Tuesday, May 8, 2012

EU voters recognize that austerity and bank bailouts unnecessary, will Spanish politicians?

Led by France and Greece, EU voters have shown that they reject the policies of austerity and bank bailouts.  They voters have seen that the policies favored by bankers and technocrats do not work.

Will the Spanish government, which promised voters as part of its election campaign not to bailout the banks, now bailout its banks and adopt further austerity policies?

It would be one thing for the Spanish government to bailout the banks and adopt further austerity policies in the absence of an alternative.  However, there is a viable alternative.

The viable alternative is to adopt the Swedish model and require the banks to recognize all the losses on the excesses in the financial system today.  This model was adopted by Iceland at the start of the credit crisis and it has put the crisis behind it and returned to investment grade.

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