Fact: a lot of the most famous American westerns were actually filmed in Spain, in the Tabernas desert region. How fitting, then that Spain is now the site of the ultimate showdown.
The European countries bailed out thus far — Greece, Ireland and Portugal — are small fry. Economically speaking they need Europe more than Europe needs them. So when they ran into trouble they knew they would have to accept whatever conditions the European Commission, European Central Bank and IMF wanted to impose. This troika wrote the checks and the three countries did as told: pensions were cut, taxes increased and serious attempts were made to cut public spending. (Now Greece looks like it may no longer play along, but until now it has certainly gone through the motions.)
Now comes Spain. It needs help — its banks are stuffed to the gills with mortgages that won’t be repaid. (How do you say “bursting real estate bubble” in Spanish?) Analysts think that Spain’s banking industry needs €40 billion to cover these expected losses, they could of course be off by several billion in either direction. Spain’s government has admitted that it does not have the dough to pay this. It wants money from Europe to pump directly into its banks. But when it comes to playing host to European and IMF officials telling it how to run things and imposing even stricter austerity programs? Spain’s all like, “Nah, bro. I’m good. Just the money, please. Kthxbai.”
Spain has done quite a lot on its own in trying to get its fiscal house in order, but right now the markets give them no credit. Spain has already acknowledged that it is being shut out of the ability to sell its bonds on the public market. In the past the ECB has stepped in to buy bonds, but ECB president Mario Draghi is pissed because the politicians keep squandering whatever time he has been able to buy them via these programs. As Europe’s third largest economy Spain knows that it is a special case. In fact, it has already broken some of the newest austerity agreements it made but Germany dared not make a fuss. In Spain Germany sees something new: a country that might just be brave enough to stand up to Frau Merkel. Who will blink first?