A Midday EU Special

I suggested yesterday that Spain's political parties were anticipating Brussels' (German) pressure in changing the Constitution to put in a debt cap. Others (here and here) believe this 'undemocratic' development is a result of pressure already applied. And I suspect they're right. It certainly does promise an unholy mess at some time in the future. The sight of Opposition parties using appeals to the Constitutional Court is one of the least attractive aspects of Spanish politics. Though this may happen in other countries as well, for all I know. Not in the UK, of course, where there is no written Constitution.

Meanwhile, there's both a growing concern about the practical consequences of this step (see the two articles cited) and a backlash against both the development itself and the undemocratic way it's being foisted on the Spanish people. Won't do much to stem the tide of anti-EU feeling.

On a wider front - and back in Germany - the criticisms of the Bundesbank have been followed by 'blistering' accusations from the German President that the ECB is violating its treaty mandate with the mass purchase of southern European bonds.

At the same time, Nobel laureate Joe Stiglitz has warned that Germany is “going to lose a lot of money one way of another” since the exit of southern states will inflict large banking losses. The country might as well opt to shore up EMU and prevent its great dream of European unity “going down the drain”.

AEP's view is that Mrs Merkel appears to have enough votes to back the EU summit deal in late July, which gives the bailout fund (EFSF) broader powers to shore up bond markets. However, the simmering mutiny [in Germany] kills off any chance that Germany will agree to a major boost to the EFSF in coming months, let alone quadruple its firepower from €440bn to €2 trillion or more, the sort of figure deemed necessary by RBS, Citigroup and others to prevent the crisis engulfing Italy and Spain. . . . The carefully-scripted comments [of the Bundesbank and the President] are the clearest warning to date that Germany has reached the limits of self-sacrifice for Europe. The assumption that it will always - after much complaining - sign a cheque to keep the project of the road, no longer holds.

As I keep saying, interesting times. With some folk believing we are sleep-walking towards a humungous global crisis by the end of the summer. Despite the brain-power (or lack of it) dedicated to preventing exactly this.

And doomsayers are not always wrong. Nor the optimists always right.

You can start worrying now.