is no hope, no chance of
jobs because of constant cuts, and I think the next three or four
years are going to get worse," he said. "People are worried
now that we will end up like Greece." [..]
Spain's
dire and still worsening economic problems are now causing serious
concern far beyond its borders – not least in Brussels, Frankfurt,
and Berlin, where fears are growing that it will need another
gigantic bailout. After Ireland, Portugal and Greece, this may be one
that Europe is simply unable to afford.
Several
years of economic recession in Spain have started to expose
corruption scandals, incompetence and overspending that cost
billions. The state of the economy looks much worse than anyone
thought a year ago. A series of banking scandals in the past few
weeks have made the City of London look reputable by comparison –
and now borrowing costs are rising, markets have scented blood, and
Spaniards once confident of their economic fundamentals are now
wondering how far they are going to fall.
Excess
during the good years, especially by regional governments, seems
foolish now."We are becoming beggars in a city of expensive
wonders," joked one jobless man who sells chewing gum
to make a bit of pocket money. [..]
The
big projects were not just a matter of municipal vanity. When Spain
joined the euro its 17 regional governments had access to cheap
money, and wanted to spend to attract the international tourist
business. Fierce competition between cities drove up fees. Billions
were lavished on theme parks, museums and art galleries. Every city
had to have a lavish university, and be connected by an expensive
network of high-speed trains. Politicians were under pressure to
outspend each other, and Valencia was determined to outspend
everybody.
A
Formula One urban racing circuit was brought to the city, for which
Bernie Ecclestone was paid €20.5 million annually; he is not a
popular man now among a population reeling from spending cuts. A
spectacular €2.4 billion new harbour built for the America's Cup in
2007 now lies almost empty. Castellon Airport, north of Valencia,
cost €150 million but no commercial flights have landed since it
opened in March. Private developers were swept up in the excitement,
and blocks of empty and half-built flats now disfigure the tourist
beaches north of the city. [..]
There
is not yet the widespread poverty that has afflicted Greece.
Unemployed young Spaniards can rely on two of their traditions –
help from the extended family, and work in the black economy. But as
recession drags on, life will get harder.
Anger
with discredited bankers, developers and politicians is showing signs
of turning into a protest movement which threatens parties of both
right and left. Student leaders and union bosses have already started
demonstrations and strikes. There have been protests since the
beginning of the recession, but now people talk about the calm before
the storm. "This government is very worried, they can see
growing anger and they have to follow their instructions on austerity
from Brussels," Mr Anyo said."Expect a hot autumn in
Spain."
Suzanne
Daley at the New York TImes makes it more personal:
Dolores
Fernández Mora, 76, and her husband, Mariano Blesa Julvé, 75, once
thought they would end their days in relative comfort, their house
paid off and a solid pension of about $1,645 a month. Perhaps they
would travel a bit.
Instead,
they are supporting their unemployed 48-year-old daughter and two of
her unemployed adult sons who now live with them in their tiny
two-bedroom home here in northern Spain. They have taken over their
daughter's debts. Sometimes there is hardly money for food.
"While
she isn't working, I don't have new teeth, and that is that,"
said Ms. Fernández, who, seated in her living room recently, showed
off the gaps in her smile.
As
the effects of years of recession pile up here, more and more Spanish
families — with unemployment checks running out and stuck with
mortgages they cannot pay — are leaning hard on their elderly
relatives. And there is little relief in sight. [..]
"The
crisis in Spain is affecting the elderly in a very special way,"
said the Rev. Ángel García, who runs a nonprofit group helping
children and the elderly. "Many grandparents want to give what
they can, and they do.
But,
unfortunately, sometimes what is happening is that the younger
generation is ransacking the older generation. They are taking all
that they have."
A
survey this year by Simple Lógica, Gallup's partner in Spain, found
a sharp increase in the number of older people supporting family
members. In a telephone survey conducted in February 2010, 15 percent
of adults 65 and older said they supported at least one younger
relative. In the survey conducted in February 2012, that number had
risen to 40 percent. Data compiled by an association of private
nursing homes, inforesidencias.com, found that in 2009, 76 percent of
its member homes said they had vacancies. Last year, 98 percent of
them did.
Such
numbers, experts say, reflect growing desperation in Spain, which has
the highest unemployment rate in the euro zone. According to recent
government figures, about 1 in 10 households now has no working
adults.
Some
experts say they believe that retired people, sharing their pensions
and dipping into their savings, have been the silent heroes of the
economic crisis, and that without them Spain would be seeing far more
social unrest. In many cases, they stand between their middle-aged
children and homelessness.
"Why
aren't there more people in the streets protesting, asking for food?"
said Gustavo García, director of Casa Amparo, Zaragoza's municipal
nursing home. "The answer is the elderly." [..
Experts
say that Spain's elderly are not only dealing with the financial
aspects of the crisis, but also suffering from watching the collapse
of their children's lives. Antonio Martín said he lost sight in his
right eye after his daughter Antonia, 41, and her baby girl came home
to live with him and he developed severe blood pressure problems.
