If there was ever a plan, there’s no trace of it left. All of the government’s forecasts have come up short. Just a few weeks ago Prime Minister Mariano Rajoy, of the Popular Party (PP), was promising that there would be no public money for the banks. But Bankia alone will now be receiving 23.5 billion euros in public funding to save it from disaster. That’s after Economy Minister Luis de Guindos said on Monday that the amount would be no more than seven billion. On Friday, Deputy Prime Minister Soraya Sáenz de Santamaría was calling it a loan. On Saturday, Bankia’s new chairman, José Ignacio Goirigolzarri, explained that it is a capital injection, not a loan. In other words, the state is investing in Bankia, and only if things go really well will it recover its money — that is to say, the taxpayers’ money.
Yet if there is something that this government fears, it is giving citizens the sense that it is improvising. That perception, the conservatives figure, was the undoing of Spain’s former leader, Socialist José Luis Rodríguez Zapatero. But several members of the executive have admitted in private that the situation has become completely unpredictable, that scenarios change hourly and that at this point nobody dares rule out any possibility.
The most obvious option of all would be an influx of European money to shore up Spain’s banks. Rajoy insists on denying it “at the present moment,” as he specified on Wednesday in Paris, and opposition leader Alfredo Pérez Rubalcaba backs him up on this point. Both men feel that such a move would, in effect, constitute a bailout, scaring away investors and leading to the same draconian austerity measures that other countries have had to accept. Pensions and unemployment benefits would surely be held up to close scrutiny.
Even if Rajoy refuses to consider this scenario, the matter is nevertheless on the government’s agenda. July 1 is a relevant date because that is when the new rescue fund, the European Stability Mechanism (ESM), goes into effect. A key summit has been called two days earlier.
For now, the government’s strategy is to keep pressuring the European Central Bank (ECB) to help it bring down the risk premium, which on Friday reached the record level of 494 once more. Spain cannot sustain such levels for very much longer, several members of the executive admitted. The ECB will not talk for now, but it has in effect been helping Spain out since August 2011, and the PP hopes it will continue to do so to avoid the ESM.
Although the Socialists also reject asking the ESM for help, the party could not really withhold its support if it came down to that. In fact, Rajoy and Rubalcaba seem to have narrowed the gap between them, and agree on European strategies. In public, however, the prime minister continues to belittle his opponent, while Rubalcaba is asking for accountability in the Bankia case — something that does not seem forthcoming.
The Socialist Party “will not support the use of one more euro of public money for Bankia without first knowing what happened, who is to blame and how this is going to be resolved,” said Rubalcaba, adding that his party wishes to prevent “losses from being socialized and profits from being privatized.”
Perhaps the urgency of the situation is best understood when one realizes that for the first time in his 30-year career, Rajoy, a veteran politician with no economic background, seems obsessed with the economy and oddly unconcerned about political matters. Like Zapatero before him, aides privately admitted, Rajoy’s waking hours are devoted to bringing down the risk premium and avoiding a Spanish bailout.