Yves here. Readers in Spain have dismissed the possibility of a Spanish breakup. But long-simmering regional frustrations combined with a rapidly deteriorating economy have the potential to produce paralyzing levels of civil disobedience. As Marshall Auerback said in a e-mail:
The big weak point is Spain. They just had 1.5 million people take to the street in Catalunia out of a total population of 7.5 million.
This week Bloomberg reported Spanish bank deposits declined by 224 billion euros or 10% in the twelve months ending July 31st. That is equal to more than 20% of Spanish GDP. When I started to warn about Spain as “the domino too big to fall” in May of 2011, I could not have imagined a deposit contraction of this magnitude.
Spanish banking system borrowings from the ECB rose from 82 billion euros to 412 billion euros in the twelve months through August of this year, according to the Bank of Spain. Once again this amounts to lender of last resort financing equal to over 30% of GDP in a mere year. This is also unimaginable.
There can be no doubt that the run on Spanish banks has been ongoing, massive, and most likely devastating.
Spanish real estate prices have been falling for years. Retail sales are collapsing from very depressed levels. Total employment has been crashing. Spain’s employment has been falling steadily year on year at a roughly 3.3% annual rate. That is equivalent to a 600,000 monthly fall in the U.S. We all agree that would translate into something like a 4% or 5% or 6% rate of GDP contraction.No wonder Rajoy doesn’t want to submit to the barbarism of the ECB’s programs. If you loved what was happening in Athens, just wait until this show moves full steam ahead into Madrid.
By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Spain has enough problems: a debt crisis, a hangover from a housing bubble, unemployment of over 25%, youth unemployment of over 50%, massive demonstrations against “structural reforms” that the government is trying to implement in its desperate effort to keep its chin above water…. And now it has a new one: the possible breakup of the country. The military has already chosen sides.
It started last week in Barcelona, capital of the Autonomous Region of Catalonia, the richest region in Spain. Of the 7.5 million Catalans, between 600,000 and 1.5 million—an astounding 8% to 20% of the population!—protested in the streets, demanding independence.
Antagonism between Catalonia and Spain has simmered for a long time. But the financial fiasco that Spain is mired in deepened the fissures. Out-of-money Catalonia had to ask the central government for a bailout. Catalans are frustrated. They claim that under the current fiscal setup, Catalonia transfers €16 billion annually to the central government, and that these transfers bankrupted the region. Now, in exchange for the bailout, the central government has imposed austerity measures that cut into health care, education, and other services.
On Thursday, Catalan President Artur Mas met with Prime Minister Mariano Rajoy, originally to beg him for a new tax deal. But the massive demonstration in Barcelona had added independence to the agenda. Rajoy brushed him off, with references to the constitution that didn’t allow regions to secede.
“Constitutions may or may not be modified, but they do not subjugate the will of the people,” Mas lamented after the meeting. As leader of the Democratic Convergence of Catalonia and chairman of the governing Convergència i Unió (CiU) coalition, he represents the middle class and has supported Catalan independence only in an ambiguous manner. Until now. “Catalonia will follow its path,” he said. Parliament would meet next week to “consider the next steps.”
“Illegal and lethal,” howled Foreign Minister José Manuel García-Margallo and threated Catalonia with exclusion from the EU if it chose independence. Decisions in Brussels as to which country will be allowed to accede to the EU have to be unanimous, and Spain’s veto would bar Catalonia “indefinitely,” he said.
Nevertheless, Friday morning, CiU spokesman Francesc Homs pushed that agenda further: after the elections—early elections could be held on November 25—Parliament may initiate the path to independence. This could be by referendum, but there would be alternatives, he said, “for example” a parliamentary vote to declare statehood.
The CiU hasn’t yet decided how to articulate its demand for statehood in its electoral program, but the strategy toward independence is an “irreversible process,” Homs said. He described Spain as a “lion” attacking the Catalan “gazelle” whose sole weapon is “agility.” And the threat of getting kicked out of the EU? “Catalans are European citizens,” he said, and he didn’t know how it would be possible to kick them out. But he wasn’t worried about the all-important business community. “We won’t lose investments if things are expressed democratically,” he said.
The response was immediate. Catalan independence would be a “tremendously huge problem“ for businesses, said Joan Rosell, president of the Spanish Confederation of Employers’ Organizations (CEOE), which represents state-owned and private sector enterprises. Employers, he said, supported a single market as a way out of the current turmoil.
Declaring statehood would have no legal value, Deputy Prime Minister Soraya Saenz de Santamaria declared at a press conference after the Council of Ministers. And the government didn’t welcome early elections, she said; “political instability” would aggravate the crisis. But she threw Mas a bone: the government would be willing to consider reforming the financing model of the Autonomous Regions.
A discussion of the nitty-gritty of independence has broken out. Hot topic: the distribution of central government debt. Would Catalonia have to carry 20% or 16%? Or none because Spain issued the bonds and not Catalonia? Would Catalonia be better off within Spain or as independent state? Would it even be financially viable? Rumors are swirling that members of the governing coalition have asked the European Commission if Spain can legally stop Catalans from seceding, and if it can expel an independent Catalonia from the EU via its veto power. As there is no law that would allow secession, there is also no law regulating it. So everything is up in the air. But the fact that this is getting serious attention, shows just how far the process has already gone.
