Thursday, 12 July 2012

Spain, meet Greece. Say hello.

Is a European Banking Union a magic solution to the eurozone debt crisis? Eurozone finance ministers in Brussels confirmed that European funds will provide direct support to Spanish banks.

€100bn of direct support!

These are loans from the European Financial Stability Facility and subsequently the European Stability Mechanism.

And guess what. In return the Spanish government will bring in tougher austerity measures, in order to cut borrowing below 3 per cent of GDP by 2014.

Oh, and Germany might have a problem convincing its taxpayers that the risk to themselves is worth it. No guarantee is expected of Spain.

So, the Spanish people get squeezed until their Seville Orange pips squeak, and the German people start to get all jittery about supporting failing Spanish banks.

Is the € going to exist much longer? I really do wonder.

If the whole of the population of Europe belonged to a community of people who could trade with each other outside of the € and other currencies, it wouldn't matter quite so much. An increasingly impoverished Greek could continue to trade within this alternative system, safe in the knowledge that his earnings capability within this system was equal to that of anyone else. His or her skills would have the same value as those of anyone else.

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