Sadly, Mariano Rajoy’s refusal to acknowledge Spain’s bailout doesn’t soften the blow of its €100bn rescue package
More and more people in Spain say they fear our government is not telling us the truth. I fear worse: I’m worried the government really believes what it says.
If you were in Spain on Sunday, you could be forgiven for thinking that the economic crisis was over and that Spain, in particular, had sorted out all its financial woes overnight. What was seen all over the world as a dramatic eleventh hour bailout deal to save the Spanish banking system from an imminent collapse was presented by Madrid as merely “a soft loan” on the “most favourable terms”. To hammer home this preposterous sense of normality, prime minister Mariano Rajoy decided that it was better to disappear from our sight. He left it to the minister of economy to inform us Spaniards that they were now the proud owners of a debt worth €100bn. A trifle, no doubt.
Even when the outpouring of outrage forced Rajoy to call a hasty press conference the next day, he still refused to use the word “bailout” – or any other word for that matter – and referred mysteriously to “what happened on Saturday”. He went as far as to say that Spain’s emergency had been “resolved” (“thanks to my pressure”, he said). He then took a plane to Poland to watch the national football team play (“the players deserve my presence”).
In the end Spain, the favourite, drew with Italy, an event Rajoy probably refers to as “what happened on Sunday”.
But worse still was what happened on Monday: the markets didn’t buy Rajoy pretence of normality, and when the markets don’t buy, they sell. The stock exchange went up a little and then down, and Spanish bond yields soared, together with Italy’s (consider that a draw too). No wonder. “What happened on Saturday” was a necessary step to solving the problem, but useless if not followed by many other measures, like growth stimulus, a banking federation and some form of debt mutualisation and joint unemployment benefits within the eurozone. We often talk about those things, but they never happen – as opposed to those things that happen, but that we refuse to mention (like Spain’s “bailout”). On its own, restricted to “a line of credit”, this bailout becomes just a mass transfer of private debt into public debt.
In Spain, the only figure we could boast about was that our national debt was lower than that of Germany. We can’t say that anymore. Our debt-to-GDP ratio will probably hit 90% by the end of this year. This, in a depressed economy submitted to a severe diet of public expenditure cuts, scares investors away. So while the government is obsessed with coming up with increasingly imaginative language to avoid the use of the word “bailout”, that “what-happened-Saturday” thing is not working. And since Rajoy is far from being the only leader heavily involved in self-delusion, the European financial authorities keep insisting that Spain is “on the right path”; which is probably true. Less clear, though, is whether, while being on the right path, we’re heading in the right direction.
I put the blame on all those PR books that infest our airports and purport to teach business and political leaders to manage information effectively. The painfully slow experience that is airport security ensures that they actually read them. It’s from those books that they get the idea that you can suppress something just by refusing to utter the word, as routinely illustrated by the classic story about Tolstoy’s brother telling him not to think of a white bear – and he being unable to stop thinking about it. Sure, but the story would have been quite different had there been a real white bear in the room.
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