The EU is getting a head start. Yesterday it lobbied for approvals on new limits to the temporary recovery fund; changes to it were agreed on in July. This is another dramatic effect that attempts to calm Europe by promising new legislature and measures, but not incorporating any changes or advances.
That the circle of the Spanish and Italian economies has pulled some alarms and caused the public to run. As people hesitate to back a recovery for either country, the torrential markets, perhaps because the public is reticent to help, will not stop punishing them.
Both countries need serious adjustments, reforms, fiscal discipline, and redirected debt and spending. Yesterday Berlusconi tried to calm market excitement. He puffed his chest at the transalpine funds and embraced voluntarism, praising Italian solidarity and reminded people that it had regained to strength necessary to spur growth.
In Spain the federal government is preparing a Plan B just in case things worsen. Without doubt it is necessary to plan some course of action, but in light of their previous conduct we are ignoring at what level of seriousness the government will feel compelled to enact it. With the Spanish risk premium hitting record highs, Salgado said yesterday that the extent of the seriousness cannot be judged accurately. We have to admit that what was done up until now was a Plan A (or any action plan at all), but a quick fix done out of fear.
And more adjustments are necessary, especially within the CCAA. That the government will continually need to respond ever more quickly and increase earnings, which logically augurs more tax hikes.
