Spain: Rajoy wins first hand in euro-poker
11 June 2012
After denying for weeks that the Spanish banking sector needed help, the Madrid government has gone to the EU with cap in hand. And to convince the Germans to go along, it played a clever bluff.
Another week on the edge of a stroke, with the persistent rumours of an impending request to Brussels to bail out Spain’s banks – leaks the Government denied, while it waits for the audits of the banking sector that it needs. This time, however, the suspense was not accompanied by new stock market crashes but by preventive spikes of eight percent that discounted in advance the coming resolution of the Bankia crisis.
Which is how it played out on Saturday afternoon when (Spain’s Economics Minister Luis) de Guindos announced that Eurogroup would accept the Spanish request for a bank bailout, which had been denied till then. What that calm of the markets seemed to be declaring was that we now find ourselves not on the edge of the precipice, and not at the end of the tunnel – but right in the very eye of the hurricane.
Indeed, the Spanish rescue comes as we are passing through the heart of the storm unleashed by the euro crisis, just as the climax of the Greek elections, which could mean the break-up of the eurozone, approaches. And that transit through the apex of the cyclone has also been witnessed in the leadership of Rajoy, who suffered a quite revealing eclipse during the weekend, as if with his initial silence he had wanted to convey an ambivalent message: yes, it is a bailout (something bad in itself) that I had to ask for, though it meant going back on my own word – but no, it’s not a bailout (or any other euphemism) because it will preserve Spain from a certain failure. So his silence meant that, having gotten the desired bailout, we can now consider ourselves lucky, because not to have asked for it would have been much worse.
Great deal of financial fallacy
How to gauge the bailout, regardless of the silences and euphemisms? The culture war imposed by our polarisation requires progressive opinion to reject the rescue, while conservative opinion applauds it. Resisting the temptation to fall into such Manichaeism, however, I will say that, despite all this, the bailout certainly seems positive.
Not only is it a lesser evil, as any alternative would be worse, but it also presents clear advantages that allow us to make a virtue out of a necessity. The first is that it is a selective rescue, intended only to recapitalise 30 percent of our financial system – its corrupt fraction, accumulated over decades of financial speculation fed by patronage networks of all the parties.
Well, that banking cancer will now be excised by the surgeon in Europe, because we ourselves cannot do it on our own. But the surgery will be on site, to avoid metastasis spreading to the rest of the financial system, and therefore there will no intervention in the Spanish state, either.
The other positive feature is that it is a ‘soft’ bailout, because when done through the Bank Restructuring Fund rather that the Treasury it does not imply a real intervention, which it avoids by not imposing any conditionality or macroeconomic demand as a trade-off. It’s a formula skilfully designed to circumvent the German veto – but there is a great deal of financial fallacy in it, since, in the end, it will make our debt look more attractive.
Such a trick has been made possible by the ambiguity of Spain’s Bank Restructuring Fund (Fondo de Reestructuración Ordenada Bancaria, created in 2009): a somewhat amphibious entity in that as a public institution it seeks to please the Germans (who vetoed the direct rescue of the banks) while as a ‘private party’ it asks for credit in Brussels (which thus does not have to rescue the Spanish state). Whichever way you look at it, however, this implies a hypocritical duplicity, a double-dealing that incurs the so-called moral hazard. Despite that, Merkel is going along with it.
Hence the clever look on the face of the arrogant Rajoy, who with that artifice seems to have succeeded in leading his rigorous colleague up the garden path after softening her incorruptible Prussian intransigence. And, what’s more, he has pulled it off by sliding forward the trump card that ‘size matters’, because Spain is too big to be left to sink or swim. It’s a bluff Merkel has not dared to call.
All of which seems to show that Rajoy is not Zapatero, which is what we had thought up till now. His wavering doubts, his attempts to improvise, his continuous going back on his word, his lack of strategy and program, also bring to mind Groucho Marx’s axiom: “These are my principles, and if you don’t like them, I’ve got others.” And now, up against Hamletesque doubts between To rescue or Not to rescue, Rajoy also responded with his famous “it depends ...”. But unlike Zapatero, who lost all his feathers after losing all his bets in the euro poker, good old Mariano has finally won by swiping the Germans’ wallet. Just lucky?
Translated from the Spanish by Anton Baer