Fitch downgraded Spain’s sovereign rating to AA+, outlook stable. This was after Spain’s parliament cleared by one vote a commitment to fiscal consolidation measures of €15 billion (1.5% of GDP).
Reacting to pressure from the European Stabilization Mechanism, this move aims to reduce Spain’s budget deficit by an extra 0.5 percentage points of GDP in 2010 to 9.3% & one percentage point in 2011 to 6.0%.
All of this is “pie-in-the-sky” nonsense! No one truly believes that politicians will willingly deliver on promises to impose fiscal restraints.
(The only element of truth is that the AAA standard applied to US government debt is so degraded on its face that Spain ridiculously-high rating may be appropriate in a relative sense!)
Democratically-elected officials in Spain (or elsewhere) operate under incentives that encourage them to make decisions that work against long-term financial interests of their citizens.
As such, it is not the nature of the beast, per se, but a matter of whether they adhere to the “Rule of Law”, perhaps expressed in a Constitution that draws “red lines” to constrain actions by organs of government.
Legislators & rulers of democratic governments are operating in a “lawless” manner in trampling the Rule of Law. For example, Euro-zone politicians wantonly violate treaty obligations that set limits on fiscal deficits & public-sector debt.
In the US, there is a certain appeal to a “throw-all-the-bums-out” movement to vote against all incumbents in the upcoming general election. While this may give some momentary satisfaction & instill some fear of voters’ wrath, it will not resolve the fundamental problems,
As it is, legislators are not afraid of being rebuked from constitutional courts that approve expansive interpretations of the powers of legislatures that have also been accompanied by enhanced duties & powers of governments.