And the military staked out its role. Colonel Francisco Alaman promised to crush the “vultures” if they chose independence. “Independence for Catalonia? Over my dead body,” he said. “Even if the lion is sleeping, don’t provoke the lion, because he will show the ferocity proven over centuries.” Words of the crazed fringe? Apparently not. “Deeply-rooted thinking in large parts of the armed forces,” explained retired Lt-Gen Pedro Pitarch. And it opened a whole new chapter in the Eurozone saga that, despite all assurances to the contrary, simply keeps getting more uncertain.
When the German Constitutional Court nodded with a stern smile on the ESM bailout fund and the Fiscal Union treaty, politicians breathed a sigh of relief. The German revolt was over. But steam is billowing once again from the misaligned pipes of the Eurozone, this time in France, where the Fiscal Union treaty had been silenced to death. Read…. A French Rebellion Against Unelected Bureaucrats: “European Coup D’Etat And Rape Of Democracy”
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The Great Depression (about 1930-1940) and the Spanish Civil War (1936-1936) seem eerily close to the great recession and a potential Catalonia leaving Spain.
How long do you think it will take until the “great recession” baloney gets thrown out of the window and this era will start to be called by its honest name “great depression 2.0”?
Or better yet, THE GREAT Depression, no numerical designation required.
if catalonia does get independence and it leads to civil war will there be any spanish regiments for foreigners to join. i would consider it a great honor to help put down the secessionists
Rick! Do you really feel spanish? Or you just want to fight against something? Are you a american? Maybe not! You’re british and you would fight against those ugly secessionists, but its too late for you.
Yesterday philosopher-(ex)mayor of Venece Massimo Cacciari said in an interview with Lilly Gruber of La7 if the euro breaks up Italy will break up, too. Meaning secession of the North (and Sicily).
that’s Venice or Venezia :-)
Catalans want the best for Catalonia ; this idea would say that we want to be an state in Europe and help to develop the Europe of nations. We want to be a competitive partner of southern europe.
Hi Ramon. Being nationalistic nowadays is like fighting against the gravity force, you always fall no matter how high you jump. Better open the borders, learn English, produce and manufacture products to export to other countries and learn how to compete with them. That s the future.
The region of Madrid gives to the rest of the country more than they receive from them and noone wants to be independent. The balearic islands the same. Creating new countries into countries is like going to the past. The European Union is the future, one flag, one union of countries, one law, one constitution, one goverment, one central bank, one educating system, one military, one border. The rest is… fairy tales of the medieval ages. So catalans nationalist you better run into the walls of your small village,get the cattle with you, come on, build a castle,hurry up, get the sword and arrow and resist till the Chinese economy gets you out to the castle and show you that we no longer live in the Medieval Ages, its 2012 for gods shake.
you better stop creating new countries and start creating new links with other countries in order to be able to fight against the american and chinese economy. This message is I dont mean only catalans, it would be the same if one day Ohio wants to be independent, it would be like, come one, leave whisky please and use your brain a little bit, just only a little bit.
And I as a Spaniard want you and all catalonians who are pro independent out of catalonia which is Spanish soil and whathever the United Nations, Nato, European Union says you will NEVER be independent and if we have to put a bullet through half the pro independentists in catalonia so be it, I will not cry over the death of a few traitors, remind you that the Spanish constitution especially article 2 was made to stop low life peasants and greedy politicians like that 10% of catalonians who are independent from doing exactly that. And if you try to act the wiser let me remind that this constitution whose article 2 you hate so much was made by a democratic government, foreign intervention from France, Germany, England or the US would show that these nations are not democratic since the sapnish constitution was made existent thanks to Spanish citizens who voted for it and yes here is the part you hate the most, in the 70´s the inmense majority of catalonians voted YES for the Spanish constitution so that is that. PERIOD.
So, anyone who doesn´t think as you is a traitor and must be shoot, is this the kind of democracy you defend?
Catalans are divided by half. There is no point in getting independent when half the population feels Spanish. No party has ever won Catalan elections on a pro-independence program.
There is no way Catalonia can get meaningfully independent if they declare it unilaterally. A new state of Catalonia would need to apply for EU, NATO and euro membership, and Spain has veto power and can deny EU and euro membership to their new neighbours. So it would be very isolated.
Anyway, this is the same old story all over again. Every time we have an economic crisis, some Catalans decide they’re Germans and the fault lies exclusively on the South, on Southern Spain. Local parties threaten with independence, but then they don’t position themvelves clearly as pro-independent, just as angry parties threatening with potential independence to get better financing terms. A majority of Catalans are angry and threaten with independence, indeed; but they are not unconditionally pro-independence.
