The media and economists have made the point before that Greece, and perhaps Spain, have begun to descend into a period much like the Great Depression. The most obvious difference is that the United States had no bailout mechanism to which it could turn. If it had, the Depression might have been shortened by years. It would not have taken World War II to revive economic growth.
Spain will not have a major war to help trigger a recovery. The posturing of the government about the need for aid is as useless as it is careless. The longer Spain nurses these illusions, the deeper its economic problems become, and the harder they will be to solve because of that.
So far, Spain’s neighbors, the European Central Bank and International Monetary Fund have not forcefully made the case that a bailout must happen right now — today. Spain’s austerity measures will not help bring its deficit in line at a level that would make aid possible because the austerity will make the employment situation worse. Plenty of economists believe otherwise, particularly those who represent Germany’s interests. But is it really possible to believe that Spain can cut its way to prosperity? The notion is absurd, based on any examination of the recent history of national financial disasters.
It may be that if Spain’s bailout fails that Italy will fall next. That argument has many proponents as opponents. Italy has a more diverse economy, so it might escape battered but thriving enough to hold off the need for outside money. That cannot possibly be said about Spain under any sane set of assumptions.
Douglas A. McIntyre
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