Spain does not want to use the EU bailout funds. In a new interview the prime minister Mariano Rajoy rejected the possibility of accepting the fierce spending cuts in exchange for help. This decision means that ECB will not buy Spanish bonds in an unlimited quality, as Mario Draghi promised last week. The reason is that bond purchases were presented as under condition of using the bailout funds and implementing reforms.

 Seemingly this means the money-print will not happen. But in fact Draghi will find another excuse for printing, because it is decided to print and inflation to erase the old debts. And once ECB stepped back from its principles, why then Spain and Italy not to wait until another step back is made. At the end ECB will monetize all debts without conditions and inflation will tornado in EU.

 In the same interview Rajoy rejected also the possibility of lowering pensions. This is a very wrong thinking, because pensions are the main social expense. And when the welfare state is collapsing, it is inevitable to cut pensions to balance the system. At the moment the business in EU is strangled with taxes and social security payments to finance the enormous pension system. This system is to collapse the all society. To avoid the catastrophe serious pension cuts are needed. So they will happen in one or other way. I may happen by nominal cuts, and can happen by inflation. In any case pensions will be lowered.

 But the thinking of politics rejecting this inevitable truth is very risky. Irrational behavior can only worsen the situation...

Dobri
Sept 11th 2012