The myths that have fallen (and those that will fall) in the Greek crisis

In the year and a half that has passed since Greece revealed

after years of lies and cover-ups, the terrible state of its public accounts is many myths, taboos, that the European leaders have had to drop to try to take the reins of the crisis and avoid a major disaster for the whole of the eurozone. It is possible that they have to drop some more to defuse definitely the time bomb in which Greece has become for the common currency.

Denial of the evidence The first reaction of the EU, led by Germany, was to deny the magnitude of the crisis that was coming upon it: markets exaggerated and conspired against the euro and the PIGS (Portugal, Ireland, Greece, and Spain) for reasons almost always unjustified. Do not “overestimate” the problem, said German Chancellor Angela Merkel; “There are also deficits in other parts of the world.” It was not until February 2010, several months after Athens revealed its huge budget hole when the EU admitted that not only the stability of Greece but of the eurozone as a whole was at stake.

A rescue? Impossible! The resolution of the crisis was hampered in the first place by the persistence of a taboo: the EU treaties prevent the rescue of their debts from their countries. And this is indicated by a clause imposed by Berlin when the euro was designed, but that is what community jurists are for, always capable of finding a fissure and a legal solution to any problem. An unknown article of the Treaty of Lisbon designed for exceptional circumstances gave the necessary coverage to launch the first rescue operation in the history of the euro, in May 2010, and create a rescue fund until then nonexistent.

The humiliation of the IMF Another taboo that had to fall to help Athens was that the International Monetary Fund could not intervene in the crisis. It would be a humiliation for Washington to come to the rescue of the euro, those days were said in Brussels and in Paris. But someone had to monitor the application of the austerity plan to which the loan was conditioned- Quotesfromtopinsurers. And Berlin did not believe in the management capacity of European doctors, the same community officials who for years believed the Greek figures. When Nicolas Sarkozy understood that the only way for Merkel to accept rescuing Greece was to implicate the IMF, he put aside his European pride and capitulated.

The role of the ECB While, in May 2010, the eurozone and the IMF granted Greece a loan of 110,000 million euros, another myth fell quietly: that the European Central Bank could not intervene in the secondary debt markets for ease the pressure on Ireland and Portugal. Finally, he pulled out the checkbook. It is considered in fact that this has been one of the most effective measures to contain the crisis. The ECB was no longer in a situation of inferiority with respect to the US Federal Reserve or the Bank of England, which did carry out this type of operation. In the case of Spain, it also helped to relax the pressure of the markets the turn of 180 degrees of the government in economic policy, to be forced by the EU to save 15,000 million euros more than expected in 2010 and 2011.

A bottomless rescue Days after rescuing Greece, European leaders took another step

they had always rejected: creating a common fund for financial emergencies, conditioned by harsh austerity plans (to avoid abuses). A dramatic nightly and Sunday meeting of the Eurogroup led to the opening of the Tokyo Stock Exchange, the European Financial Stability Fund, a reserve of 750,000 million euros, contributed by the partners of the eurozone, the European Commission and the IMF. Why that number and not another? First to make it clear that it would be enough to rescue one of its great countries and not just the smallest ones. And also because in dollars the figure sounded good: one trillion dollars, repeated the international agencies shocked.

Towards a transfer union? The possibility of the European monetary union accruing in a union of transfers or subsidies, in which the rich countries keep the poor and bear their debts, has always aroused a huge rejection in the north, especially in Germany. Unless you resort to more radical solutions to tackle the crisis, it is very possible that this taboo will eventually fall (if you have not already done so).

Greece’s rescue operation will not be completed in 2013, as expected. After 15 months since the granting of a loan of 110,000 million euros to Athens, the governments of the eurozone are resigned to give it another to support the country at least until 2015. And it is highly likely that it will be necessary to extend the aid for some years plus. Will Ireland and Portugal follow the same path? Whether through loans or direct aid to stimulate the economy, experts are convinced that this is one of the most plausible scenarios for the future of the eurozone.

Nein to Eurobonds? The idea that eurozone countries issue common debt bonds is “intellectually attractive” for many EU politicians and especially for the governments of the European periphery. However, he has never seduced Germany. Why, at the cost of cheapening the bill to countries in a worse budget situation, would you be interested in paying more because of your own debt issues?

