The Spanish government yesterday pushed through an austerity package of €15 bn by a single vote and thanks to the Catalan nationalists abstention. Spanish conservative MPs voted against and were deemed un-European by the Spanish finance minister. Well he could not say they were being pro-Spanish which is the truth. Public sector unions have predictably called a strike in protest for 8th June. The worms, or as bankers call them non-performing loans, have yet to emerge from Spanish bank balance sheets. You only have to look at the meltdown in the Spanish property market and ask who was lending on all these houses to know where the bad debts are.
Not to be outdone in Italy the CGIL union is calling two strikes in June against the 'unjust and unsustainable' cuts announced by Berlusconi's government on Tuesday. Our trade union brothers will react in exactly the same way after wee George or the even more diminutive Lawsy announce our very own British austerity package in June.
On the markets UK debt is steady thanks to its long average maturity, around 14 years which means we do not have to test our credit in the markets nearly as often as the PIGS. Greek debt spreads are still 5.5% over bunds at ten years, unsustainable over any length of time in my view. Eurozone bonds have steadied thanks to the Chinese stated they had no plans to review their huge holdings of Eurozone bonds. Well they have to say that don't they. I would in their unenviable position be saying the same thing. It does not mean they will not be cutting their Eurozone exposure on the quiet.
Tim Congdon reckons in today's DT the US recover is stalling as US money supply is still shrinking. And what will the Merkel/Sarkozy proposals for further bank regulation do? Cut the growth in money even further as the banks reduce perceived risky lending even further. Nobody can do the wrong thing better or more often than EU politicians!