The euro crisis is entering its final stages. Economic pain is now interacting with political resistance to produce intense financial pressure. I expect Greece to leave the euro ”“ and perhaps very soon.

It could happen voluntarily, but both the Greek people and Greek politicians are still clinging to the idea that they can put an end to austerity yet still stay in the euro. In order to try to achieve that, a new government may call the eurozone’s bluff.

At that point, the other eurozone members would face an awkward choice. Doubtless there would be voices in favour of providing the money, willy nilly. That might well be the French position. But if the eurozone gives way on this, what chance would there be of painful austerity being continued, not just in Greece but also in Portugal, Spain, Italy and Ireland? The northern countries would face the prospect of pouring money into a bottomless pit.

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Spain’s sickly economy faces a “crisis of huge proportions”, a minister said on Friday, as unemployment hit its highest level in two decades and Standard and Poor’s weighed in with a two-notch downgrade of the government’s debt.

Spain’s unemployment rate shot up to 24 percent in the first quarter, the highest level since the early 1990s and one of the worst jobless figures in the world. Retail sales slumped for the twenty-first consecutive month.

“The figures are terrible for everyone and terrible for the government … Spain is in a crisis of huge proportions,” Foreign Minister Jose Manuel Garcia-Margallo said in a radio interview.

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When it was over, and the balloons had shriveled and the whistles had faded away, Lionel Messi put his hands to his head. Messi, the slick, slippery forward, was rooted to his spot: it was as if he could not believe what he was seeing.

He was not alone. Around him, the Chelsea players threw their arms over one another, hugging in equal parts glee and exhaustion, while the Barcelona players only stared, as if overwhelmed by two sobering truths: on this day, Messi, perhaps the greatest player in the world, could not score. And Barcelona, perhaps the greatest team in the world, could not win.

Instead it was Chelsea, despite playing a man short for nearly an hour in front of a frenzied crowd at the Camp Nou stadium, that advanced to the Champions League final.

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Barring some kind of cataclysmic collapse””aliens landing at the training ground and kidnapping half the squad might do the trick””Real Madrid will win its 32nd Spanish title this year. Saturday’s 2-1 win at archrival Barcelona left Jose Mourinho’s crew with a seven-point lead and four games to play, which means arithmetic is the only factor delaying Real’s coronation.

Real Madrid could well have lost at Camp Nou and still won La Liga. But actually defeating its eternal rival is something of a game-changer. Mourinho may not admit it, but he didn’t just get a monkey off his back, he banished a whole pack of screaming orangutans.

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If Spain’s crisis deepens Europe’s recession, it could tip the entire world economy into a stubborn slump. The ramifications would be enormous, including: reduced odds of Barack Obama’s reelection, assuming a weaker U.S. recovery; less political cohesion and more social unrest in Europe (even now, the European Union’s unemployment rate is 10.2 percent); and growing pressures in many countries for economic nationalism and protectionism.

Spain is suffering a hangover from what economist Desmond Lachman of the American Enterprise Institute calls “the mother of all housing booms.”

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Europe threw its weight behind Spain yesterday after a diplomatic war broke out between Madrid and Buenos Aires over Argentina’s decision to take over a multibillion-pound energy company.

In the wake of tensions between Britain and Argentina on the anniversary earlier this month of the Falklands invasion, President Cristina Fernández de Kirchner risked further alienation around the world by pushing ahead with the nationalisation of Yacimientos Petrolíferos Fiscales (YPF), in which Repsol, a Spanish energy group, has a majority shareholding.

In response, Spain launched a trade and diplomatic offensive against Argentina, rallying allies in Brussels and the G20 against the move to take over 51 per cent of YPF.

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I fully intended to ignore Spain this week. Really, truly I did. I had my letter all planned, but then a few notes drew my attention, and the more I reflected on them, the more I realized that the inflection point that I thought the European Central Bank had pushed down the road for at least a year with their recent €1 trillion LTRO is now rushing toward us much faster than ECB President Mario Draghi had in mind when he launched his massive funding operation.

