The dam breaks in Portugal

... As Wolfgang Munchau wrote in the FT on Monday, the essential problem is that Spain and other Club Med states cannot both deflate to regain lost competitiveness within EMU and at the same grow fast enough to control debt dynamics. They can do one or the other, but not both at the same time.

The EU strategy is simply unworkable. It relies on hope and a prayer, and the misguided belief that the North-South imbalances are “self-correcting” to pinch from Wolfgang’s excellent column once again.

All we can do is stand back and watch in pain as the Euro-Hegelians ruin one country after another.

My sympathies to the Portuguese people who are not to blame for the foolish illusions of their governing elites. And remember, Cara Nação, this bail-out is not for you: it is for European banks exposed to Portuguese debt, just as the Irish and Greek bail-outs were in reality rescues for German, French, Belgian, Dutch, British, and Spanish lenders that ran amok during the credit bubble.
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