Catch21 - Our Charity ArmCatch21 is a charitable production company set up in 2005 which trains young people to make videos and engage with their communities.Catch Creative - Our Video Production ArmCatch Creative offers a complete video production service, from Conception to Distribution.Catch EngagementCatch Engagement is the new video interaction platform from Catch21 which allows you to run a campaign using both user generated films as well as professionally shot ones which are displayed via Video 'Walls'. Catch Engagement is all about using films to build an online community - welcome to the future of video.

We shoot cutting edge videos and provide a forum to give people a voice.
Engagement. Discussion. Empowerment.


All content featured on our charity site is produced by young volunteers with the support and mentoring of our professional production team.

Europe no image

Published on June 12th, 2012 | by Catch 21
Image © [caption id="attachment_10293" align="alignnone" width="568" caption="Spanish prime minister Mariano Rajoy secured the deal over the weekend © European People's Party"][/caption]   There was a palpable sense of relief across Europe after confirmation of the speedily negotiated bailout for the troubled Spanish banking sector. The Spanish prime minister Mariano Rajoy (pictured above) has hailed the move as a victory for Spain and for Europe, only ten days after he had insisted that Spain could solve its crisis alone. Yet this is far from a victory. At best it is merely a temporary “sticking plaster” for the eurozone crisis. At worst, the relatively cheap loan could be seen as undermining the terms of the existing bailouts to Greece and Ireland. So who will put up the money and what does it actually mean for Europe? Although the seventeen eurozone members have agreed to provide a bailout of up to €100 bn, it is not yet decided whether the money will come from the existing rescue fund, the EFSF (European Financial Stability Fund) or the European Stability Mechanism (ESM), both essentially financed by eurozone member countries. Either way it seems that the conditions attached to the loan would be much lighter than previously given for bailouts in Portugal, Greece and Ireland. This would mean intrusive intervention and supervision by the infamous “troika” of the IMF, the EU Commission and the European Central Bank only within the Spanish banking sector and not for the rest of the economy. The rationale for lighter conditions can be found in the guidelines for the EFSF. It highlights the “clear need for more flexibility and for appropriate means to cater for specific cases where the source of a crisis is primarily located in the financial sector.” This allows an increase in the speed of the funding while only requiring Spain to continue to abide by EU rules on state aid. The Spanish were particularly keen not to make this recapitalisation look like a bailout, with Spain’s finance minister Luis de Guindos, saying on Sunday that “In no way is this a rescue.” Yet that is precisely what it is and one that is still only temporary. It does not solve Spain’s deeper problems of stagnant growth and the government’s high cost of borrowing. It is clear that further sharing of resources across the eurozone must take place. One solution that may be more widely acceptable is a type of limited financial integration, the so-called “banking union.” This bailout has been the first necessary step, but regulation of the banks must be moved to a more European level enabling a system of common deposit insurance. There is pressure from external observers for this to happen quickly. US Treasury secretary Timothy Geithner welcomed the recapitalisation of Spanish banks as “concrete steps on the path to financial union, which is vital to the resilience of the euro area.” By limiting integration to the financial sector, it can avoid being dubbed as full-blown federalism and be more acceptable to northern European countries who must eventually pay the bill. Critics say that it makes no sense to treat a debt crisis with more debt, yet they are missing the point; more of this sort of fiscal transfer must occur if the euro is to survive, even if it requires adding to the current level of debt. The stark choice that European leaders may soon have to make between eurozone break-up and a pooling of resources was set out clearly by Paul Krugman, incidentally one of the more outspoken economists in the anti-austerity camp, during his recent appearance on Newsnight. He also rather convincingly dismantled conservative supporters of austerity and was a welcome breath of fresh air in the eurozone debate. The current loan to Spain is simply a much ballyhooed stopgap that does not solve the underlying crisis of low growth and huge unemployment. If some sort of further financial integration does not happen soon, the relief from this bailout may be very short-lived indeed.

0

Has Spain really been rescued?

Spanish prime minister Mariano Rajoy secured the deal over the weekend © European People's Party

 

There was a palpable sense of relief across Europe after confirmation of the speedily negotiated bailout for the troubled Spanish banking sector. The Spanish prime minister Mariano Rajoy (pictured above) has hailed the move as a victory for Spain and for Europe, only ten days after he had insisted that Spain could solve its crisis alone. Yet this is far from a victory. At best it is merely a temporary “sticking plaster” for the eurozone crisis. At worst, the relatively cheap loan could be seen as undermining the terms of the existing bailouts to Greece and Ireland.

So who will put up the money and what does it actually mean for Europe? Although the seventeen eurozone members have agreed to provide a bailout of up to €100 bn, it is not yet decided whether the money will come from the existing rescue fund, the EFSF (European Financial Stability Fund) or the European Stability Mechanism (ESM), both essentially financed by eurozone member countries. Either way it seems that the conditions attached to the loan would be much lighter than previously given for bailouts in Portugal, Greece and Ireland.

This would mean intrusive intervention and supervision by the infamous “troika” of the IMF, the EU Commission and the European Central Bank only within the Spanish banking sector and not for the rest of the economy. The rationale for lighter conditions can be found in the guidelines for the EFSF. It highlights the “clear need for more flexibility and for appropriate means to cater for specific cases where the source of a crisis is primarily located in the financial sector.” This allows an increase in the speed of the funding while only requiring Spain to continue to abide by EU rules on state aid.

The Spanish were particularly keen not to make this recapitalisation look like a bailout, with Spain’s finance minister Luis de Guindos, saying on Sunday that “In no way is this a rescue.” Yet that is precisely what it is and one that is still only temporary. It does not solve Spain’s deeper problems of stagnant growth and the government’s high cost of borrowing. It is clear that further sharing of resources across the eurozone must take place. One solution that may be more widely acceptable is a type of limited financial integration, the so-called “banking union.” This bailout has been the first necessary step, but regulation of the banks must be moved to a more European level enabling a system of common deposit insurance. There is pressure from external observers for this to happen quickly. US Treasury secretary Timothy Geithner welcomed the recapitalisation of Spanish banks as “concrete steps on the path to financial union, which is vital to the resilience of the euro area.”

By limiting integration to the financial sector, it can avoid being dubbed as full-blown federalism and be more acceptable to northern European countries who must eventually pay the bill. Critics say that it makes no sense to treat a debt crisis with more debt, yet they are missing the point; more of this sort of fiscal transfer must occur if the euro is to survive, even if it requires adding to the current level of debt.

The stark choice that European leaders may soon have to make between eurozone break-up and a pooling of resources was set out clearly by Paul Krugman, incidentally one of the more outspoken economists in the anti-austerity camp, during his recent appearance on Newsnight. He also rather convincingly dismantled conservative supporters of austerity and was a welcome breath of fresh air in the eurozone debate. The current loan to Spain is simply a much ballyhooed stopgap that does not solve the underlying crisis of low growth and huge unemployment. If some sort of further financial integration does not happen soon, the relief from this bailout may be very short-lived indeed.

Tags: , , , , , , , , , , , ,


About the Author



Back to Top ↑