The markets have spoken: the Spanish debt deal isn’t so hot!
And the reason of course is that the loan does absolutely nothing to solve the fundamental problem in Euroland: competitive imbalances between North and South.
How the Spanish, with 25% unemployment, are supposed to borrow another $100 billion to rescue a busted banking system, while having absolutely no prospects for economic growth, is a question no one in Frankfurt wants to ask or answer.
Spanish borrowing costs continue to rise.
They will do so until and unless the ECB finally decides to be a central bank: become the lender of last resort on all sovereign debt, cut interest rates to zero, and pursue an inflation target of at least 5% until competitive balance is restored and the amoral disaster of utterly unnecessary long-term unemployment is resolved.
The Fed also could be doing a lot more to restore the US economy by pursuing much higher inflation targets, but alas both sides of the Atlantic are plagued with the worst leaders since the last Great Depression.
Gorilla says: “It’s not the banks who need help, it’s ordinary people who are being destroyed for no good reason!”