Economic crisis - Spain Edition

Discussion in 'Economics' started by Kromeriz, Aug 28, 2012.

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  1. Wordsmith

    Wordsmith LE Book Reviewer

    Economic logic says tell Catalonia that they have to toe the line. Political logic says several regions (like the Basque region) won't like it. The choice is between the devil and the deep blue sea.

    And you can add into the mix that there are three other regions that are lining up to hold their begging bowl out.

    There's a bit of a conjuring trick going on here. Central government made its borrowing figures look good by offloading a lot of expenses to the regions. But that only postponed the problem. Expect more bad news out of Spain over the next few months.

    The general problem is simple - both in Spain and else where. There is too much debt, but no-one wants to cut back their standard of living to control the debt.

    • Like Like x 1
  2. MODS. I posted to the wrong forum. Should be in Economics. Would you move please.
  3. Thanks!
  4. Wordsmith

    Wordsmith LE Book Reviewer

    Spain is mired in debt - like many other countries (including the UK). You don't need to be an economic genius to see things are going to get a lot worse in Spain before they start to get better. As far as money is concerned, people and businesses have no sentiment. If they think their hard earned cash is at risk, they'll move it to somewhere safer.

    This tends to accelerate the problem as the reduced capital base affects banks ability to lend. If banks are struggling to lend this hits businesses and further slows the economy.


  5. Have they had a Northern Rock style run on a bank yet?
  6. Problem here is threefold.
    The previous catalan autonomous government was a coalition that spent too much to keep all it's factions happy and created a lot of debt. Secondly Catalonia is one of the financial powerhouses of Spain but all the money it produces goes directly to the central government who agree to dole out a certain amount. There have been several instances of the Catalans being short-changed, and this year the government said that the amount promised to Catalonia would now not be forthcoming because they have spent it elsewhere. This amount would have allowed Catalonia to have hit their targets with reference to reducing deficit and the Catalans now feel a bit miffed at being blamed for not doing so.
    There have been a lot of cuts here, often quite savage, and there is really no more leeway. Central government instead of incentivising the little guy have simply cut everything to the bone and further as well as pushing up taxes. PM Rajoy for local gain has raised VAT to 21% from next month as a 'temporary' measure. Personally as a small businessman I feel I can't pay anymore and a lot of people are cutting back on everything which affects small businesses hugely. This central government is clueless and reactionary to boot.
    Thirdly if the CG refuses to help, (and after having put the boot in financially they say they will as 'so often in the past', - and they keep a straight face) then you will find a huge wave for independence taking over. I have never met so many Catalans determined that this is the way forward. Not simply have their own tax raising agency, but a full state. The CG realise that they can go too far and are having to backpedal a bit but without using their money, so this fund is a godsend for them.
    The problems aren't over, 11/9 is the Catalan National day and the size of the marches for Independence will be a serious indication of how far the Catalans are prepared to go. Unfortunately the Autonomous President is crapping himself at the idea of having to live up to his words and start the ball rolling.

    Watch and shoot gentleman.
  7. Hmmm. Twunts as in elect a bunch of incompetent politicians who have no idea of reasonably safe fiscal policy and leave the country in a deep hole because most of the electorate is politically illiterate and naive, and because there is little choice from the political caste that exists? Politicians such as Broon and co.
    Oh, what? Sorry, slip of the tongue there. Apologies. Politicians like Montilla, Saura and Carod-Rovira.

    No they don't want to be controlled. By a central government that has a track record of rubbing their noses in it and a country that depreciates their cultural identity, well who would? Try asking any Jock, N-Iron Paddy and Taff about their views of Westminster, (and they have it easier despite what they might say) then we can talk.

    Effing high-port? They have done so down a very long line for a very long time now and will continue to do so, which forms a great part of why Catalonia is in the smelly stuff. Right now they won't because someone else is footing the bill, had it been them then the Dago Treasury Razzman would have been bawling at Pvt. Catalan before you had even heard of this.

    As the Señora said, that 5 bill is what we should have been paid by Spain anyway, and they spent it on themselves.

    So if Catalonia gets a president with a pair of collons (pron. coolyons) anybody up for a bit of mercking?
  8. Wordsmith

    Wordsmith LE Book Reviewer

    There are signs of cracks in the social cohesion of some of the countries in Club Med (my bold).

    Spain risks break-up as Mariano Rajoy stirs Catalan fury - Telegraph

    This has been simmering for some time. Catalan is the wealthiest region in Spain. It's long been used as a cash cow by Madrid, paying far more into the central government's coffers than it gets back. The regions have a lot of power in Spain and the Catalans are now starting to question whether they'd be better off as an independent state. That's an explosive question indeed. If the Catalans unilaterally declare independence from Spain, the Basques will follow.

    Austerity in Spain is putting the entire structure of the country under threat.

    You can add into the mix the escalating tensions in Greece. Syriza's vote continues to rise. And even more alarmingly, so to does the vote of the extreme right Golden Dawn. I doubt the Greek government is going to go full term - instead one or more of the junior coalition partners will pull out if they see electoral advantage. And when new elections come along, we will get an extreme government - be it of the left (Syriza) or right (Golden Dawn).

    The contradictions in the euro continue to bubble away below the surface.

