Blaming the Spanish victim as Europe spirals into summer crisis
It is time for Spain and the victim states to seize the initiative.
By Ambrose Evans-Pritchard
22 Jul 2012
The financial credibility of Spain is close to zero. Fiscal credibility is zero. Political credibility is zero. The new government of Mariano Rajoy has squandered the advantages of its absolute majority in a matter of months, and completely lost the confidence of Europe’s institutions.
That is the verdict of unnamed EU officials and sources in Brussels cited by El Pais, following the twin crash of the Madrid bourse and the Spanish bond market on `Black Friday’.
The claims are self-serving spin by Europe’s incompetent policy elite. Once again, they are blaming the victim for the consequences of their own scorched-earth monetary, fiscal, and regulatory policies.
The reason why Spain is spiralling into deeper depression is because EMU policy settings are contractionary.
The European Central Bank caused the Spanish money supply to collapse last year by tightening policy. Real M1 money was falling at double digit rates by mid-2011. The economic damage we are seeing now was baked into the pie.