No Such Thing as a Free Lunch

EXTRACT: It is hardly surprising that neither Rajoy nor, for that matter, Italy’s Mario Monti is exactly rushing to take advantage of the ECB scheme. If Madrid accepts tough new conditions, it will be seen as prostrating itself before the ‘men in black’ - inspectors from the EC, ECB and IMF troika - and that may spark more trouble on the streets. Rajoy is already deeply unpopular, if not hated, for the July budget which contained sweeping austerity measures. That €65 billion package included raising VAT from 18% to 21%, which, for example, saw the rate on public transport, hotels and processed foods rise from 8% to 10%; cuts to benefits (reduced unemployment benefit after six months out of work) and public sector pay, like removing Christmas payments; a new fuel tax; raising the retirement rate; and cutting billions off local government spending.
Vicious and painful measures that are being made at a time when the Spanish jobless rate is close to 25% - with youth unemployment now standing at a staggering 53% - and an economy that is mired in recession. The IMF, to name one organisation, expects that the recession will last until at least 2014. Extra austerity measures on top of that, even if it were a so-called ‘bailout-lite’, could amount to political suicide.

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