  9. Yesterday Artur Mas announced his intentions to dissolve the Catalan Parliament and convoke elections for the 25th Nov. The purpose of this is to allow the Catalans to voice their opinion over the independence issue, and hopefully ask for a referendum to be held to see just how many Catalans support the idea of an independent state. As it stands the Spanish constitution does not allow for such a referendum which is qualified as illegal, to my mind totally undemocratic.
    The reaction of the (right-wing) Spanish government was interesting, their No.2 said that they supported the decision 'institutionally' whilst decrying the lack of solidarity and the desire to break up Spain. Meanwhile PM Rajoy at the UN was calling for talks to be reopened on Sovereignty for Gibraltar and underlying the facts that Spain is playing their part in international peace-keeping missions. This is in accordance with recent statements like that to Hillary C that 'Spain is back' alluding to the days of the Azores with Aznar, Blair and Bush.
    What does this do? It does what the Partido Popular have done for a long time which is to appeal to a certain segment of Spanish who are heavily nationalistic and rely on their votes to get a majority. It also sets these Spaniards against the so-called regions, especially Catalunya and creates division instead of healing. They then say they are happy to listen and talk, which Rajoy is an expert at. For this read, lets talk till we are blue in the face and then I will do what I want. This merely creates more and more 'Independistes' who are tired of hearing vaccuous talk and having a certain part of Spain insulting them constantly. It creates division when what is needed is harmony. Rajoy is also a master of the wait as long as possible before acting in the hope that something will turn up, which is why he is making everything worse in both economic and social terms, because his answers are usually draconian because he now has no choice.

    However it is a huge mistake to see this over money, because it isn't, money is merely a symptom, and part of the problem in that Spain takes 45% of the revenue that Catalunya generates leaving the region with a shortfall, and then blaming the Catalans for dodgy policies, (although the latter was largely true of the previous Catalan coalition government) even though the budget was based on promised monies which Madrid then reneged on.
    In 1714 Spain proclaimed that by right of conquest after the War Of The Spanish Succession Catalunya was subject to Spanish law and custom, against the will and desire of the Catalans. Since then the hope of independence has been kept simmering and the Catalans see the opportunity after the massive march held on the 11th September. This is what it is about.
    Spain will fight tooth and nail because without Catalunya their economy will have a shortfall, but also because there is a proportion of Spanish society whose masculinity will be threatened if Catalunya goes. For years they have looked down on the Catalans as bad Spaniards because the Catalans don't reckon they are, viz Jocks and Welsh not being English. So when the Catalans say 'OK then bye' they get all irate about ungrateful Catalans and that Catalunya is part of indivisible Spain.

    Here is the crux of it all, that it will have undoubted effects on the Spainsh economy and hence the Euro is beyond doubt, but the problem has gone beyond the mere financial and cannot be seen only in those terms. Also if Catalunya declares independence and the Spanish use the Military to retain the territory then I can only see that that will destroy Spain in the markets which may well then bin the Euro.

    More on the original reason:

    Images from the march.
    Les millors imatges d'una manifestació històrica
  10. Wordsmith

    Wordsmith LE Book Reviewer

    You may be interested in this article in the Telegraph on the noises retired members of the Spanish military are making.

    Be Very Careful, Beloved Spain – Telegraph Blogs

    As you say, its not just over money.

  11. Wordsmith

    Wordsmith LE Book Reviewer

    Things are heating up further in Spain. When Spain asked for a bailout of its banks a few months ago, it was on the explicit understanding that the money would come from the eurozone's bail out funds. Holland, Germany and Finland have now reneged on that deal saying that the bailout funds can only be used to cover debt incurred after the date of the agreement. This means that Spain will have to raise an additional €100bn euros itself - something it will struggle to do.

    Time and time again - when push comes to shove - the richer nations in the EU refuse to actually provide any cash to help the weaker nations. Spain is rapidly heading for another Eurozone bailout on the lines of Greece. Given the growing anti-euro sentiment in Spain and the growing anti-Madrid feeling in Catalonia and the Basque region, the structure of the Spanish state is being tested to breaking point.

    There is a more comprehensive discussion in this Telegraph article.

    Europe's betrayal of Spain – Telegraph Blogs

    As the article puts it:

  12. Problem with the Dagoes is whenever their Nationalism/Economy/Social Unity is in Rag Order they try and find somebody external to blame. Guess Gibraltar is in for a few months of grief.
  13. Heating up is the word. Today the Catalan parliament passed a resolution to consult the Catalans as to their views on independence, which seems to me to be a reasonable democratic move to clear the air and find out where they stand. Unfortunately Spain is indivisible and this is illegal. The Spanish government has declared they will use all legal resources to prevent this happening. They are also declaring that all of Spain should be consulted, like asking all of the UK to vote on Scottish Independence.
    Have they ever got their heads out of their arses even for a day?

    That the Northern countries promise dinero and then renege is unsurprising but it's exactly what Spain has done to Catalunya for years and in a way is nice to see them suffer in turn. The Basques saw this coming and organised a system whereby they collect their taxes and send the surplus on to the Central Govt. This was then denied to Catalunya.
    Live by the sword etc.

    Not far off the mark, though they often blame the Catalans or sometimes the Basques instead. This time they might be too occupied to bother with Gib. Expect fallout after the independence thing to focus the Spanish outside of internal problems.