Spain in Bond

The euphoria that greeted the Spanish bail out was very short lived and lasted but an hour or so. I'm amazed it lasted as long as it did. Even if the eurozone leaders don't get it the markets have now understood that the euro has had it. If there was any doubt this was dispelled today by Spain having to agree to bond yields in excess of 6.8% in order to sell 10 year bonds. What will happen next? If the Greek election results in Syriza being in a position to dictate financial policy Greece will exit the euro in double quick time. What will not happen is an EU banking union in twelve months despite the pronouncements of Mr Barroso who believes that even the UK could join it. The UK would not join the EU banking union and should be selling the devaluation line. Iceland and Argentina are two examples of what can happen if you devalue and it is this message that should be given circulation rather than the lie that the PIIGS would suffer more by leaving the eurozone rather than staying in it. The pain of remaining in the euro will be worse than leaving and devaluing. Greece needs to become competitive again and can only do so if it has a currency that is competitive. As I've said before if the PIIGS won't leave the eurozone Germany should do so since if it doesn't it will be caught up supporting the periphery whether it likes it or not and suffering badly economically. A wounded Germany is an unpredictable beast.