Guest post. Translated from the French by Tim Gupwell and Bernard Bouvet

In spite of the promise of a hundred billion Euros which has been brought to the table, the markets are still not convinced, and it didn’t take them long to react. By late afternoon, Spanish borrowing rates were edging up again, reaching 6.508%, while Italian rates had exceeded 6%. Spanish sovereign CDS were up sharply. After initially rising, financial stocks plunged on the stock exchanges. The ratings agency Fitch downgraded Santander and BBVA, the two flagships of the Spanish banking system. Even more worrying for the future, the two major Italian banks, Unicredit and Intesa Sanpaolo today lost respectively 8.81% and 5.92% on the stock market, Spain dragging Italy down with it.

An absence of essential details about the loan’s final amount, its rate, and its source (either the EFSF or the ESM) is to blame. Similarly, the conditions which are to be demanded in return, downplayed by Madrid and confirmed by Brussels. The wait for the outcome of the Greek elections is also a factor. But, in reality, European leaders are suffering from a total lack of credibility. They have made too much use of dramatic announcements, have bandied about too many exorbitant sums, and are still just as divided and undecided – only intervening when they no longer have the choice.

Mariano Rajoy, the head of the Spanish government, and Joaquin Almunia, one of the European Commissioners, presented a pitiful sight. The former refers to the Spanish bank bailout as a “line of credit”, so as to avoiding describing it as the ‘rescue package’ which he had refused; the latter speaking of a “Quartet” to describe the structure responsible for monitoring the bailout, in an attempt to avoid the term ‘troïka’. It has come to this – playing with words.

Spanish banks have exhausted the largesse lavished on them by the ECB and will no longer be able to buy government debt, whilst the state, in order to save them, will increase its deficit. Were they still able to do so, this would only increase the risks they have already taken. To top it all, the European Commission will recommend to the European Council that the Spanish government be regally granted an additional year to lower its public deficit below the 3% target, whilst the public debt is now going to exceed the threshold of 90% of GDP , and the country is in recession. Who would believe it?!

They couldn’t do worse, even if they tried