Spain is a lot like Florida. Sun, sandy beaches, cold drinks. A great place to get away to.
That's why its property market boomed in the last decade. It's important to note that when reading self-righteous screeds like this one, complaining that people in other countries are now having to "foot the bill" for Spanish bank "speculation."
It wasn't Spaniards who bought those condos by the sea, which now stand vacant and unaffordable. It was Englishmen, it was Scandinavians. Germans, too. They just had to do those deals with Spanish banks. The deals were well-capitalized when they were signed. Spanish institutions were not being irresponsible. They just assumed that Europeans in other countries were good for the money.
When this sort of thing happens in the U.S. we have a pretty simple solution. The local banks go away, the depositors are paid off by the federal government, banks in other states take over and we go on. I watched something like this happen in Texas during the 1980s, a property boom similar to Spain's, only fueled by local oil money that dried up under Reaganism. The big banks were taken over, the small banks went under, and while Texas suffered grievously, life went on.
The weekend's "bailout" of Spain is only a partial solution to its problem, and in the view of Nobel Prize winning economist Joseph Stiglitz, it won't work. What's needed, he says, is a common European banking system.
What's needed, in other words, is federalism rather than federation. This is precisely what happened to our own country in the 1780s. State banks were too weak to pay the debts they had run up during the Revolution, the economy was collapsing, and a more perfect union was required to stand over all of them and get things going again.
Yeah, the U.S. Constitution was the result of a banking crisis.
From everything I've been able to discern, Europeans are way ahead of policymakers on this. Even the Greeks don't want to leave the Euro. They understand that the physical mobility, and capital mobility, of union is a huge benefit and that the alternative of going it alone is far worse than hanging together.
Americans, bound up in frankly racist attitudes about intractable European nationalism, given to us by our grandparents and seared into us by two World Wars, aren't listening to what is happening. There is an opportunity in this crisis for bringing Europe much, much closer together. That's how European voters see it. They're not voting for "socialists," in Germany or France. They're voting for stronger international institutions, that can match their economy to the way in which they live.
Europeans, in other words, want Europe, and the Spanish crisis shows they need Europe. The question is whether their leaders are wise enough to give them Europe, a Europe that its people can control, rather than the opaque welter of bureaucracies past treaties have created.
Americans ought to encourage that, instead of standing off and self-righteously telling each European nation to pound sand.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.