More About The Economy

I watched a programme last night on BBC television, in which Paul Mason presented a detailed analysis of the way in which the present Spainsih economic troubles arose. Some of you may have seen it; others may care to track it down on BBC iPlayer. Once again, it was evident that a major contribution came from the banks. In 2008 when the crisis began, Spain was one of the EU’s major economies and one of the strongest, ranking alongside Germany. The government had adopted a prudent approach to running the economy, so that in many of the preceding years Spain had run a surplus. Employment levels were high and the country appeared to have little to fear from problems in the Eurozone. Except that the major banks had embarked on similar high-risk strategies to those of other companies, so that the immediate impact on the Spanish economy was that the government had to use its own healthy finances to rescue the banks. Then, as the economy began to slow more generally, the construction boom collapsed and the smaller, regional savings banks were found to have ridiculously over-extended themselves in that sector, and everything went from bad to worse. The situation was compounded by the three or four tier structure of government in Spain, primarily the power of the autonomous communities. One down from Westminster in the UK, are the county councils and the metropolitan authorites - forty-odd in number, and heavily dependent on central government for their funding. In Spain this tier comprises seventeen authorities, wielding much more power over both revenue and expenditure. It is as if the UK were split entirely into regional authorities of the size and power of the Scottish Parliament and the Welsh Assembly. At the other extreme, local authorities can represent very small populations indeed. Frigiliana, for instance, has a population of only about 4,000, but its own local council responsible for a wide range of services. The boom years presented golden opportunities for politicians to demonstrate the importance of their own patch. Paul Watson took the example of the Comunidad de Valencia. Seeing the success of the Guggenheim Museum in Bilbao, they embarked on an ambitious programme of building of spectacular, showpiece developments that brought conference and convention business streaming to the city, captured the Americas Cup (for two years) with a magnificent new marina and port, brought Formula 1 to the area (though, again, only a couple of times). In a similar vein, the Valencian city of Castellon constructed a splendid, international airport, complete with website - but unfortunately without a single flight even to this day; the runway was inadvertently constructed too narrow for planes to land or take off. I wrote in glowing terms about eighteen months ago, about another project at Avilés in the north of Spain. One of the last commissions by the celebrated Brazilian architect, Oscar Niemeyer, who died recently at the age of 104, gave birth the theCentro Niemeyer, down by the harbour. A beautifully designed, strikingly attractive complex incorporating three gallery spaces, indoor and outdoor theatre spaces, restaurants, cafeterias and a spacious plaza. It cost a fortune, but six months after opening it closed its doors have run out of the funding necessary to run it. All of this would be laughable, were it not for the dire economic consequences of these prodigal schemes. For the past three months, for instance, the City of Valencia has been unable to pay the city’s pharmacists for the medicines they have been dispensing to patients entitled to state health care. And since 2008, 300,000 Spanish graduates have left the country in search of a job - any job.

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