There was a certain inevitability about Spain's decision to go cap in hand to Brussels and ask for a loan to help bail out its wrecked banks. Ever since Greece became the first member of the single currency to need assistance, each phase of the eurozone debt crisis has unfolded like a sad piece of classical music with its own distinctive melody.
The piece opens slowly. Policymakers in the country under threat deny that they have a problem, a view not shared by the financial markets. In the next movement the pace quickens as the pressure builds on the vulnerable country's bonds. Finally, there is a crescendo as the politicians admit that they are beaten and terms are agreed. There is a stirring passage where politicians claim to have snatched victory from the jaws of defeat.
It is not quite the end, though, because each piece has its coda. The faint echo of the melody can be heard as the crisis moves on to another eurozone capital.
Spain has adhered to this pattern to the letter. The government of Mariano Rajoy said it was on top of the crisis. Tough measures were implemented that were supposed to obviate the need for external assistance. Then it became clear that the problems of the debt-sodden banks were being exacerbated by a deepening recession. Estimates of the cost of recapitalising the banks escalated. In the end, the Spanish government, like the Irish government in 2010, was forced to accept that it could not go it alone. The details of the bailout have yet to be finalised, but it was important for the eurozone to get an outline agreement in place before the Greek election next weekend. The fear was that a second inconclusive result might place intolerable pressure not just on Greece and Spain, but on the next domino in the chain – Italy. That may happen anyway, if relief in the financial market proves, as on previous occasions, to be short-lived.
Spain's rescue differs from that of Greece, Ireland and Portugal in that this will be a Europe-only affair. The International Monetary Fund will have an advisory role but is not stumping up the money. Madrid is confident that the package will therefore come without the onerous strings that have been attached to previous eurozone rescue.
Rajoy's argument is that he already has IMF-style structural reforms in place, so a further package of austerity would amount to overkill. He is absolutely right about that. What's more, any attempt to accelerate the pace of Spain's structural reform would almost certainly backfire, leading not just to widespread popular unrest but precisely the sort of adverse reaction in the markets that Europe's policymakers are seeking to avoid.
Why? Because rising bond yields in the weaker member of the eurozone are a function of two things: high levels of government debt and recession. It is no good tackling the one without the other and until there is a credible growth strategy the debt crisis will be Europe's own unfinished symphony.
