I've Taken My Soapbox Down From The Loft
By and large this blog does not stray very far into the field of politics, which in some ways is odd as I am a political animal. So much so tht I am still a member of the Liberal Democrat Party back in the UK and continue to be registered to vote in national and European elections in the Rossendale & Darwen constituency where I used to live. Here in Spain I can vote in local elections but not in ‘communidad’ or national elections. Mostly, as regular readers will know, I write of the everyday things that are happening and of the regular cycle of fiestas that mark the path of the unfolding year - Wednesday sees the return of feria the annual knees-up to celebrate the feast of San Antonio de Padua, which in practical terms mainly affects my wife and I in the form of five sleepless nights; if we were younger we would probably admit defeat and stay up as well, but that’s another story. From time to time though, people back in the UK ask worriedly how life is here in Spain as they read of yet another supposed threat to the continued existence of the Eurozone, the world in general and life as we know it. Well obviously things are not good. Spain has just reluctantly accepted a €100 billion bail out. That was Saturday and already on Monday the doom-mongers of the British press are rubbing their hands in glee and predicting that it won’t be enough to stave off Armageddon. And George Osborne has leapt in to take the opportunity to conflate the 16-nation Eurozone with the 27-nation European Union, so that he can offer his party’s right wing the prospect of that all-important referendum to get out of Europe. So, on the one hand he and Cameron insist that the Eurozone countries must “do something”, whilst George makes it clear that if/when they do, he’ll make full use of the political opportunity it presents him with. So, let’s get some things straight. And let’s start with Spain. And let’s start with something you will be hard-pressed to find reported anywhere; the Spanish government’s debt as a percentage of GDP is lower than Germany’s. Read that sentence again. Read it over and over until it helps you to see that Spain is not a basket case. The debt that is threatening to derail the Eurozone economies, if you believe the hyperbole, is the banks’ debt. During the boom years - and this is going to sound horribly familiar - the banks invested massively in property. Just like banks in the USA and the UK, the banks lent money they didn’t have to people who wanted to get onto the housing bandwagon, in the firm belief apparently that come the day, the tooth fairy would pop round during the night and make up the shortfall. The difference in Spain is that the majority of personal bank accounts are held with what are called cajas de ahorros. These are savings banks like the old TSB, Post Office Savings Bank, and locally based building societies that people in the UK are familiar with. Mostly, they are small and many of them badly overstretched themselves in the property boom. As the bubble burst they found more and more developers and owner-occupiers handing back the keys instead of being able to carry on making their loan repayments, so that now a huge amount (I can’t be more precise, I’m afraid) of their assets are in property whose value is significantly reduced from its 2008 value. One solution that was tried, and which has now hit the buffers, was to persuade around a dozen of the hardest hit to amalgamate all their assets and rely on their resultant size to carry them through. The new grouping adopted the name, Bankia, proudly announced that at a stroke it was the fourth largest bank in Spain - and now the government have got to nationalise it. So we have the old, old story of “cash poor but asset rich”. Except that the banks have shown themselves extremely reluctant to acknowledge that they are a lot “asset poorer” than they were. Left to themselves, they will simply sit on their property portfolios until the good times return. In the meantime, they haven’t the liquid resources to finance an economic recovery by lending to small and medium sized businesses, who in turn suffer a domino effect, with business closure and a horrendous level of unemployment. Strangely, thoug the bonuses and mega-salaries continue to be paid out; that probably sounds familiar too. All of this helps to explain how what is now generally referred to as the “Occupy Movement” - Wall St, St Paul’s, etc - originated on the 15th May, 2011 in the Puerta del Sol in Madrid, the Plaza de la Constitución in Málaga, in Barcelona and many other cities across Spain as “Los Indignados”, the indignant ones, who asked the very reasonable question of the bankers and financiers, “Why should we pay to clear up your mess?” They are still waiting for an answer. However, the Spanish government is taking steps to make progress. There are the austerity cuts (mainly hitting the 1%, as los indignados also call themselves), there is now the bail out, but there is now the requirement on the banks to accept that they can’t sit on repossessed property whilst at the same time grabbing a cool €100 billion from Europe; they must write down the values and sell at realistic prices into the current market. It remains now to be seen how successful the government will be in forcing the hand of the banks.