Your over-confidence is showing, Diego. No party has won on an independece program in Catalonia because previously the costs were untenable. You’re familiar I’m sure with the price paid by Catalunya in the Civil War. And in long, costly insurrections in the middle past. Up until the EU was formed, it was clear that the Spanish military would fight and fight hard and that no one in Europe would held a secceing Catalunya. The choice for Autonomy was rational—but it’s always been a Trojan hourse for eventual secession. Would the EU accept Castilio-Spanish military action, or intervene to ‘stop the violence’ in the diplomatic sense? The Spanish military is scarcely in a state for a prolonged action. Civil disobediance, unlike the charry fringe insurgency of the Basques, has great potential there. But that’s the messy outcome, real secession actions would likely provoke a blizzard of conferences; but time would favor the Catalans in that if they settled into a prolonged strategy.
Being thrown out of the EU would be a boon for Catalunya if it meant severance from Spain. And it wouldn’t be permanent, of course the EU would take them back in the end. With the EU opening to even poisoned chalices like Serbia, don’t think an intrinsic part of Europe such as Catalunya would be poled off. What matters most is who gets blamed, and if Spain acts militarily (and surely badly) that is where the blame will fall.
What is really at stake here are the break up costs. Everyone will argue no, no, no they are too high. But let’s face it: Spain has milked Catalunya dry for four hundred years. Recovering fiscal control would make Catalunya one of the most prosperous regions of the EU over the long term. It is, has been, and always will be in Catalunya’s interests to dump Spain _if_ Catalunya remains economically engaged with Europe. And any messy interlude aside, they will.
If and when the die is cast, don’t be surprised if sentiment in Catalunya hardens. A potential change is always fretted over with the sheep huddling in the middle clutching their wallets, but a real program for severance met with violence from Madrid will make those hovering choose sides, should that come—don’t doubt Catalans will choose Catalunya. Spanish bluster is extremely ill-advised; now is the time for concessions, but they won’t be made. When Catalans take their money out of Madrileno banks and stop transfering taxes, then push will come to shove. And should, in my view, as I’ve expressed before.
I am just astounded in reading a fool brag and believe catalonia can gain any possiblity of independence. I ask what the hell do they expect to use to acquire this independence without any arms or heavy armour to protect themselves from a 1st World power like Spain; it was mentioned in this retarded statement that Spain wouldn’t be able to prolong any long interlude of a WAR with catalonia, but are you kidding.
Spain is trying to make democracy work but fools like the catalans and Vascos are doing every thing they can to have the Spanish Hammer fall on them for the 1000th GOD DAMN TIME on these pipe dreamers!!!!!!!
I say sit back and let these fools get shot up; however, I hope this time the 80percent of Catalans that want to stay with Spain do most of the killing of the seccessionist traitors that are messing with their lives and the UNITY OF SPAIN!!!!!
Diego: you should improve your source of data. Last demo reveals that 51% would vote yes, (only) 18% would vote no (against the freedom of Catalonia) and the rest (30%) is divided into not to vote (20%) and 10% that “do not know”…so…Democracy will lead Catalonia to its freddom.
Here’s a working link for Clark&Dawe.
http://www.youtube.com/watch?v=I5QwKEwo4Bc
Thanks. Which reminds me, What ever happened to the guy who was advocating that all the banks just cancel each other’s debts? Because so many of them are hedging anyway. I guess that won’t help Germany out directly, but it could help to defuse austerity. And close down all the banks which are superfluous. No?
Soros did say, back in 2008, that we (us and yurp) “missed an opportunity” in not nationalizing the backs and doing something just like that.
Then after hearing about the book Treasure Island, I found out there is $20 – $40 trillion in tax dodge fiat treasure to find too! We could zero out the national debt!(but then immediately issue $900 billion in t-bills so our money system works properly again.)
“backs” s/b banks…
Thank you Bert-S for the working link. And thank you Mr. Richter for including this video in your piece. Best summing up of the EZ to date. These two guys are a brilliant comedy team, too.
“Foreign Minister José Manuel García-Margallo … threated Catalonia with exclusion from the EU if it chose independence.”
Kicked out of the EU? Whip dee fucking doo!
Too funny. It’s like threatening a death row inmate with freedom.
“Thanks for the offer warden, but I prefer the chair!”
Exactly. The problem is not that Catalonia is part of Spain, but that it is part of the Eurozone. Spain is just another non-independent administrative subdivision that happens to contain Catalonia.
Going back centuries, Catalonia was never quite contented being a subsection of a greater sovereign entity. Today, Catalonia finds that it is but a subsection of an abject rump state.
Do you die as a forgotten sprig on a humungous rotted vine, or do you stake your chances on a fresh replanting?
Which makes me wonder, what are Sicilians thinking, looking at the numbers? The Italian government (oxymoron?) officially slashed it’s forecast for GDP growth this year to minus 2.4 percent.
Minus 2.4 percent! If I was a Sicilian, I’d be asking. “Is our proud island not perfectly capable of de-growing at a slower, and therefor, less damaging rate than that sell-out boot to north of us?”
Spain will continue its depression if it remains in the Euro but not outside. (I am not sure of a breakup ? , having talked to some Galicians and Basques…..the Basques are more Basque on the Spainish side of the border…the French Basques are well……..
What people are missing is Spains previous very significant capital spending on internal productive capacity as well as Housing Junk.
The problem is the Euro of course.
