Mariano Rajoy
Mariano Rajoy Reuters

The bailout of the Spanish banks followed the usual pattern of Eurozone fixes. First there was "joy in Mudville" that the EU had not struck out and was making contact with the problem - or giving the appearance of progress. Stocks rallied and interest rates declined, the euro gained against the dollar. Then realism set in, with the realization that the problems were still there.

The infusion of capital into the financial sector represents added Spanish debt. The 100 billion euros that the Spanish banks received were definitely a big confidence builder for the Spanish financial sector. It covered immediate needs and left enough spare cash to cover contingencies and perhaps even an aggravation of the Greek situation following the June 17th elections in that country.

But the big question still remains how, with its contracting economy, can Spain manage to pay off its debt? As we have seen with doub t come spiraling interest costs turning the doubts into a reality.

The Spanish debt will be overseen by the same oversight committee of IMF, EU, and European Bank officials who supervise the Greek, Irish and Portugese bailouts.

Spain is not being forced fed an austerity package as in previous bailouts and that enables Premier Mariano Rajoy to salvage some pride. Spain has already imposed its own severe austerity measures and one cannot heap austerity on already existing austerity.

If Spain cannot repay its debts, the genuine bailout may come anyway and since it is the fourth largest economy in Eurozone thea could be the big one that will sink the bloc.

As expected, the Spanish bailout has already become a major issue in the Greek elections scheduled for Sunday. The Greeks are incensed over what they perceive as favoritism towards Spain. They would have also liked a cool 100 billion euros with no strings attached. For the far left Syriza, this was proof that the problems were continent -wide and not the particular responsibility of "lazy Greeks". T

he Spanish deal showed that even Europe had realized that austerity was the wrong horse and why should Greece remain saddled with it?

The conservative New Democracy that accepted the austerity package and is running neck and neck with Syriza argues that the Spanish case demonstrates the value of negotiating with the EU from a position of acceptance.