The markets will never be satisfied with any financial deal that Eurozone leaders put together to save the debt-stricken economies of Spain, Greece, Ireland and Portugal because the authorities are not dealing with the real problem — these countries simply cannot afford to service their loans.
At the end of last month, Eurozone authorities announced a plan to, in effect, bail out Spanish banks. Global financial markets recovered briefly on the news. Now, however, Spanish borrowing costs are back in the danger zone as doubts over the country’s ability to pay its loans re-emerge and Eurozone commitment to the deal seems to be wavering.
Two things are necessary to resolve the crisis in a responsible manner. Those who put money into bad investments or loans must take their losses. This will effectively reduce Spain’s debt to levels which the country should be able to manage better.
Then, Eurozone leaders must show the political will to stand firm in the face of popular pressure that will follow the inevitable contagion in the rest of the continent. The global economy can no longer suffer the continued volatility caused by the half-measures taken to deal with the crisis by Eurozone leaders.
