Following yesterday's Spanish governments €550 bn bail out of regional bank Cajasur, the IMF issued a warning about the state of the Spanish economy and in particular what it described as Spain's dysfunctional labour market. Spanish unemployment is over 20% but more importantly, youth unemployment in Spain is 50%. That means a lot of young people with time on their hands, ready fuel for extremist agitators and trade union activists looking to organise street protests which inevitably turn into riots. The same is true of all the other PIGS all of which have strong and active communist parties and in the case of Italy the Neo-Nazi Liga Nord. The German populace is disconnected and disenchanted with its political class and has already publicly vented its views against Merkel's Greek profligacy with their hard earned cash.
Add in now the deflationary spiral that the ECB seems intent on imposing on its bad little PIGS or as Miss Lizzie Bennett said in Pride & Prejudice, how is half such a sum of debt going to be repaid. The EU is obsessed with imposing greater budgetary discipline on the little pigs but what about the big porkers? As the FT today reports on the latest van Rumpoy edict,
"Ministers agreed four broad objectives – namely, on the need for greater budgetary discipline; an effective crisis management system; stronger economic governance and means to reduce divergences in competitiveness between members of the 27-country bloc." but as the FT also reports, "they shied away from any immediate focus on a mechanism to handle state defaults." Very Augustinian, Lord give me chastity but don't give it to me yet!
Read the history of Germany in the early 1930s to understand how this explosive mixture can be exploited by extremist politicians. It is as I noted months ago the Brussels elite worship their EU state model spirit but the national flesh is weak so to speak. There will be much blood on the streets until the EU accepts as the markets have that the Euro is irretrievably flawed and broken.