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Ambrose: Spain is spiralling into the vortex of debt-deflation.

This has nothing to do with Greece. 

It is not the result of fiscal extravagance over the past decade, or other such Wagnerian myths. 

Monetary tightening by the European Central Bank caused Spanish real M1 deposits to fall at an 8 pc rate in mid-to-late 2011

Indeed, the ECB even let the broader M3 money supply contract for the whole eurozone late last year, badly breaching its own 4.5pc growth target. 

This was not purist hard-money discipline. 

Let us not dress it up with the bunting of ideology, or false authority. 

It was incompetence, on a par with the errors of 1931. 

Spain’s Bankia fiasco has merely brought matters to head, 

A €4bn bail-out in mid-May. A €23bn bail-out two weeks later. You couldn’t make it up. 

Ambrose Evans-Pritchard,  27 May 2012

Spain        Monetarism

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