It is made much worse by the unpleasant discovery that elected governments can do nothing to escape the trap. They have lost control over their own destinies.
Spain and Portugal are trapped in chronic slump with over-valued currencies. While they have clawed back some lost labour competitiveness by cutting wages, this has merely – and necessarily – compounded the debt-deflation disaster. It has pushed them closer to bankruptcy.
The Draghi bond plan can certainly put off the day of reckoning. It can lower borrowing costs across the board and cushion the slump. But it cannot in itself stop the slow asphyxiation of these societies.
We are moving from the financial phase of this crisis to the full-blown political phase. It really is playing out like the 1930s.
People sometimes ask when I became a pessimist. The answer is the summer of 1991 when I accompanied Serb troops into the Baroque city of Vukovar – shattered by howitzer shelling within a comfortable drive from Vienna, and strewn with the bodies of dead children – and watched 300 wounded prisoners taken from hospital. I assumed they were at last safe. We learned later that they were machine-gunned shortly afterwards at a collective farm nearby.
The unthinkable was happening before my eyes, though it was small in scale compared to the slaughter of 8,000 Bosnian Muslim men and boys at Srebrenica, which I later covered at a trial in The Hague.
When things go wrong, they really go wrong. Cuidado, Querida España