Spain's bailout conundrum

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As Spanish banks' bad debt hits an 18-year high, Madrid is seeking a change to Europe's bailout fund which would enable it to lend directly to financial institutions.

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Geoff Croker,

Having failed to take over Europe by force, the Germans have succeeded in bribing much of southern Europe into subservience by offering free money to euro governments and various rent seekers known as banks and shonks (Spain's bailout conundrum, April 19). This follows closely the Federal Reserve model started by Richard Nixon.
The strategy has worked up to the point when the free money has all been spent and more is required.
Spain should just nationalise its banks that are insolvent and default on any German bank loans. Then put those bank boards in prison or at least offer them German passports.
The Germans could fain outrage then bend the rules to pay its banks direct. At least it cuts out all the ticket clippers.
Another avenue is to ask Citi, JPM, GS, BoA if they want to make a test run on their net position for US$200 trillion of CDSs, etc. This may end up in the bigger test of the reality of fiat currency and World GDP of US$60 trillion. The Fed may cough up to avoid such a test. Even better than asking the Germans. The Fed has a bigger printer and mobile arsenal to back it up. What could the Germans do?

Tim Bullen,

Geoff's (April 19, 9.39am) wrong here, Germany's acceptance of the euro was a political deal made to gain France's acquiescence to German reunification (Spain's bailout conundrum, April 19). When the euro collapses German banks will be hit hard by defaulting peripheral nations. But Germany will survive whilst the defaulters will become bond market pariahs and living standards there will drop dramatically.