The initiative reappears periodically in European debates, with little fortune: Germany continues to say nein. Even when? “Putting bad and good in the same basket would be disastrous. They will arrive, but only when all economies are straightened out,” a European leader ventures privately. In fact, the European Financial Stability Fund may already be the embryo of the future European debt agency.

Will a euro country go bankrupt? And if everything fails? The loans, the austerity plans, the reforms … The objective that the anti-crisis strategy improvised by Europe is no other than to avoid at all costs that one of its partners declare itself insolvent. The dollar can afford a bankruptcy, but not a monetary union as young and sui generis as the European, it is said. In addition to prestige, a suspension of payments could take ahead to the interconnected European financial sector, with effects on the other side of the Atlantic, as the White House seems to fear.

However, the economists are practically unanimous in their verdict: sooner or later Greece will end up declaring itself insolvent, the weight of its debt is unsustainable. It is known that the Greek government has flirted with the idea. For now, the EU has dissuaded him. But the effects of the austerity plan have yet to be seen. The countries of northern Europe are beginning to tire of paying for the excesses in the south. The crisis tightens, the pressure on the streets of Athens does not stop and the opposition seems more interested in making the government fall than in stabilizing the country’s finances …

Will it restructure the European dike? With what consequences? The taboo of bankruptcy, of falling, will be the last to do so. At this point of the crisis do the unthinkable (remove a country from the euro, contain the damage …) would be the least of the problems of Europe.

Zapatero seeks the advice of experts like Boyer to get out of his labyrinth


Two hundred billion euros. That was the lifeline, they told the president when the sky began to overcast. 200,000 million euros was the debt margin available to the Kingdom of Spain in the spring of 2008, without infringing the third mandate of the Euro Law (“your public debt will never exceed 60% of the gross domestic product “). 200,000 million euros are twenty points of Spanish statistical wealth. They are a cabalistic figure: 33.3 billion of the old pesetas. They are the rope that today caresses the neck of José Luis Rodríguez Zapatero.

With the rope in his neck, but with his feet still on the unstable platform, the president has broken the seventh seal: in recent weeks he has gone to seek the opinion and advice of Miguel Boyer, Minister of Economy in the first government of Felipe González, conspicuous liberal (although a supporter of Keynes), hated by the guerristas and defender of the economic policy of the Aznarato. Boyer has agreed to give advice, in exchange for not appearing publicly in the council of wise men of the presidency of the European semester along with Felipe González, Jacques Delors and Pedro Solbes . Zapatero’s mobile phone can not cope. Other veterans of the PSOE of the eighties are being consulted. Each time more papers are entrusted to the reviled old guard.

John Maynard Keynes, champion of public spending. How much Keynes fits in the current Spanish tribulation? That is the question. Solbes and Miguel Ángel Fernández Ordóñez put their hands to their heads when they were informed of the Keynesian festival that part of Zapatero’s circle of trust ( Miguel Sebastián, Elena Salgado, José Blanco …) theorized in response to the crisis in 2008 An exemplary social-democratic Spain would resort to its sound public debt to mitigate the damages of the storm. There were umbrellas to protect everyone. Or almost everyone. Spain was going to set an example. Solbes no longer believed in the soft landing and sensed that the unemployment bill and the fall in tax collection would create an explosive cocktail.

More severe, the governor of the Bank of Spain already advocated iron surgery (structural reforms, according to the fashionable euphemism) before the abrupt collapse of the expansive cycle. Attracted by the role of social democrat hero in a world torn apart, excited by the victory of Barack Obama in the United States and very attentive to the Bonapartist successes of his friend Nicolas Sarkozy in France, Zapatero let Solbes go, he withdrew the word to Fernández Ordóñez and he threw to the four winds the bullfighter’s cry: “Leave me alone!”.

Seduced by the heroic vision of the crisis, the president took command of economic policy in the ministerial reshuffle of April 2009, placing in the second vice presidency a self-sacrificing Elena Salgado who will never take the opposite. In the new Cabinet, no one takes the opposite. There is hardly any debate at the meetings of the Council of Ministers: the good days are given, the matters approved by the undersecretaries are dispatched and until next Friday. Only José Blanco insinuates himself as an increasingly autonomous figure, but we will see that later. Sheltered by María Teresa Fernández de la Vega and Salgado, two women delivered body and soul to the government, two Stakhanovites who will never fabulate with the possibility of displacing the number one, Zapatero has taken to the extreme the presidential substance of the Spanish democratic regime.

