Looking back over 2012, it was clear where it had all started to go wrong for the eurozone. Markets had rallied strongly in the first two months of the year following the decision by the European Central Bank in late 2011 to provide cheap three-year loans to commercial banks starved of credit.
Interest rates on the bonds of the weaker members of monetary union tumbled, raising hope that Europe was emerging from its debt nightmare.
Then, on 2 March, Spain's new prime minister, Mariano Rajoy, announced that he was ditching the budget deficit target: instead of reducing borrowing to 4.4% of GDP as Brussels wanted, Rajoy would be aiming for 5.8%. He was later forced to bring that down, but only slightly.
There was no immediate explosion; it took a couple of weeks for financial markets to react to the news.
But by early April, interest rates on 10-year Spanish bonds were back to where they were in the dark days of 2011.
Back then, pressure mounted as the bad economic news continued during the spring and summer and by the late autumn Spain became the fourth eurozone country to need a bailout from the EU, the ECB and the International Monetary Fund.
That, briefly, was how many in the markets saw 2012 panning out as they headed off for Easter. The thinking went as follows: Spain has suffered a colossal property bust that has left it with weak growth, high unemployment and the shakiest of banking sectors.
A double-dip recession will make it impossible to bring down the deficit in line with the Brussels timetable, particularly since the appetite for stringency is stronger in Madrid than at municipal level.
This makes markets nervous. the Greek crisis shows that investors face 70% losses in the event of default, and markets remain to be convinced Greece was a one-off.
They are, therefore, demanding higher returns on Spanish debt. This adds to Spain's problems, raising its debt-servicing costs, pushing up long-term interest rates,and making a bailout more likely. Little wonder the IMF says Spain faces "severe challenges".
Spain will not need immediate financial help, and the good news is that it has already sold nearly half the bonds needed to cover borrowing this year. The ECB's long-term refinancing operations will also provide enough liquidity to prevent Spanish banks from going belly-up.
But it is not hard to sketch out how things go from bad to worse over the coming months. First, signs that François Hollande will defeat Nicolas Sarkozy in a run-off for the French presidency give the markets jitters.
Then, the lack of growth in Spain makes it look unlikely that even the watered-down deficit targets will be hit. There are demonstrations and strikes over austerity. Eventually, the government throws in the towel and admits it needs outside help.
Even this need not be a drama, if three preconditions are met. The first is that policymakers both in Spain and at the eurozone level learn lessons from the botched rescues of the past two and a half years.
Experience shows that there is a need to move decisively and with speed. The second condition is that there are enough bailout funds available to the EU and the IMF to cope with the demands of Europe's fourth-biggest economy.
Finally, there has to be a recognition, belatedly, that Spain's deficit-reduction programme needs growth more than austerity. The war chest available to Europe and the IMF is probably big enough to cope with Spain. But the adamantine belief in cutting at all costs shows that lessons still need to be learned.
■ Nicholas Ferguson's elevation at BSkyB hasn't been applauded by all shareholders. He is not, they fear, the tough independent chairman prepared to overhaul the boardroom that the satellite broadcaster needs.
BSkyB's is not a normal board. Of the 12 non-execs, four are News Corp placemen and three have been there more than nine years, which means they are not classed as independent under the corporate governance code. Two more, including Ferguson, will pass the nine-year mark next summer.
Ferguson, investors point out, was on transmit, rather than receive, when so many of them expressed concern about James Murdoch's tenure after the hacking scandal exploded.
Ferguson's job, as senior non-exec, was to listen to shareholders. But while 45% of them were preparing to oppose or abstain from supporting Murdoch's re-election, Ferguson was penning a letter robustly defending his chairman.
Sky investors would like someone with a record of delivering financial success; in Ferguson's seven years at private equity group SVG, its shares have halved. But mostly they want someone prepared to force through change. And they are not convinced that man is Nicholas Ferguson.
guardian.co.uk
Interest rates on the bonds of the weaker members of monetary union tumbled, raising hope that Europe was emerging from its debt nightmare.
Then, on 2 March, Spain's new prime minister, Mariano Rajoy, announced that he was ditching the budget deficit target: instead of reducing borrowing to 4.4% of GDP as Brussels wanted, Rajoy would be aiming for 5.8%. He was later forced to bring that down, but only slightly.
There was no immediate explosion; it took a couple of weeks for financial markets to react to the news.
But by early April, interest rates on 10-year Spanish bonds were back to where they were in the dark days of 2011.
Back then, pressure mounted as the bad economic news continued during the spring and summer and by the late autumn Spain became the fourth eurozone country to need a bailout from the EU, the ECB and the International Monetary Fund.
That, briefly, was how many in the markets saw 2012 panning out as they headed off for Easter. The thinking went as follows: Spain has suffered a colossal property bust that has left it with weak growth, high unemployment and the shakiest of banking sectors.
A double-dip recession will make it impossible to bring down the deficit in line with the Brussels timetable, particularly since the appetite for stringency is stronger in Madrid than at municipal level.
This makes markets nervous. the Greek crisis shows that investors face 70% losses in the event of default, and markets remain to be convinced Greece was a one-off.
They are, therefore, demanding higher returns on Spanish debt. This adds to Spain's problems, raising its debt-servicing costs, pushing up long-term interest rates,and making a bailout more likely. Little wonder the IMF says Spain faces "severe challenges".
Spain will not need immediate financial help, and the good news is that it has already sold nearly half the bonds needed to cover borrowing this year. The ECB's long-term refinancing operations will also provide enough liquidity to prevent Spanish banks from going belly-up.
But it is not hard to sketch out how things go from bad to worse over the coming months. First, signs that François Hollande will defeat Nicolas Sarkozy in a run-off for the French presidency give the markets jitters.
Then, the lack of growth in Spain makes it look unlikely that even the watered-down deficit targets will be hit. There are demonstrations and strikes over austerity. Eventually, the government throws in the towel and admits it needs outside help.
Even this need not be a drama, if three preconditions are met. The first is that policymakers both in Spain and at the eurozone level learn lessons from the botched rescues of the past two and a half years.
Experience shows that there is a need to move decisively and with speed. The second condition is that there are enough bailout funds available to the EU and the IMF to cope with the demands of Europe's fourth-biggest economy.
Finally, there has to be a recognition, belatedly, that Spain's deficit-reduction programme needs growth more than austerity. The war chest available to Europe and the IMF is probably big enough to cope with Spain. But the adamantine belief in cutting at all costs shows that lessons still need to be learned.
■ Nicholas Ferguson's elevation at BSkyB hasn't been applauded by all shareholders. He is not, they fear, the tough independent chairman prepared to overhaul the boardroom that the satellite broadcaster needs.
BSkyB's is not a normal board. Of the 12 non-execs, four are News Corp placemen and three have been there more than nine years, which means they are not classed as independent under the corporate governance code. Two more, including Ferguson, will pass the nine-year mark next summer.
Ferguson, investors point out, was on transmit, rather than receive, when so many of them expressed concern about James Murdoch's tenure after the hacking scandal exploded.
Ferguson's job, as senior non-exec, was to listen to shareholders. But while 45% of them were preparing to oppose or abstain from supporting Murdoch's re-election, Ferguson was penning a letter robustly defending his chairman.
Sky investors would like someone with a record of delivering financial success; in Ferguson's seven years at private equity group SVG, its shares have halved. But mostly they want someone prepared to force through change. And they are not convinced that man is Nicholas Ferguson.
guardian.co.uk
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