The nights are drawing in and Christmas decorations are beginning to appear around the shopping centres of the UK. However, in Europe the temperature – political and economic at least – continues to rise remorselessly.This week the cross hairs have moved to Madrid, where elections take place over the weekend. Mariano Rajoy, the leader of the Partido Popular is well ahead in the polls and looks likely to form a new centre-right government to replace the outgoing Socialist administration of Jose-Luis Zapatero. In comments to businessmen this week, he noted “I do not have the habit of not honouring my commitments. Until now, I have committed myself to nothing."
This was not perhaps the most useful statement from the potential leader of a peripheral European nation and may have been a contributory factor in the move of the yield demanded from bond markets for Spanish sovereign debt to close to 7%. As the new head of the European Central Bank, Mario Draghi, has said, “Gaining credibility is a long and laborious process. Maintaining it is a permanent challenge. But losing credibility can happen quickly – and history shows that regaining it has huge economic and social costs.” It is to be hoped that European leaders take these comments fully on board as they enter another weekend of frantic negotiations.