It seems to function as a capital $$ exporter – the $$s good little sister (the $ is now functioning as a oil based hard rather then previously soft reserve currency )
People still find it easy & cheap to export $$ in Spain
Example – 3million+ people still travel on the Madrid – Barcelona air shuttle (peak 4.8 Million in 2007)
WHY ?
There is a high speed line operating since 2008 not running to capacity !!!
The South needs to get out of Dodge Pronto.
Madrid / Barcelona air shuttle passengers 2012
Y2012
jan 229,759
feb 228,750
Mar 244,802
April 213,921
May 247,514
June 239,077
July 206,383
Aug 143,341 (regular seasonal lull – little business passengers)
WHAT A WASTE OF CAPITAL.
This export of Hard currency destroys internal domestic demand….ditto for Ireland Italy & Greece.
The Euro is the most anti – labour ,anti nation state, pro -international capital construct ever created.
It hollows out countries from the inside out.
Its quite clear , the ECB is the FED and the FED is the ECB.
If we get a Euro breakup the capital export device that is
Europe post 1986~ will stop dead.
That means the BRICs are dead , international banks that are recaptilising using high $ oil prices are dead as the oil price dives under such a scenario as international linkages between former Euro vassel states flow back into domestic demand sustaining real people rather then the local oligrachs therefore reducing waste /capital export dramatically.
The Euro crisis is a domestic demand crisis caused by the Euros gestation & birth – this was disguised by Credit hyperinflation but it has been with us for 30 years now.
The Irish & Greek economies have the most dramatic domestic demand crisis but I am sure Spain & Italy are not too far behind these Irish Numbers (ratios)
Gross domestic fixed capital for. in Ireland at current prices.
Y2007 Q1 : 13,994 million
Y2007 Q2 : 11,828 million
Y2012 Q1 : 5,082 million
Y2012 Q2 : 3,646 million.
The above was mainly wasteful house and road building sustaining domestic demand until collapse(both houses & cars are products of consumer bank credit)…..these economies had no choice other then waste as they had no domestic currency to sustain real money / wage demand
Total Irish domestic demand (current)
Y2007 Q1 : 43,003 Million
Y2007 Q2 : 42,115 Milllion
Y2012 Q1 : 30 ,915 million
Y2012 Q2 : 29,947 million
Now gone beyond the stopping of house construction and is now eating into the flesh of the social economy.
(there was reports a hospital in Cork had no credit to buy bread recently…..it had to use CASH)
Good comments.
The Dork of Cork says: “Its quite clear , the ECB is the FED and the FED is the ECB.”
Both corruptly created, by rich folks, for rich folks, against the will of the people and both premised on grand fairy tales about how the ‘free market’ would fluidly move capital around. They also make for great good cop bad cop game playing to fuel the intentional global perpetual conflict. New rivalries have been created and the old are easily inflamed.
The sociopathic parasites disease mutates and spreads — Evilism to Xtrevilism — as their host victims herd thinning intensifies.
Deception is the strongest political force on the planet.
Speaking of local oligarchs…….the local Irish Oligarchs orbit a very tight circle…..one of its most important electrons is the Former Guiness peat aviation / Ryanair crowd.
Very very nasty…..they extract via wage arbitrage and use some other methods also…..
Stuff has been flying or not flying around Spainish airspace this summer….
18 July 2012
“According to data from AENA in the first six months of this year Spain’s airports have seen passenger numbers fall by 4.6% to 90.15 million. Apart from the general economic difficulties across Europe, Spain also suffered the collapse of one of its leading airlines (Spanair) at the beginning of the year. Among Spain’s busiest mainland airports there are significant differences with Bilbao (+3.8%) and Barcelona (+3.5%) both reporting growth in the first half of this year, while Girona (-20.3%), Alicante (-12.1%) and Seville (-10.4%) all suffered double-digit falls in passenger numbers. The country’s busiest airport, Madrid, has seen traffic drop by 7.2%.
“Ryanair clear #1 airline in 2011
Using AENA data to identify the airline on which passengers passing through Spanish airports were travelling, reveals that over 34 million airport passengers were travelling on Ryanair flights in 2011, up over 28% on the previous year”
Dork – Ryanair does well in this entropy envoirment , it can can direct more capital towards fuel waste as it pays its Staff less then its competitors and runs its pilots harder.
Indeed there has also been accusations that it has been pushing the envelope of fuel safety also …with one incident of 3 emergency mayday diversions from Madrid to Valencia airport during a period of Thunderstorms during one day in July.
No other Airline called such emergency landings on that day
Ryanair does not appear to break the rules but some pilots like to carry a few 100 KG + extra then the guidelines – there has been reports that Ryanair puts pressure on such pilots.
http://www.rte.ie/news/2012/0816/ryanair-spain.html
In this Dorks opinion Ryanair is the lowest of the low – it creates malinvestment by appearing to make certain transports competitive via Wage competion rather then the intrinsic cost of such operations.
They are the true representatives of a certain class of Anglo Irish low lives which form the Oligarchical backbone to this sick Irish society.
These GPA guys flourished during the post 1986 Big bang / Euro EMU malinvestment period which has completly externalised Irish domestic demand which remained hidden during the credit hyperinflation years.
