Portugal passes austerity budget as speculative attack on Spain intensifies

[Hannah Bell]

The European debt crisis intensified Friday, as speculators continued their latest attacks on Spain and Portugal. Meanwhile tensions rose between Germany and European officials over the amount of money to be set aside for further bailouts.

Borrowing costs for the Spanish and Irish governments hit their highest levels Thursday since the adoption of the single currency. In response to the ongoing attacks, Portuguese lawmakers, spearheaded by Socialist Party Prime Minister José Sócrates, passed an austerity package Friday. The budget includes cuts to pensions and welfare benefits and tax increases mainly affecting the working class.

The cuts partially abated the appetites of speculators, and Portugal's borrowing cost ticked down slightly after reaching record highs earlier in the day. The speculators then turned their attention towards Spain, sending its borrowing costs to a new record.

Spanish Prime Minister José Luis Rodríguez Zapatero assumed a defiant tone Friday, and, just like the leaders of Ireland and Greece before him, denied considering a bailout from the European Union. “I should warn those investors who are short selling Spain that they are going to be wrong and will go against their own interests,” he said.

Germany, which would bear a disproportionate share of the cost of any bailout, has insisted strongly that countries requiring funds cut pensions and social services before seeking assistance. The German government has also pushed for restructuring debt and giving a “haircut” to private bondholders. This has generated opposition from other countries and from bond investors, determined to have their speculative activity covered in full.

For Greece and Ireland, neither austerity measures nor the EU bailouts have stopped speculative attacks. Borrowing costs for those countries continued to rise this week, with those of Ireland hitting a 12-year high Friday. By the end of trading Friday, Greece's cost of borrowing was 9 percentage points higher than that of the US, Ireland was 6.5 percent, Portugal's 4.3 percent and Spain's 2.4 percent.

It is clear from the latest developments that the speculators will not content themselves with preying on small countries like Ireland and Greece. Today they are attacking Spain, but tomorrow they may turn on any Eurozone country.

Whatever the differences between the major European powers over the size and necessity of future bailouts, all are agreed that the working class in Europe must pay for the ongoing financial crisis. Governments, "left" and right alike, will proclaim that they will have "no choice" but to implement austerity measures, putting into practice policies long demanded by their local ruling classes under the pretense of an "external" threat.

http://www.wsws.org/articles/2010/nov2010/euro-n27.shtml

[Rex]

1. All these ultra-rich people around the world trying to find a new money

'high' with another bailout, more billions they don't deserve but get. They are addicted to greed and will eventually cost us everything.