IF THE EU regarded Spain’s problems with deep concern at the start of the summer, Brussels must view the country’s multiplying crises as the autumn advances with high anxiety. Yet there has been some apparent improvement in the root issue, securing Spain’s solvency.
The June EU summit, with its apparent endorsement of direct recapitalisation of troubled Spanish banks via the ESM, significantly eased the intolerable pressure that the bond markets had been putting on Madrid. It appeared that the central strategy of the prime minister, Mariano Rajoy, was succeeding. His priority has been to avoid a troika “rescue” that would explicitly impose economic conditions and erode Spain’s sovereignty. So he has implemented a very severe austerity programme, further reinforced by the harsh measures in yesterday’s budget proposals.
His critics argue that this programme, ironically enough, fulfils precisely the conditions the troika would impose, and is also driving Spain even further into recession. More radical opponents responded this week with two nights of violent demonstrations outside parliament. This does not mean that Spain is turning into Greece, but it is a new cause for concern, as is an apparent over-reaction by police.
But the great worry for Rajoy must be the turbulence in Spain’s autonomous regions, which is driving the economic crisis towards political and constitutional tipping points. Yesterday, Castilla-La Mancha became the fifth region to seek help from a patently inadequate liquidity fund. This fund is being set up by Madrid to bail out autonomous governments. But 75 per cent of the fund is already spoken for by just three regions. It is in one of these most affected regions, Catalonia, that the crisis has taken the most dramatic turn.
The Catalan nationalist autonomous government argues that its chronic insolvency is mainly due to Madrid’s redistribution of Catalan taxes to poorer regions. Rajoy’s recent refusal to concede full fiscal autonomy to Barcelona has prompted the Catalan first minister, Arturo Mas, to call early elections for November 25th. Mas has made it clear that the only real issue will be Catalan independence. How would the EU respond to secession in one of its member states, and a Catalan application for EU entry?
The very fact that Union treaties are being seriously scrutinised to find out, in Madrid, Barcelona and Brussels, is one more indication of the radical scenarios precipitated by the Euro crisis.