He
says he is happy to help Antonia, who lost her job when the
construction company she worked for went bankrupt. "I said,
'Come, come.' It's a normal reaction." But he said what really
bothered him was realizing all she had lost. "She had a job and
a house, and now she has nothing," he said. "That is the
thing that is so hard."
While
Sharon Smyth for Bloomberg reports on the newly found desperate ways
of the Spanish real estate industry:
Idealista.com's
pitch to Spaniards in their 20s still living with mom and dad is
simple: Rent your own place or end up having sex in the back of a
cramped car for years to come.
The
new 20-second TV advertisement by Spain's biggest real estate website
features still shots of couples and threesomes caught naked in cars
with looks of surprise. It's aimed at 20- to 29-year-old Spaniards,
seven in 10 of whom still haven't left home as Spain's unemployment
rate soars to a record. "We were brainstorming the moment when
people most think 'I need my own home' and having sex in a car sprang
to mind," said Fernando Encinar, co-founder of Idealista.
"Millions of Spaniards have gone through it."
For video SEE HERE
Spain
has the highest rate of home ownership in the euro zone after Estonia
and Slovakia, at 83 percent of dwellings, compared with a 65.5
percent rate in the U.S. The Spanish government is trying to
encourage more people to rent as banks give fewer mortgages, making
it more attractive for foreign funds to invest in the nation's 1.5
million of unsold homes. The rental market in Spain will grow to 25
percent of the total by 2015, according to Encinar.
"Youngsters with no deposit saved and permanent labor contract are effectively locked out of the mortgage market," Encinar said. "We are already seeing part of that huge pent-up demand running into flat sharing as it's the only option for some."
"Youngsters with no deposit saved and permanent labor contract are effectively locked out of the mortgage market," Encinar said. "We are already seeing part of that huge pent-up demand running into flat sharing as it's the only option for some."
There
are 25 million homes in Spain, 3 million of which are empty, and 1.8
million are rented. Ads on Idealista for rooms in shared rental
apartments have surged more than 120 percent to 26,079 in the past 12
months. The company organizes regular gatherings to match up those
seeking rooms in shared rentals with people looking for roommates.
In
May, Public Works Minister Ana Pastor said she will adopt measures to
boost investment in the rental market. The changes would protect
landlords by speeding up evictions of tenants who don't pay, allow
landlords to raise rents above the annual inflation rate and reduce
the duration of leases. [..]
The
measures, expected to be brought before congress by year's end, would
encourage foreign funds that are looking to invest in Spain by
purchasing apartment blocks and absorbing some of the housing stock,
said Fernando Rodriguez de Acuna Martinez, a partner at Madrid-based
property consultant R.R. de Acuna & Asociados.
"Funds,
mainly from the U.S., are showing interest in becoming big landlords
here like those that you have in the Netherlands and the U.S. because
they see a huge percentage of the population has been priced out of
the buyer market and rentals are the future," according to
Rodriguez de Acuna. "They are awaiting the introduction of these
measures to secure legal guarantees before they get their wallets
out."
The
Spanish economy, the euro area's fourth-largest, is mired in its
second recession since 2009 after the collapse of a decade-long
property and construction boom, which at its height accounted for
about 18 percent of gross domestic product. Rents in Madrid have
fallen 14 percent from their June 2008 peak. In Barcelona, Spain's
second-largest city, they've dropped 20 percent, according to
Idealista data.
Youth
unemployment in Spain surged to 52.1 percent in May from 45.4 percent
a year earlier. The overall jobless rate at 24.6 percent is the
highest in the 27-nation European Union. A study by La Caixa
coordinated by Almudena Moreno and titled "Transition to
Adulthood of the Spanish Youth" found that of those who have
found a job, 59 percent have short-term contracts.
"Young
Spaniards no longer have the option to move out of the family home as
high unemployment and precarious contracts for those that do work
means they can't emancipate themselves," she said. "Many
young people are even emigrating or thinking about it."
In
the first half, the number of Spaniards moving abroad jumped 44
percent from a year earlier to 40,625. Among those planning to leave
is Miguel Castillo, who said he's had to live at his parent's home in
Malaga after failing to find a permanent job even with a fine arts
degree and a master's degree in gender studies. He doesn't own a car.
"I
feel damaged by the system," Castillo said in a telephone
interview. "I have all this education and I can't do anything
with it or lead my life in a dignified way." Castillo, 30, said
he's planning to go to the U.K. in October to learn English and find
work doing "anything at all" after only finding jobs as a
waiter or a supermarket cashier in his hometown of Alhaurin del
Grande.
About
60 percent of Spanish newborns have parents more than 30 years old,
the highest average among the 15 original European Union nations,
according to a La Caixa study published July 10. At the same time,
the birth rate, historically one of the lowest in Europe, has been in
decline since 2009, according to the National Statistics Institute.
Spanish
home prices posted their biggest annual decline on record in the
first quarter, falling 12.6 percent, the most since the measurement
began in 2008, the National Statistics Institute in Madrid said June
14. Home prices have declined 30.4 percent since the peak in December
2007, according to Tasaciones Inmobiliarias SA, the country's biggest
home-appraisal company.