So, we simply must pay attention to what Spain has done this week ”“ which, to my surprise, seems to have escaped the attention of the major media. What we will find may be considered a tipping point when the crisis is analyzed by some future historian. And then we’ll get back to some additional details on the US employment situation, starting with a few rather shocking data points. What we’ll see is that for most people in the US the employment level has not risen, even as overall employment is up by 2 million jobs since the end of the recession in 2009. And there are a few other interesting items. Are we really going to see 2 billion jobs disappear in the next 30 years?

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In a largely claustrophobic game at the Allianz Arena, Bayern Munich dramatically defeated Real Madrid 2-1 thanks to an 89th-minute strike by Mario Gomez, giving Jose Mourinho endless cause for concern heading into the second leg at the Bernabeu on April 25.

Many wondered how Real Madrid would handle its first truly top-class opponent in the Champions League knockout stages — having sparred with CSKA Moscow and cruised past plucky APOEL in the round of 16 and quarterfinals — and I suppose this dispiriting defeat gives us plenty of indication….

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Is the euro crisis back with a vengeance, or do investors have a needless case of anxiety?

Until very recently, the gloom over the Continent had seemed to be lifting, with the conclusion of Greece’s second bailout and the calming effect on the financial sector of cheap loans from the European Central Bank. But last week’s jump in borrowing costs for Spain and Italy provided a clear signal that the euro’s problems are far from solved….

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If I read my Twitter feed correctly, Jorg Asmussen, the German representative on the European Central Bank’s executive board, thinks that the ECB has already played its part as far as saving the euro is concerned with last December’s LTRO intervention; it’s now up to national governments to complete the process, he says, by undertaking the necessary structural reform (Mr Asmussen has been speaking at the Institute for New Economic Thinking conference in Berlin).

As is becoming ever more common when it comes to euroland, it’s a view which is quite at odds with the facts. True enough, the ECB’s surprise liquidity operation did succeed in dousing the crisis, at least temporarily. A Lehman’s style meltdown was averted. But the idea that the ECB can now sit back and let the politicians do the rest is surely deluded.

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The Spanish reading public now has a very good grasp of the fundamental realities of EMU. This will have consequences. Spain is not on the fringes of the Balkans, terrified of being cast into Ottoman banishment. It is not a small country that can be pushed around for year after year.

How and when all this will end is anybody’s guess but I have suspected for a long time that Spain is the lynchpin of the system. The intellectual atmosphere has changed entirely. Politics must surely follow.

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Spain’s first general strike for 18 months has been well-supported, as citizens protest against the government’s labour reforms and austerity plans.

Protests began early, with demonstrators clashing with police in several cities as they tried to disrupt buses and prevent lorries arriving at, or leaving, wholesale markets. Over 50 people were arrested, and a small number treated for injuries.

Unions say they were pleased with the turnout today. Transport links have been badly affected, with hundreds of flights cancelled, and trains and buses delayed.

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Update: There is more there as well.

Prime Minister Mariano Rajoy will unveil the most austere budget since before Spain’s return to democracy in 1978, risking a deeper recession in a bid to avoid succumbing to Europe’s debt crisis.

“There’s interest in seeing how they are going to manage this particular trick of cutting the budget so aggressively,” said Harvinder Sian, an interest-rate strategist at Royal Bank of Scotland Group Plc in London, during a telephone interview. “The recession will be dramatic.”

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With the highest unemployment rate in the European Union at 23 per cent and 50 per cent of young people out of work, Spain this week veered back to recession for the second time in two years.

The strike comes amid mounting international concern that Spain might become the next casualty of the eurozone debt crisis after Greece, Ireland and Portugal, which were all forced to accept financial rescue packages.

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Lionel Messi scored five goals, a Champions League record, as Barcelona thrashed Bayer Leverkusen 7-1 at the Camp Nou to win their last-16 tie 10-2 on aggregate.

Messi netted with two lobs, a fine low drive, a close-range finish and a long-range screamer to make history for the umpteenth time in his short career.

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Watch it all–my oh my; KSH.

