Debt is not sexy. Desperation is even less sexy. Both show weakness, a lack of power, and these are not the things voters look for in a politician. This has to be weighing on Mariano Rajoy, Spain’s prime minister, as he ponders his own future after announcing that Spain will need a €100 billion credit line to fix its own banks. Over the past four years, as politicians turned with cap in hand to the IMF—or Angela Merkel—each has tried, in his own way, to make the distinction between a sovereign debt failure and a bank crash. Each has tried to take the money and save his own career. And each, ultimately, has failed:
The bailout is your fault, too. Geir Haarde was Iceland’s prime minister during the country’s boom years. After its banking crisis in 2008, he pushed through an emergency law that guaranteed domestic deposits, launching several years of negotiations with the Netherlands and the United Kingdom that ultimately left foreign financial institutions with a haircut. Iceland’s contract with the IMF pegged some conditions to growth and preserved the country’s safety net. It’s not just debtors that behaved badly, Haarde’s line went, but creditors, too. All must suffer. Haarde left office the next year. In April 2012 he was acquitted of several charges of criminal negligence in allowing Iceland’s banks to grow, unchecked.
The bailout is our fault. In 2010, Brian Cowen, Ireland’s Taoiseach, asked the IMF, the European Union, and the countries of Europe for a bailout after assuming the debts of the country’s banks. He then introduced a painful austerity budget. It’s honorable to own your own shame and to pay to redeem it, was his argument. Following the budget, Cowen announced elections. He lost them.
This is not a bailout. At a news conference in Madrid on Sunday, Rajoy announced with a straight face the “opening of a credit line.” Like Ireland, then, right? No, said Rajoy; since the money was going to shore up Spain’s banks and not the Spanish government, his country was not being bailed out like other European countries. Also, the credit would flow through the Spanish government to the banks. So … like Ireland, right? A government, not in arrears itself, assumes the debts of its banks and then accepts a line of credit to cover its new liabilities? No, said Rajoy, whether Spain was accepting a bailout was a “semantic discussion.”
Rajoy’s government waited a long time to accept its un-bailout. In his telling, the country first needed to prove itself through austerity. “Because we’d earned our credibility, the result of the euro group meeting last night became possible,” he said. What he must have known as he waited, however, is that there is only one way, as a politician, to survive a bank bailout: You don’t.