European officials are devising a new approach to the debt crisis. The model used for Greece, which was the prototype for Ireland and Portugal is being replaced by a new approach. It is being hammered out in Spain. It is evolutionary in the sense that it is responding to the changing environment and conditions, while at the same time the new approach uses mechanisms and approaches seen in the earlier model but uses them somewhat differently.

There are three dimensions to the Spanish debt crisis: the general government deficit, the bank problems and the regional debt. Spain is moving on all three.

In exchange for additional time to reach its deficit targets, the government is agreeing to new savings measures. The EU raised this year's target to 6.3% of GDP from the 5.3% agreed just four months ago after an initial target of closer to 4.3%. Recall that in the