Why is it taking the Spanish government so long to request a bail-out from the European Union? Prime Minister Mariano Rajoy is still dithering and even said yesterday that perhaps Spain would not need one after all. I find this incredible. The Spanish government is broke and heavily in debt, the Spanish regions are in the same financial state so why does Rajoy think that Spain can survive without even more European Union cash? The problem is that if Spain receives additional funding or a rescue package the European Central Bank will be effectively in control of the Spanish economy. This could mean an even greater austerity drive. I think in the end Rajoy will have little option but to take the cash but politically speaking the risks are high. At the moment he faces a winter of discontent with civil servants in all sectors planning strike action. The popularity of his government has nose-dived over recent months and ordinary voters feel let down. They have seen their tax bills rise and there is still no light at the end of the tunnel, The increase in the VAT rate will dent consumer confidence even further and the fact that civil servants (and there are four million in Spain) will not be receiving a Christmas bonus this year will dent spending even further. So the outlook is pretty gloomy for Spain. In the end the bail-out will have to come but the cost is going to be high. You can see why he is dithering, but he can´t wait too much longer.
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