"Memorandum of Understanding" Secures Spain the Greek Treatment
July 12, 2012 • 7:07AM

You will recall Spain's "victory" at the late June EU summit, in getting promises for a 100 billion euro EU bail-out of Spain's banks, with "no Greek-style conditions" attached.

As Bill Cosby used to say: "Riiiight."

After the EU yesterday approved the first 30 billion euro tranche of that package, Spain today revealed that there was a 32-point Memorandum of Understanding behind the deal, and Prime Minister Rajoy went to parliament to announce 65 billion euros in cuts over the next three years. The VAT will rise to 21% from 18%; jobless benefits, pensions, and social security will all be slashed; public wages will be cut; labor rights have gone on the chopping block; and privatization fire sales of public companies will begin.

On the financial side, an "anti-Glass-Steagall" bank reorganization will be rammed through, including forced write-offs of 67 billion euros of subordinated bonds and preferred shares of those banks, held mainly by small retail investors; the Bank of Spain has handed over total supervision of the country's financial system to the Troika, which will run stress tests and shut down banks as they see fit; and a "bad bank" will be established to hold all the toxic assets from the real estate bubble — backstopped by government of course.

The hapless Rajoy told parliament that he had been forced to implement his fourth austerity package in seven months in office, because "circumstances have changed and I have to adapt to them." Miners and other protestors immediately took to the streets in Madrid, and violent clashes with the police are being reported.