Spain – in advance of the Jeremy Vine Show at 12 today

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I'm on the Jeremy Vine show at 12 today. (UPDATE AT 11.15: No I'm not - I've been replaced by Paul Krugman - I guess I can't complain)

The question is a simple one - should Europe bail out Spain?

The answer is equally simply - yes, of course it should.

The 'why not' position is Spanish banks and the Spanish people must pay the price for their folly. I am sure someone will be putting that point forward.

And, of course, they're wrong. Spain took part in a collective deceit that engulfed Europe and the OECD economies. Germany gained from it: the biggest foreign participants in Spain were probably people from the UK.

Banks everywhere, without exception, in the Eurozone, the UK, the US and beyond fuelled a property boom, over-leveraged, under capitalised, and have now collapsed. It had happened before - in the US Savings & Loan crisis, for example. Without change it will happen again.

The issue now is making a particular group pay for the collective failure of the system - which is what it was - is akin to the treatment of Germany at Versailles after the First World War. It so happened Germany lost that war: they price imposed was huge, irresponsible, and ultimately led to September 1939, almost inevitably.

We could impose an economic Armageddon now on Spain. But think what we'd be doing.

Spanish banks would fail.

The Euro would fail.

With Euro failure there would be a risk that quite literally the European economy would stall, completely. Cash would not flow. And within days food would not either. The we'd have complete social breakdown.

If that could be averted by the massive printing of money in other states - something Germany would have to agree to - the cost would be bigger than bailing out failed banks in Spain, and Italy which will surely follow.

And if that could be averted on a pan European basis we'd still see social meltdown in Spain, fuelled by hunger, fear and hopelessness. That way leads totalitarianism in a state I can recall, all too readily, being a dictatorship.

And would we win anyway? No, of course not: Santander would collapse in the UK. The supposed saviour of UK High Street banks would need bailing out here. We'd be in Northern Rock territory very soon.

And that would tip us into depression.

So of course we bail out.

But equally we do so with conditions. Wipe out the shareholders this time: let's not pretend these are private banks anymore. And since this is being done to save other banks from contagion, let's be vigorous in our approach to banking regulation. The pretence that baking exists without state support is now over. Banks create money under licence from the state. The reality is that the state has to take control of that process back, now and for good.

There is only one answer for the future, and that is state controlled banks. They may be regional; we'd need more than one to encourage development. But let's stop pretending that banking can now be a private sector activity anymore. That's not possible.

If we are to save democracy, the nation state, people from starvation, chaos, despair and worse let's say it as it is: in the 21st century banking can only be a state run activity simply because only the state has the capital needed to support it.

That's what must come out of Spain. But we must support Spain to achieve that goal.