Mar 26, 2012

Germany to Directly Supervise Spain's Budget Reforms

We have long maintained that the ongoing sovereign debt crisis in Southern Europe will precipitate further European integration. (See Another Step Forward in the Creation of the United States of Europe). With the second Greek bailout a done deal, the market's attention has again shifted to Spain. Last week yields on Spanish government bonds were once again up at 5.5%.

Today Dow Jones Newswires reported that a German government delegation will fly to Madrid to

corroborate first hand the government's reforms and assess the true risk of the new deficit target
Reading between the lines this means that representatives of the German government will have a direct
say in the determination of Spain's budget. This is somewhat similar to the dispatching of German tax collectors to Greece last month to help fight tax evasion (although this initiative was done under the official aegis of the EU and the IMF).

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