…[Italian Prime Minister Mario] Monti’s joint letter with twelve EU states last week calling for an end to self-defeating contraction marks a key moment in this crisis. If Francois Hollande is elected French president in May, the shift in Europe’s balance of power will be complete. Germany will lose its stifling grip on EU policy machinery. The EMU bloc will start to tilt towards reflation at long last.

Whether it can come soon enough to avert a social explosion across Europe’s arc of depression remains to be seen. Nor can such stimulus overcome the fundamental flaws of EMU since Germany is at an entirely place in the deform structure, with unemployment at 20-year lows of 5.5pc.

What is needed to save the South must endanger the North. Germany would overheat, pushing its inflation to 4pc or 5pc until Bild Zeitung erupts in Teutonic fury. It is impossible to reconcile the conflicting imperatives.

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Judge eternal, throned in splendor, who gavest Juan de la Cruz strength of purpose and mystical faith that sustained him even through the dark night of the soul: Shed thy light on all who love thee, in unity with Jesus Christ our Savior; who with thee and the Holy Spirit livest and reignest, one God, for ever and ever. Amen.

Even as the euro zone hurtles towards a crash, most people are assuming that, in the end, European leaders will do whatever it takes to save the single currency. That is because the consequences of the euro’s destruction are so catastrophic that no sensible policymaker could stand by and let it happen.

A euro break-up would cause a global bust worse even than the one in 2008-09. The world’s most financially integrated region would be ripped apart by defaults, bank failures and the imposition of capital controls….The euro zone could shatter into different pieces, or a large block in the north and a fragmented south. Amid the recriminations and broken treaties after the failure of the European Union’s biggest economic project, wild currency swings between those in the core and those in the periphery would almost certainly bring the single market to a shuddering halt. The survival of the EU itself would be in doubt.

Yet the threat of a disaster does not always stop it from happening. The chances of the euro zone being smashed apart have risen alarmingly, thanks to financial panic, a rapidly weakening economic outlook and pigheaded brinkmanship. The odds of a safe landing are dwindling fast.

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Banks clamored for emergency funds from the European Central Bank on Tuesday, borrowing the most since early 2009 in a clear sign that the euro region’s financial institutions are having trouble obtaining credit at reasonable rates on the open market.

Indebted governments among the 17 members of the European Union that use the euro are also finding it harder to borrow at affordable rates as investors lose confidence in their creditworthiness.

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Land in some parts of Spain is literally worthless, said Fernando Rodriguez de Acuna Martinez, a consultant at Madrid- based adviser R.R. de Acuna & Asociados. More than a third of Spain’s land stock is in urban developments far from city centers. About 43% of unsold new homes are in these areas, known as ex-urbs, while 36% are in coastal locations built up during the real-estate boom.

“If you take into account population growth for these areas, there’s no demand for them, not now or in ten years,” he said. “Around 35% of Spain’s land stock is in the ex-urbs, which means it’s actually worth nothing.”

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Through heavy social spending and investments in major building projects, Spain is one country whose regional authorities have been living beyond their means and racking up large budget deficits. Those gaps were sustainable during boom times, but in the current economic climate, they threaten to push Spain toward a financial reckoning that could have consequences far beyond its borders.

Regional overspending is likely to cause the central government in Madrid to miss its target of bringing the nation’s overall deficit down to 6% of gross domestic product this year, considered crucial to maintain investor confidence. For that reduction to happen, Spain’s 17 regional governments were told to post budget shortfalls amounting to no more than 1.3% of GDP, but they almost reached that level after just the first six months of the year.

“If the regions surpass their deficit limits, then they can send Spain as a whole off course,” said Ismael Sanz, an analyst at King Juan Carlos University in Madrid.

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Obama, at any rate, felt that they would have little value. Instead, he confronted the Germans in Cannes with a suggestion so radical that it alarmed both Merkel and Schäuble. To save the common currency, Obama proposed that the Europeans follow the example of the American Federal Reserve, which buys up almost unlimited amounts of US treasury bonds when necessary.

The Germans pointed out feebly that the ECB operates within a completely different tradition than the Fed, and that it also pursues a different mission. But it is becoming increasingly clear to Merkel and her finance minister that, in the end, only the ECB will be able to save the euro if the crisis continues to escalate. It is the only European fiscal policy institution capable of taking action, and it also comes equipped with unlimited firepower. It can never run out of money, because it can simply print new money when needed.

