By Panos Garganas
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Size does matter if Spain goes Greek

This article is over 9 years, 9 months old
Alex Callinicos recently argued in these pages that the global economic crisis is far from over. The ink had hardly dried on his words when the crisis in Spain started growing to "Greek" proportions.
Issue 2299

Alex Callinicos recently argued in these pages that the global economic crisis is far from over. The ink had hardly dried on his words when the crisis in Spain started growing to “Greek” proportions.

Interest rates for Spanish bonds rose to 6 percent in the week after Easter.

This was fuelled by fears that Spain’s government was about to ask the European Union (EU), European Central Bank (ECB) and International Monetary Fund for financial help.

Spain’s prime minister Mariano Rajoy vigorously denied these rumours.

But other EU leaders were angry that Spanish problems had upset European bond markets.

A European Commission delegation is now heading to Spain’s capital Madrid to examine the Spanish budget.

All this sounds very familiar to those who have followed Greece’s recent economic difficulties. The Greek government issued umpteen reassurances that it would not need any “help” from the EU. We all know what happened in the end.

But if Spain goes the way of Greece, the crisis will be on a far larger scale to anything we have seen previously.

The vicious circle of austerity and recession that threatens to drag down Spain is far more advanced now.

When the “Greek tragedy” started it was easier to imagine that the problems would remain confined to Greece. Some argued that the rest of Europe would pull Greece through its crisis after a brief spell of pain.

This turned out not to be the case. And the Spanish economy is much larger—twice the size of Greece, Ireland and Portugal put together.


There is also the problem that Spanish banks were the first to make extensive use of the cheap loans from the ECB. The so called “Long Term Refinancing Operation” saw the ECB handing European banks one trillion euros since January.

That was the reason behind the surface appearance of calm in the crisis. But below the surface the “zombie banks” continued to deteriorate.

Nobody has a clear picture of the toxic assets these banks are still holding. But we do know that loans made by banks are becoming increasingly “non-performing” as the effects of austerity and recession bite.

If people lose their jobs or have their wages cut they cannot meet their mortgage or credit card payments. If firms’ turnovers go down they cannot repay their loans. If states’ tax revenues fall they have trouble refinancing their deficits.

But it isn’t just the economics of the crisis that are being repeated on a bigger scale in Spain—it’s the politics too.

Rajoy’s right wing government has been in office for just a few months. And yet it has already been hit by a clear swing to the left in recent regional elections in Andalusia.

On election night Spanish finance minister Cristóbal Montoro looked mortified by the results.

EU officials are worried that the Madrid government will soon find itself unable to impose the austerity package it has agreed with them.

There is radicalisation going on—and not just in electoral terms. Spain’s general strike two weeks ago was the clearest evidence that the “Greek dynamic” is at work at this level too.

And nor is the dynamic confined to Spain. Hundreds of thousands of workers struck against new labour reforms in Italy on Friday of last week. Three unions joined together for the strike—the CGIL, ISL and UIL.

The reforms aim to make it easier for bosses to fire workers. But the government has already been forced to make concessions.

A powerful strike movement spreading to Spain—the country that initiated the Occupy movement—is the last thing that European rulers want to see.

But for workers it would be the most exciting development. The crisis is far from over—and our side is far from having said the last word.

Panos Garganas is editor of Workers Solidarity, Socialist Worker’s sister paper in Greece

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