The Irish Aviation authority appears to have been recruited to defend this outfit by the Irish State amid accusations by the Spanish equivalent of serious safety breaches no doubt also encouraged by the Spainish authorties wishing to defend Spainish airlines.
The IAA appears to have only lightly slapped Ryanair with some “recommendations”
Its all seems very sick
google
Ryanair planes had ‘sufficient fuel’
Irish Times
1. The €16 billion “transfer” represents a staggering, immoral, outrageous 40% (forty per cent!!!) of all the taxes collected in Catalonia.
Did you ever hear “No taxation without representation”? What country/nation/territory/colony can put up with such fiscal rape? This goes on and on EVERY YEAR – some years it has been even higher, the only reason why it currently is 40% is because the crisis has decreased tax collection in Catalonia.
1. The “transfer” is not a transfer, but a confiscation: Catalonia DOES NOT collect any taxes (except for a tiny portion). Collection is done by the Spanish government — so is “redistribution”. And both are done based on political criteria. For example: tax raids are six times more frequent in Catalonia than anywhere else in Spain. (Of course, I’m not against tax raids, but you see where I’m coming from, in a country with an underground economy estimated at 20-30% of the GDP). It is also worth noting that Catalans DO NOT complain about paying more taxes than they should, like malicious Spanish nationalist propagandists try to make us believe. Catalans complain about what they get back for the taxes they pay.
Indeed, spending of Catalan taxes by the Spanish government responds to the same political, arbitrary criteria than collection: historically all Spanish governments (this was a public issue already in the 19th century) have not felt the need to invest in Catalonia specifically, and all along the Mediterranean coast generally, despite it being the most dynamic, rich, productive region of the Peninsula. This is Catalonia, Valencia and the Balearic Islands. How interesting to see that these three territories, with also historically abandoned Aragon, were the losers of the 1701-1715 Hispanic (Spain did not exist) war of Succession. After losing the war, these four formerly independent states were literally annexed to Castille. This is as if the Netherlands had lost the war for independence in the 17th century and by decree they had been annexed to Castille. Or Portugal. Would that be acceptable? Would that make Dutch people, or Portuguese people “Spanish”?
In other words: Catalans were and are treated as foreigners and Catalonia was and is treated as a foreign colony. Just so.
Even the abusive, colonial, terrorist-like fiscal treatment that the Spanish government dispenses Catalonia would not be enough to explain that the way Catalans choose to express this grievance is to ask for independence. This happens only because the sense of nationhood, the sense of being foreigners in Spain, has survived these 300 years. In other words: Catalonia wants independence because it is a Nation.
The negative example that confirms this is precisely Aragon and Valencia, who were on the same side as Catalonia, but where the sense of nationhood has been all but extirpated through intense social and political manipulation by Spain.
” Readers in Spain have dismissed the possibility of a Spanish breakup”
I am a Spanish reader and I think the chance of a three-parts break up is quite high.
Note also that the collapse of the economy has a north-south axis. The south is is in much worse condition than the north.
Far north, in Euskadi, the situation has been deteriorating at a much slower pace, and last time I checked unemployment in Euskadi was the same as the average across the EU. There wil be elections soon in Euskadi and the nationalist left as well as the nationalist centre will certainly get a majority.
“They claim that under the current fiscal setup, Catalonia transfers €16 billion annually to the central government, and that these transfers bankrupted the region. Now, in exchange for the bailout, the central government has imposed austerity measures that cut into health care, education, and other services.”
This is misleading. Catalonya started the cuts before the central Spanish state did. And the Catalonyan president was not asking for a bailout but for a more fair fiscal contract, more similar to what Euskadi currently have.
“Would Catalonia be better off within Spain or as independent state? Would it even be financially viable?”
Not only that. Without the transfers from Catalonya to the central State Catanolya would be one of the less indebted States in Europe.
“And the military staked out its role. Colonel Francisco Alaman promised to crush the “vultures” if they chose independence. “Independence for Catalonia? Over my dead body,” he said. “Even if the lion is sleeping, don’t provoke the lion, because he will show the ferocity proven over centuries.””
Mmh, at least in Euskadi, the Spanish military is very weak. They have a few bases far away from cities and the contingent is composed mostly of Colombians and other South Americans. Heck, you have to travel to Cantabria to see the Spanish flag!
The more things change. Colonel Alaman? Names twist as much as political ideology. He is too bellicose to listen to. But 1936 lives on. Funny how it is now Germany telling the EZ that a fiscal union is necessary to get out from under “sovereign debt.” Sovereign money however is the thing that is supposed to be used to spend a country out of a recession. The disconnect implies that Europe knows it has to act fast to get their fiscal plan in working order. Lots of debt needs to be written down and credit creation by all their private parasite banksters controlled so that debt service cannot siphon the life out of any more economies. All this money is currently just being shuffled around in a big bank shell game. Catalonia proves that the EU must busy itself with fiscal-mometary measures that produce positive social results, not negative ones. Because you cannot separate the fiscal and monetary at this stage without causing more austerity. Right? Europe must quickly fashion an effective social umbrella for the EZ to replace sovereign spending. Their twist of the term to relief from sovereign debt is just nonsensical.
