It was not hard to find video of Spanish workers rioting outside the parliament yesterday. They numbered into the thousands, if not more. While they took to the streets to protest austerity, their prime minister, Mariano Rajoy, was talking to the press. He said that he would ask his neighbors and the International Monetary Fund for a bailout if the yields his nation would have to pay on its sovereign debt were too high. The austerity masters at the European Central Bank and IMF, and in Germany, got to watch the reaction Rajoy will face if he buckles. And the same scene could easily play out in Italy if it is the next to fail financially.
Spain faces several hurdles now, but the largest one may be its own citizens. The government would need to essentially have its budget managed by outsiders. That is, if those outsiders are willing to take the job. The ECB has sought legal advice, as has the Deutsche Bundesbank, about the legality of the bond-buying program the ECB has proposed to bring down borrowing costs of the most troubled nations.
Spain, no matter the size of the bailout, will still find that a deep recession could make the amount it needs larger and larger. With unemployment at 25% and probably rising, and a gross domestic product that may be contracting at a faster rate than any nation other than Greece, Spain will have to go to its rescuers more than once.
The riots will become larger as questions of jobs, taxes and pensions become increasingly troubling. As has happened in other nations around the region, Rajoy could lose his job because he is the symbol of the capitulation of Spain. Whoever replaces him may quell the riots after campaigning against austerity, only to find there is no other way out.
Douglas A. McIntyre
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