The euro is falling once again and now trading below 1.29.
It’s looking increasingly likely that Spanish leaders will do whatever is possible not to accept aid from the ESM.
In my mind, it’s virtually certain Spain will need the aid eventually and it’s equally critical that more reforms are needed.
What is stopping it? Ego. Pure political preservation. Reuters:
Spain once pushed hard for Ireland and Portugal to ask for bailouts from their partners in the euro because it was keen to shelter itself from an accelerating sovereign debt crisis.
Now the tables are turned and Madrid is holding back from applying for help, not least because the Spanish government knows all too well what befell its Portuguese and Irish peers once they did seek help — voters dumped them.
There is a faint hope the Spain is putting on a brave face ahead of a regional election on Oct. 21 but that hope is fleeting.
Italian undersecretary of finance Gianfranco Polillo explained it on the weekend.
“There won’t be any nation that voluntarily, with a pre- emptive move, even if rationally justified. I rule it out for Italy and for any other country.”
Remember that Monti’s Italian government is technocratically appointed to make the tough decisions. They don’t even have a democratic mandate and they would rather pander than risk the wrath of voters.
These decisions that are necessary, unavoidable and rationally justified. But European politicians would rather appease voters, in the hope of clinging to power for a few more years.
Appeasement tore Europe apart once and it will do it again.
