The pain in Spain

Spain was always going to be where the doom of the euro would be determined. Ireland, Portugal, Greece and Cyprus amount, together, to less than 5 per cent of the EU’s economy. They can be rescued without emptying the bailout fund. Alternatively, their defaults can be managed as controlled explosions.

Spain is in a different category. Europe’s banks are massively exposed there: an explosion could blast the continent’s financial system to splinters. On the other hand, the sheer scale of a rescue package might finally exhaust the patience of the northern European taxpayers.

Spain’s agonies were caused directly by the euro. We can’t, as we can in Greece, blame irresponsible local politicians or poor tax collection. Spain was running a surplus going into the crash, and had reduced its national debt to 42 per cent of GDP. To be sure, José Luis Zapatero’s Socialist government made mistakes, but it never went in for anything like Gordon Brown’s demented ­incontinence.