One could almost hear the sigh of relief from the world's financial markets last weekend following the announcement that Spain had finally agreed to a $125 billion bailout of its troubled banks.
While it was probably a necessary step, it was temporary. Very temporary. Oh yes, much more importantly, it doesn't solve the fundamental problems.
Spain's banks are awash in massive real-estate debt and it would be easy to blame their troubles on a plummeting world real-estate market. But that is not nearly the entire story.
First, one reason so many banks in Spain have bad real-estate loans is that politicians there have used their influence far too often to obtain questionable loans for developers and local governments.
Second, officials in both the Spanish government and Spain's banking industry have repeatedly misread the seriousness of the banking crisis in Europe as they have opted for temporary measures to double down in the hope that the economy would soon improve.
While "hope" might be a winning political buzzword, it unfortunately is not a very viable or savvy economic strategy. Without fundamental (read: painful) change in the way the banking industry operates in Spain, we are not confident that this bailout will do much more than lengthen the fuse on the dynamite.
After this bailout is implemented, Spain's sovereign debt is likely to be nudging up against 80 percent of gross domestic product with interest payments that total more than 8 percent of GDP. Yikes, talk about your minimum monthly payments.
Of course, the import of the Spanish bank bailout is likely to be overshadowed by the biggest European news as voters in Greece go to the polls this Sunday to decide the direction of that nation.
Like Spain, the government of Greece has ignored significant fundamental financial flaws and has overcommitted its treasury for years, despite repeated warnings. Now, it is feeling the pain, and its voters don't like it.
If the Coalition of the Radical Left wins in Greece, and there is a significant chance that it might, there likely will be a significant shift in national policy there that could see Greece exit from the euro zone. The fear all along has been that an exit by Greece could cause a "contagion" that would threaten the European Union.
In both countries the heart of the problem stems from governance that has been exceedingly generous and has sought painless, quick and overly optimistic remedies at the expense of long-term prudence.
In this country, we call such actions kicking the can down the road.
Does this sound familiar to anyone here in California? OK, here's a hint: What does the California Constitution require must be passed by Friday? Yes, the state budget. And, believe us, our politicians could offer a lesson or two in can-kicking, not to mention how to use "hope" as an economic strategy.
We could "hope" that all three governments are finally ready to do the financial heavy lifting to make things right. But, in each case, we will believe it when we see it.
See our photo slideshow of the crisis in Spain and Greece at www.contracostatimes.com/opinion and click on this editorial.