Biggest Threat to Spain's Democracy since Franco's Day
Byline: COMMENTARY by Alex Brummer
THE eurozone faces a summer of unprecedented turbulence as the financial crises in Spain and Italy spread from the centres of government to the countries' regions.
In Spain, the disruption on the financial markets has triggered a series of public protests on the streets. These threaten to pose the biggest challenge to the country's democratic system since the death of the dictator Franco in 1975, which ushered in a period of modernisation, prosperity and free elections.
The urgency of the current situation was underlined by the decision of the country's economy minister Luis de Guindos to fly to Germany today to request further bail-out money in addition to the injection of [pounds sterling]78billion for the banking system that has already been agreed by European leaders.
The crisis facing Spain comes as financial leaders from Brussels, Frankfurt and the International Monetary Fund are due in Athens to try to tackle Greece's latest debt problems.
The truth is the monumental scale of the problems facing the beleaguered nations in euroland is moving to a new, dangerous level. Instead of being merely a problem for banks and central government, the economic woes are now starting to affect the countries' grassroots.
Across the so-called ClubMed nations (the deeply indebted Greece, Spain, Portugal and Italy), regions and municipalities are fast running out of money and are seeking rescue from their central governments. In turn, political leaders in Madrid and Rome are looking to Germany yet again for salvation.
This latest stage in the two-and-half-year crisis in the euro currency area comes at a particularly awkward moment as national leaders travel to London for the Olympics and as bankers and policymakers head for their yachts and holiday hideaways.
Invariably, late July and August - when these key figures are on holiday - have proved to be some of the most dangerous times in the world's financial markets. In the summer of 1992 the pound and lira came under enormous pressure leading to their ejection from the European Monetary System (the predecessor of the eurozone).
The sub-prime credit crunch happened in August 2007 and the 'great panic' that led to the collapse of Lehman Brothers began in August 2008. This summer, the stakes are enormously high. If Europe's politicians and central bankers cannot find a way to win back the confidence of the financial markets, there is a huge risk of the euro area breaking up. The potential for more bank collapses would make the events of four years ago look like a minor economic squall. …