The decision by the AAA bloc of Germany, Austria, Finland and Holland to walk away from the June summit deal for direct ESM recapitalisation of Spanish banks (lifting the burden off Madrid's shoulders) has keelhauled Spain.
Yes, the AAA quartet now claim they never agreed to cover "legacy assets" or the mess left from the EMU bank bubbles of the Noughties (in which German and Dutch banks were central players). That is a very dubious claim.
The Council document circulated for several days and was discussed by key officials from all countries. The purpose was crystal clear: to break the vicious circle between banks and sovereigns. Everybody knew that it was intended to stop Spain spiralling out of control.
I have been assured by Council officials that the text was not changed in the small hours of the night. The leaders agreed to it, then discovered they could not sell the package to their own parliaments – especially the Bundestag – and are now wriggling out on a technicality.
The AAA volte-face is perhaps the most shocking chicanery, deception, and cowardice that I have seen over the 20 years or more that I have been writing about Europe’s affairs (on and off). The EU has broken its word to the markets. The Latins feel betrayed. So do the Irish. There will be deep consequences, even if these are not obvious at first.