Photo: Wikimedia Commons
The buzz right now is that European leaders are meeting to discuss a staggeringly large bailout for Spain.The key thing right now is that it’s all a big dance. Europe has wanted Spain to take the money for a while. And Europe is prepared to offer a lot.
Spain doesn’t want to be seen as entering a “roach motel” (as Mohamed El-Erian calls it) of coming under international aid. The idea is that once Spain sips from the cup of bailouts, it fears it’s then seen as a country under a “program” that’s in league with Greece, Ireland, and Portugal and that it loses market access and sovereignty.
So Spain has to want the aid, and ask for it, which it’s expected to do this evening. But it has to do it in a way that doesn’t look like the country is a bailout country. The trick is structuring it in some way so that it’s purely the banks, and not the government getting bailed out. It will likely happen, but the dance is amusing.