Ireland, Portugal, Italy,
Belgium, are Spain replicate Greece in slow motion, gain speed, and
head toward a similar train wreck. France, the Netherlands, and other
troubled EU economies follow close behind.
Austerity cuts exacerbate problems. Public rage expressed in strikes
and street protests follow. Politicians pay no heed and plan more.
At the same time, they allocate hundreds of billions in vital revenues
for criminal bankers responsible for the crisis in America and across
No wonder John McMurtry calls predatory capitalism a "cancer system."
It gets "cumulatively worse the longer it is unrecognised."
On March 31, the European Financial Stability Facility (EFSF) pledged
an additional 200 billion euros for the European Stability Mechanism
(ESM). It raises its total amount to 500 billion euros. Its overall
firewall totals 800 billion euros, or does it?
In fact, 100 billion euros is European Financial Stabilization Mechanism
(EFSM) money. It's already earmarked for Greece, Portugal and Ireland.
Another EFSF 200 billion is allocated for existing bailouts. In other
words, 300 billion in double counting means less than reported is available.
Despite the 800 billion euro headline figure, at most 500 billion is
available, depending on whether pledged amounts provide it. All contributing
nations fund the ESM. Nominally, Spain's the fourth largest contributor.
However, its private and public debt way exceed the pledged ESM total.
If Madrid needs help, Germany, France, and other contributors have to
make up the difference. Whether they'll do it short-term is questionable.
Longer-term's not politically or economically sustainable.
Troubled Eurozone countries can't manage their own problems. How can
they take on more? Even German resources are finite. Its political will
has limits. It can't bail out Europe alone without crushing its already
Money power in private hands caused today's problems. As a result, economies,
communities, and households have been hollowed out. Bad as things are
now, expect worse. Austerity assures it. So does rising debt.
On March 29, rage spread across Spain. Up to 80% of workers supported
a general strike. Stoppages affected industry, transport, and other
services, including hospitals providing minimal amounts.
Dozens of protests and rallies brought hundreds of thousands to the
streets nationwide. Police violence confronted them. Injuries and arrests
followed. It happens every time across the continent, in Britain and
New labor law changes demand harsh concessions. Workers must sign contracts
limiting severance pay to 33 days for each year worked, up to 24 months
for unfair dismissal.
If layoffs are "financially driven," companies need only pay 20 days'
wages. They can fire more freely, reduce working hours, and pretty much
do as they please. Collective national agreements are undermined. So
is Spain as a decent place to live.
On March 30, its Popular Party government announced $36 billion in 2012
cuts. They follow $20 billion earlier with more to come. Spanish economists
call them "the most severe since Franco."
Measures involve freezing civil service wages, ministerial spending
cuts, and new corporate taxes.
Ministries had budgets slashed 16.9%. Foreign Affairs lost 54.4%, Justice
34.6%, Defense 31.9%, Education, Culture and Sport 21.2%, Agriculture
7.4%, Health 4.3%, and Economy 3.8%.
Civil servants suffered earlier. In December, the work week increased
from 35 to 37.5 hours without extra compensation, and wage cuts up to
15% took effect in May 2010.
On April 1, electricity prices rose 7% and gas 5%. Other price hikes
are coming with austerity strapped workers less able to handle them.
Spain has Western Europe's highest unemployment. Overall it approaches
23%. For youths, it's 50%. Expect those numbers to rise, perhaps dramatically.
Prime Minister Mariano Rajoy wants Spain's 2011 8.5% budget deficit
cut to 5.3% of GDP. Like Greece and Portugal, stiff government spending
cuts affect economic activity severely. Production falls. Unemployment
rises. So does public anger.
Nonetheless, EU Economic and Monetary Commissioner Olli Rehn urged he
implement measures immediately, saying:
"The unambiguous commitment of the Spanish government to the target
of 3 percent fiscal deficit in 2013 is indeed of paramount importance.