"Even
with the drop we've seen already, buyers with cash are making offers
with a 20 percent discount to asking prices and those bids are being
accepted," said Cesar Oteiza, Idealista's other co-founder.
"Home prices are down so much and there's more on sale, yet to
young people buying is more out of reach than ever."
The
number of home sales in the first quarter were 72 percent below their
peak in the second quarter of 2006, according to data from the
Ministry of Public Works. Spanish banks granted 21,498 new mortgages
in April, an 83 percent drop from the peak in January 2007, according
to the Bank of Spain. [..]
Idealista's
ad aimed at encouraging rentals, entitled "Caught in the Act,"
has been banned in Italy. The uncensored version can only be shown in
Spain after 10 p.m. It has received 400,000 viewings on video-sharing
website Vimeo, according to Encinar. "It's a testimony to the
fact we have really connected with how young people feel today,"
he said.
Oh
well, there's always Ambrose:
Defying
charges of heresy, Spanish economist Lorenzo Bernaldo de Quiros has
penned a piece in El Mundo that more or less calls for Spanish
withdrawal from the euro – unless Mario Draghi conjurs up real
magic at the ECB.
My
rough summary/translation: Spain is heading for insolvency as big
chunks of debt come due later this year. Events are moving fast. The
relevant issue is no longer whether this will happen, but whether it
is better for Spain to restructure its debt "inside or outside"
EMU.
"Inside
the euro and without financial resources, a debt reduction is
pointless. The Spanish economy would have to go into deepening
internal deflation, with cuts in prices and salaries, to restore
competitiveness. This is impossible, or at least improbable."
The process would take too long. Capital flight would continue. It
would lead to another debt restructuring in short order (as in
Greece). "The snake would bite its own tail in a
diabolic spiral," he said.
Mr
Bernaldo de Quiros — who heads Freemarket Corporate Intelligence —
seems to assume that there will not in fact be a eurozone rescue (or
that the Rajoy government will refuse to accept Troika terms). He
contemptuously rebuts the "apocalyptic casuistry" of those
who claim that the banking system would necessarily collapse, or that
real interest rates would surge, or that Spain would succumb to
hyperinflation.
He
notes the success of Britain, and the Scandinavian states in leaving
the Gold Standard in 1931 – and those Latin American states that
did so later (perhaps a better parallel, since Spain today has net
external debt near 100pc of GDP). Their recoveries were in stark
contrast to those like France, Poland, Belgium, Italy, and the
Netherlands that clung to the dysfunctional fixed-exchange system
until the bitter end, trapped in perma-slump.
He
cites a study from the Centre for Economic Policy Research studying
13 cases of devaluation shocks over the last two decades. Output
exceeded its previous level within three years in ten of the
countries, with an average growth rate of 10.3pc (ie, even more than
the oft-cited growth rate of Argentina, post-liberation). Nothing is
foreordained, either way. What matters is the policy pursued
afterwards. "It would be in our hands whether it would be a
success or failure."
Competitiveness
would be restored rapidly; the Bank of Spain would be able to act as
a lender of last resort again and eliminate the risk of future debt
restructurings. The country would at least have a sporting chance of
avoiding protracted depression. Obviously it would all go wrong if
the government turned crudely populist. "Whatever the case, the
current situation is unsustainable".
I
pass this along. The arguments are familiar to readers of this
thread. He does not address the issue of what would happen to Italy,
and therefore to France, and therefore to Germany, and therefore back
to Spain itself, if Madrid did indeed light a match to this powder
keg, but again, perhaps that is apocalyptic casuistry.
So
why did the markets rise in anticipation of Mario's loose-lipped
cocktail party comment last week? Are all those big and savvy
investors really that gullible? In a few words: yes, they are.
They're looking for short term gains. And we collectively seem to
have forgotten it, but short term gains will always lose out to long
term bare survival.
Maybe
Rajoy will be PM of Spain a few more months, and maybe Draghi can
hang on to his ECB post for a while longer as well. But once we move
out of the plush comfort zones we've come to see as the sole reality
of our societies over the past decades, we will be hit over our heads
with fundamental fact that says the economic fundamentals are not
built in stock exchanges and boardrooms. Take away people's basic
necessities and people become the economic fundamentals.
Why
would Spain stay in a eurozone that has neither the will nor, more
importantly, the firepower to save it from disaster 2.0? In the end,
once its people wake up to the fact that things can only get worse if
they don't fundamentally change, Spain will choose to go its own way,
like it's done for a very long time. And Mario Draghi will be a
forgotten footnote, if he's lucky, in what will be regarded as just
another embarrassing episode of European history.
Embarrassing,
because in hindsight everyone will understand what has been obvious
to us for a long time: that is, there is no solution for a Europe
that tried to unify in the spectacularly failed fashion that is the
eurozone. It's simply not the sort of project we should trust the
money, power, and glory hungry amongst us to execute.
But
we always do, time and again. Now why don't you try and tell me why.
And not why all the others do it, but you yourself. That's a much
more interesting topic. I mean really, what were you thinking?
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