Almost a year after the last ministerial reshuffle, the scaffolding – half social-democratic, half Bonapartist; half obamist, half caudillista- is falling apart before the look between astonished and shocked of a society that now, when the bell of pensions has sounded, begins to get a full idea of the depth of the crisis in Spain. And Zapatero, heroic social-democrat, wears a nice rope around his neck.
The costs of unemployment insurance and additional subsidies, plus the plummeting VAT collection, have pierced the Keynesian shield that Minister Miguel Sebastián, for months the President’s main valid, believed unbreakable. The year 2009 has been provisionally closed with a public deficit of 11.4%, which some sources maintain that it will reach 12% when the definitive data are known within a few days. A Greek deficit . A deviation of two points that leaves a hole of 20,000 million in the accounts of the State (without adding to that figure the worrying and opaque budget mismatch of the autonomous communities and municipalities, in some cases on the verge of bankruptcy; a disaster that could hardly go unnoticed in the circuit of powers and intrigues also known as international markets.
Since the British magazine The Economist published in November of last year a special issue with the eloquent title of Spain, the party’s over (Spain, the party is over), Spain is under suspicion in the circuits of Anglo-Saxon opinion, in the that the derogatory acronym PIGS (pigs) has been coined to gather Portugal, Italy, Greece, and Spain in the same squad of suspects.

The PIGS thing hurts. Zapatero is convinced that there is a conspiracy of Anglo-Saxon conservatism to discredit the euro, taking Spain as a scapegoat. The president reads the translations of The Wall Street Journal, the most incisive newspaper with his management, and cannot ignore that José María Aznar is an advisor to News Corporation, the gigantic media group of Rupert Murdoch, owner of the old and influential newspaper of Wall Street Dan Brown in the Moncloa? A neoconservative plot to break the planetary constellation between Obama and Zapatero? A movement of dark forces to plug the social democratic response to the crisis? Every conspiracy theory has its faults.

There are voices on the left among the most severe diagnoses of the Spanish crisis. With an interval of a few months, Paul Krugman, winner of the Nobel Prize in Economics and a point of reference for progressive thinking, has launched two frightening warnings: he warned that Spaniards should lower their salaries by 25% in order to get out of the quagmire and

the situation in Spain may be more dangerous for the European Union than Greece (much worse in accounting terms) given the greater Iberian size. The idea that Spain is the new sick man in Europe has been spreading like an oil stain. Today there is a European consensus on that image. And the vice president of the European Commission, Joaquín Almunia, former secretary general of the PSOE and for years faithful squire of Felipe González, riveted it on Wednesday publicly paragating Spain and Portugal with Greece. In the Moncloa, they want to strangle him.

The heroic scaffolding is falling apart. Devoid of an economic vice president with an autonomous voice and voice capable of attracting on his head the rays of Jupiter, the City, the CEOE, the unions, the press of Murdoch, Aznar and the entire Dark Side of the Force , Zapatero’s credibility, already seriously deteriorated by his delay in admitting the crisis, is currently charred.

The Spaniards have stopped loving him, although they recognize his conciliatory mood. The last barometer of the CIS (January 2010) reveals an extraordinary rejection: 71% declare to feel little or no confidence in the President of the Government. Neither Suarez, nor Gonzalez, nor Aznar never fell so low. There is only one person who overcomes him. Mariano Rajoy, leader of the opposition, does not inspire great confidence to 76% of respondents. This is the drift of Spain: four million unemployed people, a galloping public deficit, problems of solvency, stunting the issuance of public debt, the absence of horizons and a political establishment under suspicion. Heading towards the coasts of Greece, in spite of the firmness of the banker Emilio Botín asking for tranquility and confidence.

The shield of 200,000 euros and a leadership that sought mimesis with Obama and Sarkozy are disrupted. We have to cut costs and parallel leaders begin to emerge, such as that of White Minister announcing Friday, with a stern voice,

the guantazo to the air traffic controllers. It is no longer a secret: the deputy secretary general of the PSOE is emerging as a spare part. Blanco denies it, but his gestures confirm it. Other voices point to the Basque Patxi López, today in sweet hours.

Stunned by the incredible management of the future of pensions (a chain failure of the two vice presidents, which leaves them dismasted), by the fraying of the European presidency, by polls and by the foreign press, Zapatero tries to find an exit to the labyrinth. Greek drift or surgery. Two Minotaurs lie in wait for him: the irreversible discredit and the general strike.