There is a clear pattern of events in the eurozone, and not much to choose between Portugal and Spain At 20.5%, Spain's unemployment rate is almost double Portugal's 11.1%. Spain's current account deficit looks a lot healthier than Portugal's, and its national debt is lower but there's little between the two countries when it comes to the size of their respective budget deficits. The notion that Spain is somehow different to Portugal is based on a somewhat fanciful belief that it is a more dynamic economy and is immune from speculative attack by virtue of its size. – UK Guardian/Larry Elliott, Economics Editor
Dominant Social Theme: Hey, Portugal's leaders have finally admitted the country is tapped out. Glad that's over with. Now the EU can get back to building stability.
Free-Market Analysis: The mainstream press for the most part is taking the usual ho-hum approach to Portugal's impending default and the Guardian article above is one of the few that takes a different tack. More common when it comes to this latest EU setback is the Economist magazine, perhaps the most authoritative of all the elite media mouthpieces, as follows:
Another domino has fallen in the eurozone debt crisis … After Greece and Ireland, Portugal has become the third debt-laden economy on Europe's periphery to request a financial rescue. European Union leaders have breathed a sigh of relief. Olli Rehn, the EU's top economic official, said it was a "responsible step for securing the financial stability of the euro Zone." José Manuel Barroso, a former Portuguese prime minister who is now president of the European Commission, said the request would be "processed in the swiftest possible manner."
Of course that makes sense. The Eurocrats who got themselves into this mess by lying to Europeans serially over decades about their real intentions (to recreate the Holy Roman Empire) have become quite practiced when it comes to "bailouts" (which really aren't bailouts as Germans won't tolerate them). This is a kind of dominant social theme: All is well with the EU and its top thinkers can deal with innumerable crises without breaking a sweat. They are cool cats, just like America's Barack Obama.
Yes, things are OK with the Union. It's just a rough patch. On the other hand, had we postulated just three short years ago that more than 10 percent of the EU would be insolvent at the beginning of 2011, we probably could have made a cold fortune from Britain's bookies who will bet on anything. We should have made the bet, too, because we have never believed the EU could work, not so much because of the one-size-fits-all currency but because the entire EU enterprise has been built on lies and attempts to defraud some 500 million people about the real import and ambition of the Union.
The Eurocrats, the top ones, anticipated the current crisis and had made plans long ago to deal with it and use it to their advantage. Every default, every bond market meltdown, every financial failure was to be used to further centralize Brussels' control. Recently we have pointed out that the EU itself is on its way efficiently and silently to gaining unprecedented power over its member states' budget processes – as many administrations, conservative or socialist, obviously can't be trusted to run their own economies. And just yesterday we carried a story about an EU itch to issue its own fixed income securities. There is no doubt what those running the EU have in mind. A United States of Europe and one, over time, that may be even MORE centralized than America.
The Guardian is not so sure. The article points out quite rightly that the mainstream media, in addition to playing down the upcoming Portuguese default, is reporting that Spain seems far better able to weather Euro-difficulties than the current batch of prostrate piggies. The argument is that Spain is in less dire straits generally, that it has a large, diversified economy and that its leaders have been properly decisive about implementing austerity measures and have accepted the "pain" earlier than other countries in similar difficulties.
The article in the Guardian points out that originally Eurocrats claimed that no country would be forced to default. This thesis, it adds, went by-the-boards when Greece defaulted after it was revealed that Greece's situation was a good deal direr than the previous government had admitted.
Then there was Ireland, the Celtic Miracle. Eurocrats justified the Irish default by claiming that Ireland's otherwise healthy economy had been compromised by a severe, anomalous housing bust, according to the Guardian. Now there is Portugal. The argument of the optimists is that Portugal is the last of the Eurozone's three weakest economies. Spain, Italy, even France are all in much better shape. This is the argument that the Guardian summarizes and then proceeds to attack. The optimism that Eurozone leaders have voiced has been shown to be unfounded three times now. Why should current arguments that Portugal is last of the EU's troublesome economies be believed?
The article goes further and tries to suggest that there is a kind of economic pathology, or at least denial, at work. In the first phase, the article suggests, a country is seen to be in difficulties. Phase two involves denials from the country's leaders themselves. These denials continue in the third phase while debt-rating agencies issue warnings of downgrades that are eventually implemented. In the fourth phase, it becomes increasingly difficult for the country to sell its debt without paying punitive interest rates .
Phase five begins, according to the Guardian, with Europe's policy elite "agreeing to a bailout with strings attached" while insisting that such a bailout and surrounding discussions will finally put paid to the country's difficulties. The Guardian does not mention it, but when the financial package is finally delivered, it includes the regular IMF remedy that has caused unrest around the world: "privatization" of the country's resources; higher taxes, reduced public services and pensions. This is the stage where Greece and Ireland reside; Portugal will surely get there.
The question is whether Spain will proceed down this path. We recently reported on an analysis of a Telegraph article that argued Spain would avoid the fate of the "PIG" (Portugal, Ireland and Greece). The Guardian argues otherwise. First there is the economic comparison: Last year, Spain grew by 0.6% while Portugal grew by 1.2%. And Spain suffers from the same kind of housing crisis that put Ireland under. The insolvency of the country's construction industry has "infected" Spain's financial system. This is a polite way of saying that Spain's banks are under water and will remain so until the oversupply of houses and business buildings is reduced and prices return to normal. That could take years.
The Guardian's conclusion is that Spain has some of the same problems as the "PIG" which is already insolvent. These make it an "obvious candidate for some close attention from the bond market vigilantes." On the other hand, the article points out that coming to the aid of Spain is not like coming to the aid of the aggregate PIG. Spain is the Eurozone's fourth largest economy. A default would not be contained. A crisis of such a magnitude in Spain, the article concludes, "will put at risk the future of monetary union in its current form."
We have never predicted the imminent break-up of the EU or even a shrinkage of the eurozone. We've merely indicated for several years now that such events are possible (and from our perspective highly desirable). What is true, and remains true, in our opinion, is that the EU and the euro are involved in a larger tug-of-war between the truth-telling of the Internet and the fear-based promotions of the Anglo-American (and European) elite that have driven this ant-democratic and deeply authoritarian project forward.
But what has surprised us, of late, is the alacrity with which the EU is unraveling. It has led us, even, to speculate that the powers-that-be are doing the unraveling themselves to increase chaos and strengthen the case for a global currency. But we are not convinced, along with many others in the alternative media, that it will be either practical or easy to install a global currency in a short period of time. Meanwhile, the EU itself (or at least the euro) may commence to unwind in earnest.
Even if this somehow plays into power elite hands, it will be an extraordinary unraveling to watch and we would have to believe after 50 years of half-truths and outright falsehoods, such an occurrence would mark at least a setback for the Anglosphere. It would also setback the other regional currency unions that have sprouted around the world, and that would be a good thing as well.
We are always cautious about prognosticating because there are so many moving pieces when it comes to something as complex as the EU. But it does appear as if the Union's problems are growing worse, not better and that if Spain begins to go downhill, the EU could shortly find itself sliding toward a precipice. Were this statement reality (and not metaphor), we would gladly provide the final shove.