The other option is to undo the ill-fated EZ, allow each country to reintroduce its legacy currency, and restore growth.
Of course, this would equate to the triumph of democracy, and too many “progressives” have grown comfortable with a “small group of far-sighted statesmen” dictating fiscal and monetary policy from Brussels.
I wouldn’t say comfortable.
Europe is an ocean liner headed straight toward an iceberg under pirate Captain Draghi. Many of the kidnapped passengers want to get in the lifeboats now. But that has its own dangers, although it might clearly be the best course eventually. It seems the pirate captain calculates that the passengers in the front will be killed, while he & his pirate crew will be fine.
People who suggest real fiscal union are not comfortable with how this state of affairs arose, how the ship was pirated. They just think that right now, the main thing is to not head straight towards an iceberg. Major problems being that some think the pirate Captain is legitimate, & worst, some think that the present course towards an iceberg is the only one to avoid it, and that the victims in the front are to blame. But who is in the majority doesn’t matter as much as the reality of the situation.
“Fiscal transfers” from ECB money-printing would be a win-win for everyone compared to today. Germans would get more non-inflated Euros & better growth. The periphery would get working economies, no unemployment, more real wealth. It would not be a transfer of wealth from the center to the periphery. Not steering towards icebergs is a positive-sum-game. So is escaping in lifeboats if you’ve already hit the iceberg.
The future for Spain ?
“In July 2012, the current account balance showed — for the first time since May 2010 — a surplus, which came to €642 million, compared with a €880 million deficit in July 2011.
The trade deficit fell by €836 million, as a result of a €389 million decrease in the trade deficit excluding oil and ships, as well as declines of €305 and €142 million in net payments for purchases of ships and the net oil bill, respectively. The trade deficit excluding oil and ships shrank due mainly to the considerably reduced import bill (down by €346 million or 15.8%), as export receipts rose by only €43 million or 3.9%”
http://www.bankofgreece.gr/Pages/en/
Dork – the non national euro must destroy domestic demand so as to sustain its waste based systems.
The all important Greek oil balance remains the same more or less….as a non national economy it must destroy its internal capital & domestic demand to maintain the dominace of external capital……
Greek Oil balance Jan – July
Y2010 : 5,467.4 million euros
Y2011 : 6,675.2 Million euros
Y2012 : 6,604.4 Million euros
It is quite easy for a NATIONAL ECONOMY to reduce its oil imports if it has access to a extensive rail system.
Spain has seen the biggest rail capital investments in Western Europe by a wide margin.
It therefore has huge spare capacity.
Fiscal subsidy of rail tickets by a domestic currency is a no brainer.
But the Euros role it seems is to Sustain German & Saudi Domestic demand……..
Around the world,the story has the same undercurrents…..the financial sector,that produces nothing….instead of being a tool for the rest of society is sucking the blood out of all the people….these central banks and the community they inhabit ate like black holes…they gobbled up all the money…rather than the production of a population contributing to everyone’s well being..everyone is getting nothing for their work….they just owe more than they can repay….we can work forever and never repay what the bankers say we owe them….this is a problem. I for one say the banks ought to go out of business,not everyone else ..
please dont let this site turn into zeohedge!
spain is not breaking up and AZ is not a swing state.
Nexxxxt!
yawn…
JD, what’s your take on the EZ?
Do you favor Draghi’s suppression of democracy and unilateral imposition of fiscal policy on non-core states, or do you favor democratic rule and an EZ break-up, especially in core states.
It must really trouble “progressives” that the only viable way for the EZ is via suppression of democratic institutions.
gee, i haz no clue abot progressivezz jimbo,
but i’ll tell you my thots on Lisbon k?
Fcuk Lisbon.
again spain is not breaking up y ¡Qué sorpresa! Arizona no eso un swingo stato
Hmm.
Will Germany offer to transport Spanish troops using their Airbus (Junkers)aircraft ?
Or perhaps use Spain as a training ground ?
And Catalonya will be controlled by anarcho-syndicalists, lol!
That was really funny sleeper.
All that excess Spanish rail capacity as it exports precious $$ for oil…
http://www.youtube.com/watch?v=M3njZDBto2o
http://www.ferropedia.es/wiki/LAV_Madrid_-_Segovia_-_Valladolid
If the periphery was functioning as national economies the highways would be empty of cars and the above would become a almost Indian density experience.
But that is not their function – their function is as a conduit for international oil capital.
Part of the problem of course is the language difference:
http://www.youtube.com/watch?v=H-oH-TELcLE&feature=fvwrel
The President of Catalonia (Mr. Artur Mas) is much frightened about loosing popularity and he is using the independence meme as a tool to divert the attention of an angry population. The same is true for prime minister Mariano Rajoy. Interestingly, both conservative leaders co-operate in their respective parliaments to pass austerity measures and generally agree on their political position with normal divergences between political egos.