This is an approach Germany’s representatives in the ECB council have strongly resisted….But how long can the Germans resist the pressure from other members?

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The 14th crisis summit in 21 months starts with a meeting of all 27 European Union leaders at 6 p.m. The real business gets under way at 7:15 p.m. when chiefs of the 10 non-euro nations depart, leaving the rest to hash out a strategy that they already say requires more work.

The cancellation of a finance ministers’ meeting to precede the summit underscored the holes in the plan. The finance chiefs will now meet at an as-yet undetermined time after the summit to complete its main elements, including safeguarding banks and writing down Greek debt, according to an EU official.

Global exasperation with Europe’s response is deepening, with politicians from Australia to North America prodding the euro area to get ahead of the crisis before it infects the world economy.

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Just when the eurozone governments thought it could not get worse for Europe’s single currency, it did.

Shell-shocked EU finance ministers meeting in Brussels on Saturday were already reeling from the worst Franco-German rift for over 20 years and a fractious failure to resolve the problems that have brought Greece, and the euro, close to the brink.

But then a new bombshell hit as a joint report by the EU and the International Monetary Fund (IMF) warned that, without a default, the Greek debt crisis alone could swallow the eurozone’s entire €440 billion bailout fund – leaving nothing to spare to help the affected banks of Italy, Spain or France….

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EU ministers were wrangling on Saturday over bolstering their banks, with some officials saying broad agreement was nearing but others warning that Spain, Italy and Portugal were objecting because of concerns over the costs involved.

“There is 24 against three – Italy, Spain and Portugal,” said one euro zone diplomat. “They think it’s too expensive. They don’t want to pay it.”

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L’Osservatore Romano (English, September 21) reprinted an essay, “God in Madrid,” by the Peruvian novelist and Nobel Prize winner, Mario Vargas Llosa, from the Spanish paper El País about the meaning of the papal visit….

[In the essay Llosa says that] contemporary culture is rather vapid, a kind of “light entertainment.” Within it is a “cabal of incomprehensible and arrogant experts, who have taken refuge in unintelligible jargon, light years from common mortals.” Culture has not replaced religion, particularly that religion originating in revelation….

Most human beings suspect that the answers need a “higher order” of existence to locate the center of their lives. Atheism’s self-satisfied defenders no longer stand on the solid ground they once assumed. Science itself is looking like it has to admit that the origin of the universe lies in some transcendent, extra-cosmic, intelligent source even to explain science….

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The reserve powers would be well advised to pull out all the stops to save Europe and its banking system. Together they hold $10 trillion in foreign bonds. If they agreed to rotate just 4pc of these holdings ($400bn) into Spanish, Italian, and Belgian debt over the next two years, they could offer a soothing balm. None has yet risen to the challenge. It is `sauve qui peut’, with no evidence of G20 leadership in sight.

Once again, the US has had to take charge. The multi-trillion package now taking shape for Euroland was largely concocted in Washington, in cahoots with the European Commission, and is being imposed on Germany by the full force of American diplomacy.

It is an ugly and twisted set of proposals, devised to accomodate Berlin’s refusal to accept fiscal union, Eurobonds, and an EU treasury. But at least it is big.

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Before the euro zone, individual countries issued bonds in their local currency and could print more of it, whether it be francs, lire or drachmas, if a crisis was making it difficult to pay off the loans.

Today, with the European Central Bank in charge of euros, governments in Athens, Rome and elsewhere no longer control the “printing press.” Yet even as individual governments lost the power to pay off debts by printing money, the politics and regulations of the euro zone encouraged banks, insurance companies and other financial firms to load up on government bonds ”” and countries to issue them.

The “persistence in sustaining risk-free status .”‰.”‰. has, in our view, directly contributed to the development and severity of recent market turmoil,” Achim Kassow, a member of the board of managing directors of Germany’s Commerzbank, wrote in a recent study of the bank rule for the European Parliament. “Both the course and the severity of the crisis can clearly be tied to incentives set by current regulation.”

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