The Spanish bailout saved the world for about 48 hours

Has the EU just flushed €100bn down the drain?

So, as we predicted, Spain got a bailout on Saturday. The mark for trouble – a five per cent spread between Spanish and German bonds – seems almost to be a self-fulfilling prophecy now. Spreads for Greek, Irish and Portugese bonds were over that level for 16 days, 24 days and 34 days respectively before they were forced into bailouts, but for Spain it took barely a week. 

But the bailout came, the Spanish government was given a €100bn loan from the EU to shore up the troubled banks, and when the markets opened this morning, everything was good again! The IBEX, the country's main stock market, started the day up 4.5 per cent:

Unfortunately, five hours later, the rally isn't looking quite so hot:

 

Even worse, Spanish bond yields are way up today:

The problem is that now that we're up to four eurozone bailouts, the time taken to go from "everything has been solved" to "none of the fundamental problems have been addressed in any way" is measurable in hours.

Europe remains a continent with massive imbalances between the core and periphery, and no obvious way to undo the damage that causes. Germany is so much more competitive than Spain, let alone Greece, that in a full fiscal and monetary union, there would be near permanent transfers of wealth between the two – as there are, without raising a single eyebrow, between London and Bradford, or New Jersey and New Mexico.

In addition, although this bailout is aimed at protecting the Spanish banking sector from damage already done, it does nothing for damage yet to come. The Greek problem is unchanged, with the bank jog continuing steadily (modified chart via FT alphaville):

Such a bank jog can, if it continues unchecked, force Greece out of the euro without any political intervention needed. Paul Mason explained the mechanism in detail, but the basic issue is that eventually, the Greek banks will need to appeal to the ECB for further loans against poor capital. If the ECB, at any time, refuses to allow the loan limit to be raised, then the first bank goes bust at that moment. From there, either the jog becomes a run, and the Greek banking system shuts down, or the country imposes capital controls and de facto leaves the euro.

If Greece leaves the euro, Spain's current banking problems will be looked back on with nostalgia. And, as ever in economics, the fear becomes a self-fulfilling prophecy; belief that Spain might be going the same way as Greece is a large part of why it is going the same way as Greece.

Of course, the fact that the bailout fails to address the fundamentals of the European problem is not to suggest that it does a particularly good job dealing with the surface issues, either.

It is still not clear, for example, what proportion of the loans are coming from the European stability mechanism (ESM) and what are coming from the European financial stability fund (EFSF). This matters because (it seems that) loans from the ESM would be senior to private market loans, while loans from the EFSF would be at the same level; in other words, the ESM money must be paid off before any other loan is, which is unlikely to make the private sector particularly eager to loan to Spain.

As if to emphasise the messy nature of that problem, though, Alphaville is now running a story suggesting that, since Spain already borrows from the EFSF, its loans from the ESM take a more junior status than if it didn't.

It's also not clear whether the money handed over to Spain is actually enough to dampen its banking crisis. Reports suggest that Spanish banks are, in total, exposed to around €400bn in dodgy property loans, so the recapitalisation may not have gone anywhere near far enough.

Oh, and Ireland is getting fidgety as well. Its bailout – way back in November 2010 – happened for much the same reason as Spain's. An overextended banking sector exposed the whole country to risk which it had to ask for help for, but the government was, overall, fiscally responsible. Yet because it needed European funds before the EFSF had any powers narrower than a full-scale bailout, the money came with onerous terms which have not been matched in Spain's case. So Ireland may now be feeling hard done by, and attempt to renegotiate its own terms.

It's looking more and more likely that the EU has just flushed €100bn down the drain.

Do not pass go, do not collect €100bn. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.