I expect this will be substantiated soon by a convincing path of fiscal
consolidation," as well as economic reforms putting Spain on a "more
sustainable growth model."
Nothing in Spain's budget produces growth. Debts aren't addressed. Lower
national income and GDP will follow. Capital flight continues. People
are voting with their feet and leaving. Private sector lending is down.
Housing prices keep falling, and household savings are evaporating.
It mean lower consumption's coming.
Moreover, Spanish banks are insolvent. Private business overall is troubled.
Weak conditions are worsening. Budget cuts exacerbates them. Revenues
are declining. Debt's rising. Recession's deepening. Budget cuts when
increases are needed assure much worse times ahead.
Like other troubled Eurozone economies and America, Spain force-feeds
austerity when stimulus is needed.
According to an unnamed government official:
"....let's not deceive ourselves. We are holding on thanks to the artificial
respiration of the open-bar-liquidity of the European Central Bank."
If not for that, "this explodes."
How long that continues isn't known. It depends on Germany's willingness
to provide it. Its Bundesbank is the ECB's backbone. If German resolve
wanes, all bets are off, and economists expect it eventually.
Progressive Radio News Hour regular Bob Chapman says up to $6 trillion's
needed to bail out Spain and Italy combined. If both countries require
amounts near that great, it's game over. No one has enough to provide
Day of reckoning times approaches, but no one knows when.
A Final Comment
Economies built on sand collapse. America is no different. Financial
analyst Martin Weiss says "the government bubble is the biggest of all
time," and expanding.
He cites an unprecedented growing national debt bubble. "Washington
spent a record $16.3 trillion since 2007." America's debt burden exploded
and keeps rising because of trillion dollar + annual deficits.
In addition, we're "witnessing the Greatest Monetary Bubble in US history."
Massive money printing went for speculation, not economic growth. Moreover,
zero interest rates tax savers. Their net worth falls as inflation rises.
It's rising much more annually than reported. Everyone who eats, drives
a car, heats a home, buys health insurance, has medical bills, and pays
college tuition knows more about inflation than government economists.
Bob Chapman thinks it's around 10%. Manipulation lowers official figures.
It's been going on for years.
Eventually says Weiss, America's chickens are coming home to roost.
Bubbles don't expand forever. Foreign investors are shunning US debt.
The Fed's had to compensate by buying record amounts.
In 2011, it bought "a stunning 61% of the total net Treasury issuance,
up from negligible amounts" pre-2008.
Excess money printing not providing economic growth eventually fuels
trouble. Higher inflation's coming. Bonds always get it right. When
interest rates rise in response, bursting the government's debt bubble
They all burst. So will this one. When it does, the fallout will hit
globally. Financial analyst Marc Faber also predicts eventual "massive
wealth destruction." At issue is out-of-control money printing and runaway
Appearing on CNBC, he said:
"Somewhere down the line we will have a massive wealth destruction that
usually happens either through very high inflation or through social
unrest or through war or credit market collapse. Maybe all of it will
happen, but at different times."
Before then, the Fed will keep printing money. "(T)hey're going to print
and print and print. So what you can get is a bad economy with rising
equity prices" until the entire house of cards collapses.
It's coming he predicts but can't say when. His advice and others like
Chapman and Weiss is prepare now. Forewarned is forearmed. Good times
never last when fueled by excess.
Bad endings always follow. This one promises to be a whopper. Moreover,
on their own and out of luck in America and Europe, ordinary people
will be hurt most.
If pain exceeds thresholds of no return, all bets are off. Often the
unthinkable happens. Rebellion at times follows. Street protests are
precursors. What happened before will again. Bet on it.
Stephen Lendman lives in Chicago and can be reached at email@example.com.
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge
discussions with distinguished guests on the Progressive Radio News
Hour on the Progressive Radio Network Thursdays at 10AM US Central time
and Saturdays and Sundays at noon. All programs are archived for easy