I think that Mr. Richter misses the true political risks that Spain, and Mr. Rajoy faces. Particularly Mr Rajoy’s popularity is falling steepely amongst his natural voters. The radical tea-partiers are never happy with any public expense and have been dissapointed by the, in their opinion, low speed of social dismantling programs. There are political reflections of this dissapointment: new radical parties arising want to steal ultra-conservative votes, the recent withdrawal of tea-party leader Mrs Aguirre in Madrid, etc. Radical rigth-wing voters may not be many but there are other internal menaces that Rajoy faces. He is trying to fix an agreement to keep pensioners’ purchasing power (they massively support Rajoy’s party) but he will face opposition from european austerians as well as social division between young unemployed and elder pensioners.
I have said this before but I don’t think Mr. Rajoy will end his term. In my opinion it will be the combination of pressures from european austerians and internal discontent in the conservative party that will lead to the resignation of Rajoy. It won’t be independentism.
From La Moncloa…..
Overseas trade data, July 2012
“Spanish trade deficit drops 20.9% so far this year”
Wow – Great isn’t it ? or is it ?
I have seen the same type of goverment spin in Ireland although we have a very extreme trade surplus which is the hallmark of a extreme colony.
So whats really happening ?
It like other vassel nations of the eurozone is manically exporting to maintain imports……but this comes at a huge cost to the local serf as so much energy is lost in long distance trade.
Local production and distribution collapses as there is no local money demand….everything is chucked at exports.
The redundency of the country becomes even more compromised as it becomes a ever more extreme market state with no rational internal trade and now no local trade period.
Making the situation even worse.
“Exports to France (the main buyer of Spanish exports with a share of 16.1%) fell by 4.3%, while exports to Germany (10.5% of the total) rose by 17.2% year-on-year.
Exports to Spain’s other main European buyers fell: Italy down by 3.1%, Portugal down by 0.3%, the United Kingdom down by 3.4% and Belgium down by 3.7%. On the other hand, exports to the Netherlands rose by 4.9% and to Ireland by 22.7%”
I am quoting from a goverment propoganda website but you can clearly see whats happening – even more logical exports to its neighbour (France) declines as stuff is transported to even greater distances… to Germany simply because for the moment they hold the tokens….a absurd situation.
It makes no political geographical sense of course – it just is……in and around the 80s they changed the political geography courses as obscene capital flows began to overpower rational trade flows.
Anyhow less food for immediate consumption is produced at home as food imports rise….
“Food imports (10.5% of the total) and imported consumer manufactured goods (9.3% of the total) recorded opposing results.
The former posted (import) growth of 4.1%”
And of course energy……..
“The import of energy products (the leading import sector in the period with a share of 24% of the total) grew by 13.6%, with increases of 11.8% in oil and derivatives and 19.7% in gas”
Capital good purchase is of course reduced to afford the fuel bill.
“Imported capital goods (with a share of 16.8%) fell by 7.2% year-on-year”
During the oil glut years of the early and mid 80s Spain was making rational internal capital investments.
http://www.youtube.com/watch?v=gnrfBOm6FhQ
It should have never joined the Eurozone.
Its been a catostrophic coup d’état by the Venetian banking system.
Santander and the rest of the wolf packs have destroyed both the landscape the people and its culture.
Very much like Ireland really but of course we take these things to ever more extreme levels.
They should try to get out of this vice while they can as they have somewhat more internal capital then Ireland – they should give it a go – they have nothing to lose now.
I don’t think you are getting it rigth. First, the trade balance is equilibrating for a simpler reason: internal demand falls more steeply that in the rest of the trading partners.
If you consider the energy efficiency in $ terms, yo should bear in mind that the reduction may be due to HIGHER energy prices, rather than increased energy consumtion in relation to output. In fact, fuel consumptiom is declining at a faster rate than the overall economy due to high prices.
@Ignacio
I am rejecting the $ as a currency over local distances…..the Euro / $ does not work withen the Spainish economy as a medium of exchange.
It does not work because it is a international medium of exchange working withen a national / city state structure.
Therefore the input /output ratios do not compute by a wide margin.
Reserve currencies were never meant to work as local currencies – they simply don’t fucking work.
PS
You can see this with the Euro efforts to give inflation metrics which claim 2% inflation or whatever.
They don’t touch wage deflation – in fact they actively promote it so that they can gain a artifical yield on a declining capital stock.
Wage deflation is merely another form of inflation is it not ?
To do this magic trick they use a fixed amount of currency against certain goods.
A metric which only works if you have capital income rather then a wage.
Wage deflation is a form of inflation – it just affects different people.
But this is not a factor in CB inflation metrics for good reason.
Local trade orbits local demand – it should not be about international demand in a local area.
That will merely create huge distortions which it has with hugely negative consequences for all but the few.
These events could be a rare boon for Spain. If only the Spanish government chose to play this card, it could extract almost anything from Brussels, Frankfurt, Paris, and Berlin. The threat of breakup seems fairly credible and growing. All the power would be in Rajoy’s hands: he could negotiate an end to austerity, debt write-off, or even an exit from Euro – because there’s little the creditors can threaten with if their threats lead to a breakup of the country. There’s no indication Rajoy would choose to play this card, but who knows?
What difference does it make if you’re technically independent, yet you still have to serve our bankster masters? Hmm? NOT A DAM THING!!!!!!!
