A Spanish newspaper has revealed that the Spanish prime minister effectively held the EU to ransom as his battered government sought favourable terms for its banking bailout.
A series of text messages between Mariano Rajoy and finance minister Luis de Guindos gives an insight as to how the Spanish managed to get such a good deal for its banking bailout compared to other nations. Spain’s neighbour Portugal is feeling slightly aggrieved as it has had to endure strict austerity measures and the humiliation of EU interference.
According to the newspaper El Mundo Rajoy texted Guindos; “Resist, we are the 4th power of the EZ. Spain is not Uganda.”A follow-up message has been translated as: “We are powerful, and if they don’t give in, the whole thing will go down. It will cost Europe 500 billion if Spain goes bust, and then another 700 billion if Italy goes bust.”
It seems as though Rajoy effectively scared the other EU leaders into giving in and offering the money raising the issue of fairness amongst the single currencies members. Small nations such as Portugal, Greece and the next suspected receiver of a bailout Cyprus cannot hope to have as strong a position when it comes to negotiating fairer deals.
The Irish have already revealed that they are unhappy with the Spanish deal and are seeking a renegotiation. Unlike Ireland, Spain’s economy minister said a deal on financing for the country’s troubled banks would not impose any conditions on the wider economy.
Dublin plans to raise the issue during the next meeting of Eurozone finance ministers to be held June 21, the sources said.
“Ireland raised two issues: one is the need to ensure parity of the deal with Spain retroactively on its bailout from EFSF,” one European government source said, referring to the temporary rescue fund, the European Financial Stability Facility.
Another European government source confirmed the information.
Ireland secured an 85-billion-euro ($112 billion) rescue deal from the European Union and the International Monetary Fund in November 2010, but only after agreeing to draconian austerity measures.
The Spanish bailout may have been greeted with cheers by some quarters but already that joy is being replaced with concern. The disparity of the Spanish deal is sure to divide the Eurozone further at a time when the members need to work closer together.
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