Why does confusion mount every time we announce a new measure to get out of the crisis? Why is it that European leaders and representatives from the continent?s biggest firms, including those in Spain, sow discord when they speak?
Well, it looks like they just don?t have any clear messages to convey. Behind all the chaos lies discord, indecision, back-and-forth pressuring that result in nothing getting done, cowardice at a time when policy-makers need to ignore that the actions they need to pursue are unpopular. Yesterday we witnessed another instance of confusion. Protagonist: the European Commission. Once again it was slow to respond when it didn?t explain from the start that the paragraph in which it proposed a "direct recapitalization of the banks through the European Stability mechanism (Mede)" would not be applied immediately. That is to say, it wouldn?t be able to be utilized by Spain, which is where most attention is focused right now, because its application would require changes to EU treaties and delays tied to those changes.
Within several hours it was understood that the EU was providing a solution to recapitalize Spanish banks. The risk premium started to fall and for a moment it looked like a certain degree of calm had returned to the markets. It didn?t last. Oli Rehn had to end up giving the following explanation: this is not a solution that Spain can use right now, but it is a proposal for the future. What?s more, the report on Spain deems the latest round of financial reforms as ineffective, because it doesn?t take into account real estate mortgages and the PYMES. But the report doesn?t offer another solution.
Instability hit the markets once again and it is not going to stop so long as we can?t decide where to get the 19 billion necessary to clean up Bankia and additional funds needed to fix the rest of the financial system. The government continues to be the one responsible for resolving uncertainty and putting wasteful political spending before the common good. The Spanish Socialists? Working Party is particularly culpable in this regard.
The opposition?s behavior should be an element that contributes to whether Spain is trustworthy or irresponsible. Rubalcaba needs to control internal dissent that erodes support for the party in power. Such solidarity is especially important right now, because despite the disorder mentioned previously, the EU is offering Rajoy one more year to meet Spain?s deficit objective if he can make certain cutbacks now. That is to say, if he applies 10% of the ?German recipe,? which entails a mandated budget for the 2013 and 2014 fiscal years, raising Spain?s VAT (raising the personal income tax and recalibrating housing deductions were criticized widely) and various special taxes, deepening current labor reforms, tightening control over regional government accounts and strengthening the Budget Stability Law.
Applying these measures is admitting, without euphemism, a partial intervention for Spain in exchange for giving the country some more flexibility in meeting financial agreements that they have made with Germany and the EU. It is also a way to show that we are capable of eventually meeting these agreements and winning back the globe?s confidence in our economy, which we are short on after committing a series of grave management and political errors. People are waiting on a collective mid-term plan, and that is what needs to happen
In 1998, Antonio Mercero directed the film A Time for Defiance (La Hora de los Valientes in the original Spanish). In the movie, Gabino Diego, playing a guard at the Prado museum, risks his life to save a self portrait of Goya during as the Spanish Civil War breaks out and people evacuate the museum. The action in the movie serves as a parable for our time. In trying situations, it is necessary to discern between what is really important and private interests. We are living in one of those trying moments. In order to escape its dilemma, the Spanish government should first declare how its is going to finance a massive banking sector cleanup, putting this goal before any other interests. And if it is necessary, the government should ask for a bailout.
