The news yesterday that the cost of borrowing for Spain has jumped to over 6% will inevitably mean that for the country to stagger on any further will require a massive bail-out from the European Central Bank.
The 6% is the rate of interest the capitalist money markets are demanding as the price for them buying Spanish 10 year government bonds, due to be auctioned today and Thursday.
Auctioning these bonds is crucial for Spain to raise the money to carry on functioning and service its debts to the international banks.
The 6% interest rate on government bonds is reckoned to be above the limit at which a country can even hope to repay its debts, so effectively, the banks and financial institutions are declaring that like Greece, Spain is bankrupt and needs massive loans from the ECB just to keep going.
Where Spain differs from Greece is the sheer size of its economy.
Spain is the fourth largest economy in the Eurozone, twice the size of the Greek, Irish and Portuguese economies combined.
Speaking last week the Spanish prime minister, Mariano Rajoy, admitted that a bail-out of the Spanish economy was impossible.
He said: ‘To talk about a bail-out for Spain at the moment makes no sense, Spain is not going to be rescued; it’s not possible to rescue Spain’, in an act of bravura he insisted ‘it’s not necessary and therefore it’s not going to be rescued’.
Four days later it is clear that a bail-out is precisely what Spain needs but he was absolutely correct in saying that it is not possible to save Spain just by pumping billions of euros into its banks – banks which are already entirely dependent on ECB loans to stop them from going bankrupt.
The prospect of a major country like Spain defaulting on all its debts and being declared bankrupt is dominating the thinking of the International Monetary Fund which meets in Washington this week.
The head of the IMF, Christine Legarde, has been warning for months that a default by Greece, let alone Spain, will crash the Eurozone banks and that would, in turn, cause a banking collapse internationally so entwined is the banking system.
In January she warned that the effect of such a collapse would plunge Europe and the world into a crisis not seen since the 1930s.
At the IMF meeting Legarde will be arguing for its member countries to cough up a further £378 billion to create a ‘global firewall’ to stop state bankruptcy spreading throughout the world.
But a powerful section of the bourgeoisie opposes Legarde’s plans.
They are acutely aware that conjuring money out of thin air to prop up bankrupt economies is not going to save capitalism – all it will do is stoke up a massive inflationary crisis.
Their solution, articulated most forcibly by the German banks, is for the weak economies of Greece, Spain, Portugal, Ireland and Italy to ‘start delivering on structural reforms’.
Given that all these countries have already imposed the most draconian cuts ever seen it is not hard to see that by ‘structural reforms’ what is really being proposed is that bourgeois democracy is dumped and that military and police dictatorships are the order of the day for capitalism to survive.
But the ruling class face an undefeated working class determined not to be driven back, a class that is being revolutionised daily by this crisis.
The urgent task today is the building of sections of the Fourth International all over Europe, to give leadership to the working class in the socialist revolution, to replace the bankrupt and broken EU with the Socialist United States of Europe, as part of the world socialist revolution.
