Having visited Spain this last summer, I have very fond feelings for the place and its people. That makes for an emotional investment in the following story. From Via Meadia:
The euro mess is getting worse again. With Greece seething over the strict austerity measures required as terms of its bail-out, Spain's Prime Minister Mariano Rajoy is hoping that biting the bullet now can keep his government and even his country together. With Spain's interest rates now retesting the six percent level, the alternative to a dramatic and convincing austerity budget in Spain is a new ECB bailout. That would mean a humiliating, Greek-style loss of sovereignty, and cripple Prime Minister Rajoy and his center-right government.
As Walter Russell Mead notes, it isn't merely Rajoy's government that is at stake; it is Spain. Consider this image:
Catalonia is Spain's most productive region and also its most indebted. The Catalonians have had a very long history of nationalist sentiment and it may seem to them now that they are contributing more to Spain than Spain is contributing to them. Unfortunately for Catalonia, they are deep in the red. Getting out of Spain, if that were possible, would solve neither their problems nor Spain's problem.
The problem is simple. Like most of Europe, Spain and its provinces have been running up debt faster than their economies have grown. There is no easy way out of that. The dream of Catalonian independence like the dream of stimulus spending is only a way of avoiding reality. You can borrow against the future only if the future has something to lend.
The United States is on the same road. While some of our states are fiscally sound (South Dakota) many are not. California and Illinois, to mention two, are fiscal basket cases. The same is true of many of our major cities. The federal government is running deficits of more than a trillion a year. This might be what we should be talking about as we approach a major election. It isn't. We will be forced to face it soon enough.