To receive a 100 billion Euro bailout of its banks, Spain is again slashing expenses. This time it is to eliminate the inflation adjustment to retiree pensions. Why does that matter? Because with a staggering unemployment rate of over 25% of the workforce, times are so hard in Spain, more than 40% of those over age 65 are providing financial support for their families.
That bank bailout also made other demands. A hike in income taxes and the value-added tax, cuts in unemployment benefits and wage reductions for public sector employees. What kind of a way is this to treat anyone? With an economy already in a Depression now likely to grow worse, it is no wonder thousands of Spaniards are taking to the streets in protest.
The European Union will regret these actions it is forcing on Spain for Spain will eventually default on its debts, unable to pay them under these extreme circumstances. For a time, it will appear no such defaults are taking place because the European Union lenders will keep restructuring their paperwork so it appears payments are being made and the loans are still good.
Ultimately those debts will be sharply written down or written off. In Spain, as in Portugal, Ireland, Italy and Greece, we are watching a financial tragedy play-out, as more money is lent to nations that already cannot pay back their current loans, let alone the new ones.
Meanwhile, the financial pain to the men, women and children of those nations is enormous and growing worse. And we will all feel their pain as their import of our nations' goods fall off sharply and those of us who have loaned our money there through our banks or our mutual funds discover our loans are no good.
Now is the time for partial loan forgiveness (reality) and a sincere financial helping hand to stop the financial collapse taking place there, not lender silliness that only exacerbates it.
Dick
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