Spain continues bailout waiting game
A protester holds a banner depicting Prime Minister Mariano Rajoy which reads 'Enough lies' during a demonstration against government austerity measures on September 15, 2012 in Madrid.
For months now, Spain has been bracing itself for a bailout. In fact, the government has already made many of the deep budget cuts that typically come with bailouts; the kind that make people very unhappy. At this protest in Barcelona against cuts to education, teacher Xavier Masso says the question on everyone's mind is when the Spanish government will finally take the money. “I mean they're waiting to ask the European Union for a rescue.Today, they say yes. Tomorrow, they say no. You never know what's the real situation.”
What's the hang up? Luis Garicano, an expert on Spain at the London School of Economics, says Spanish leaders may see a benefit in waiting. “I guess the benefit is maybe you find out the situation stabilizes on its own, and if the situation stabilizes without asking for a rescue that’s always a better thing for sure.”
Spain’s situation has stabilized a little. The European Central Bank says it will buy Spanish debt. The mere offer has brought Spain’s borrowing costs down, but to take the offer Spain has to accept a bailout. While the Spanish government stalls on that decision, the country's economy is on pause. Fewer consumers are in stores or shopping for new cars. “Who wants to buy a car now?” Jaume Ventura, an economist at the Center for Research in International Economics in Barcelona, asks. “A lot of the fact that people are not spending is due to the uncertainty.” He says Spain needs a bailout and the conditions will force the government to push through even more cuts and reduce Spain's budget deficit.
Back at the protest, Xavier Masso disagrees, “I don't think the bailout should be a solution. I don't think so because in what would you invest this money?” He says that money will only go to bailout Spanish banks, but it won't help the Spanish people.