The Spanish bailout and the spreading crisis of capitalism

The EU’s rescue of the Spanish banking system signals the newest phase in the worsening crisis of the global capitalist system.

On June 9, eurozone finance ministers agreed to bailout Spanish banks to the tune of €100 billion ($124 billion), which Spanish Prime Minister Mariano Rajoy hailed as a major victory for the Euro. Optimism about the efficacy of the bailout quickly faded, however, as analysts and investors began to realize that the money being given to Spain in order to recapitalize its banks will only worsen Spain’s government debt, which currently sits at 72 per cent of their GDP.

Spain has become the most recent eurozone country to have its banking sector bailed out—with its largest bank, Bankia, expected to receive €19 billion of Spain’s bailout funds. This comes shortly after Bankia received an initial bailout of €4.5 billion from Madrid in June.

Spain in crisis

Spain’s economy has fallen into its second recession since 2009, shrinking 0.3 per cent in the first three months of 2012. Spain’s unemployment rate is the highest in the eurozone at 24.4 per cent—beating out Greece’s unemployment of 22.6 per cent—with an unemployment rate of more than 50 per cent for workers under the age of 25.

Shortly after the bailout package was announced, the credit ratings agency Moody’s Investors Service cut its rating of Spanish government debt by three notches from A3 to BAA3, following a similar downgrade by Fitch Ratings which cut Spain’s debt rating from A to BBB. In both rating systems, this leaves Spain’s debt rating hovering just above “junk status,” and the markets have responded accordingly. Moody’s notes that the €100 billion bailout will increase the country’s already staggering debt, leading many to fear that Spain will be next in line for a full-on sovereign bailout like we’ve seen in Greece, Ireland and Portugal.

Prime Minister Rajoy has thus far refused to acknowledge the capital injection as a “bailout,” preferring instead to call it a “soft loan.”

Whatever Rajoy calls it, the bailout has caused ripples across the eurozone, with many working-class people in Greece, Ireland and Portugal furious over what appears to be a bailout package without the same types of austerity measures required under previous agreements. In May 2010, the first bailout package was given to Greece ($146 billion), followed by bailouts to Ireland ($113 billion) and Portugal ($116 billion). Each bailout introduced massive waves of cuts and job losses as part of the terms for accepting the bailout package.

However, our sister publication En Lucha points out that until the details of the Memorandum of Understanding have been released—an agreement between the EU and the recipient government of a bailout—we won’t know for certain what the consequences will be for the Spanish working-class. According to En Lucha, conditions for the bailout are likely to include an increase in consumption taxes, cuts to workers’ benefits, more anti-labour reforms, and further cuts in social services. In other words, the same program of austerity that we’ve seen imposed on countries not only across the eurozone but around the world.

What’s next for Spain?

These austerity measures will be nothing new for the Spanish working-class, who have been engaged in a militant fightback against the Spanish ruling class ever since the first round of cuts and anti-worker legislation were introduced by Spain’s previous “socialist” government, PSOE (Partido Socialista Obrero Español).

There were nation-wide work stoppages by trade unions in 2010, and last year we saw the emergence of the May 15 social movement—the “indignados”—which occupied city squares, organized marches and agitated for “real democracy.”

A one-day general strike was held in March, with railways and factories shut down and tens of thousands of people pouring into the streets. Most recently, over 8,000 miners have gone on an indefinite strike in the province of Asturias, with one of their banners reading: “No Estamos Indignados, Estamos Hasta Los Cojones” (“We Are Not Indignant, We Are Pissed Off To Our Balls”).

With each new bandaid solution to capitalism’s contradictions, the EU ruling class proclaims an end to the crisis. But as we’ve seen from Ireland to Greece, from the current upheavals in Spain to the increasing instability in Italy, each time the crisis is said to end, it deepens and spreads. And at each turn, workers are rising up to say no to austerity and no to bank bailouts.