Spanish bailout is now inevitable

We are getting an ever increasing deja vú feeling yet again. In 2011 it was all Greece, now just change that to Spain. Same, same, but different, or? From Presseurop.

There are three conclusions to be drawn from these events. The first is that Spain is heading inexorably towards a bailout, probably quite soon. It was always a case of smoke and mirrors to imagine that the promised €100bn (£78bn) package of support for Spanish banks would be enough and so it has proved.

This is a country with a collapsing economy, an imploding property market, banks nursing colossal losses, and 10-year bond yields at 7.5%. The question is not whether there will be a bailout, but how big it will be. At least €300bn in all probability.

The second conclusion is that the trapdoor is opening up under Greece. German patience with Athens has run out, and the IMF was forced to deny reports on Monday it was preparing to cut off financial support. The Greek government is now faced with the choice of agreeing to a new range of demand-reducing measures it knows will be both counter-productive and politically toxic in order to be able to pay its bills inside the euro zone, or to devalue and default outside monetary union. A voluntary Greek exit would be ideal for Angela Merkel.

What links Greece and Spain is that the failed approach that has brought the smaller of the two countries to the point of no return is now being tried with the bigger and more strategically important member of the club.

Full article here.