HAHAHAHAHA!!!!!!!
“Antagonism between Catalonia and Spain has simmered for a long time.”
Ever heard of Homage to Catalonia by George Orwell?
During the Spanish Revolution in the 1930’s, non-Communist leftists, led by the Anarchists, rose up against both Franco and the (Stalinist-backed) Republic. They took over industry and agriculture and controlled several regions in Spain. Catalonia was one of their home bases.
Wow, thanks for dropping that knowledge on us, we had no idea.
What nonsense!
It doesn’t matter what Spain does or its component parts. It’s bankrupt. There is no way for it to escape its onrushing ruin.
http://www.economic-undertow.com/2012/09/22/disintegration/
China, Japan, Spain and the rest are bankrupted by their unaffordable automobiles. None of these countries can pay for their past consumption of non-renewable resources. They have borrowed in the past and seek to borrow now, to pay for the resources and to retire older debts.
Meanwhile, the same countries have nothing worthwhile to offer as payment for the resources they need tomorrow … or for the generations to come. They consume the means with which to pay. They offer up comic-book drek … of a careless future the outlines of which are becoming more clear. In the place of a fanciful futurama of robot kitchens and flying cars, there is a continual unraveling accompanied by denial of the same unraveling, a collective inability to respond appropriately leading to system breakdown: more cognitive dissonance.
— from ‘God, Peak Oil and Turkeys’ (March, 2012)
Nobody will admit that Greece was undone by peak oil, nobody will even discuss it or entertain the possibility! This isn’t economists in 2004 missing a prediction about what might happen in 2008. This is an entire army of exceptionally well-paid, over-educated analysts, policy makers, business leaders, economists, university professors, pundits, finance- and energy bloggers, fiction writers, poets and bass fishermen not seeing what is taking place right under their noses!
Now it is Spain’s turn to be swept off the table by its automobile waste. The only issue is how long will the process take. Using Greece as a model, once the establishment is admittedly insolvent, the spasm of national ruin and follow-on decline is almost instantaneous.
BTW: It’s not ‘Great Depression’, it’s ‘Permanent Depression’.
Couldn’t agree more. And thanks for excellent links.
Understanding peak oil and its role in this … “crisis” … is not as difficult as say, learning 2 + 2 in first grade math.
It’s more like we’re back in kindergarten, striving to learn the colors of our crayons.
I guess it’s the simplicity of it all that escapes most everybody.
As a former resident of Barcelona, which is probably one of best quality of life cities to be found anywhere, there are some issues here that the post is not addressing. The post Franco Catalan independence movement has a lot to do with resentment of what “native” Catalans seen as free loading southerners. Catalans are an unusual mix of radical left wing (mostly young and urban) and very conservative middle class and small town/rural. Obviously this is anecdotal, but so many Catalans that I met, were incensed at the idea of their income taxes supporting health care, infrastructure, government jobs, etc. in other areas of Spain. The language used to describe people from Andalusia and the south in general was borderline racist and openly xenophobic. Also, the Barcelona metro area, which has nearly half of the residents of the region, has a huge number of people from those areas of Spain that Catalans deride so much. The enormous suburbs and commuter towns that ring Barcelona are mostly populated by people from the rest of Spain that moved there over the last 40 years for the best job opportunities in the country so the region is not exactly monolithic in terms of demographics.
And in terms of the debt load of the region, Catalunya is not exactly a model of fiscal probity. Like a lot of places in Europe, Ireland for example since it’s come up in other posts, there is a lot of shenanigans in terms of nepotism, jobs for the boys, overly generous pensions, purposeful cost overruns, bridges to no where. Independence is not undeserved, I am definitely no supported of the dregs of the imperial Spanish state, but the Catalans have done a lot to dig their own grave over the last 20-30 years.
Dear Diego, your analysis ignores de freedom factor. Catalonian economy is practically the only one in Spain whose mainstream is not dependent upon what Adam Smith called the “imperfections of the market”, exactly the opposite of the madrilenian manipulation of regulators and proximity to public spending. This is the quixotic, improductive move that has killed the bubble amidst the lack of foreing financing for Bankia-type indebted banks. A productive, competitive catalan economy is a guarantee for Europe to repay our debts. Even taking in our shoulders the proportional part of spanish debt, our debt vs gdp would not overcome 65%. Basically peanuts amongst similar or even larger economies. With regard to a democratic majority, time will pose the reality in the face of Europe and of course, Spain. Military threat is out of the picture now. Let us all confront our discussions including the voters. This is the mother of all clarifications. Adéu Espanya!
Alexander Hamilton certainly found a way to satisfy the self-interests of sovereign states while securing the collective posterity of all states through powers aiming to serve the common good. Europeans would do well to institutionalize a like means to legitimize debt and assure it a blessing, much the same as the U.S. soon enough again will need to do the same. One significant difference we face now versus then is the matter of lawlessness rationalized casting due diligence to the wind, this particulary systemically. Thus is much debt today in fact illegitimate, as long removed from the equation has been the otherwise weighty regard for how debt is to be extinguished. In no way will today’s shell game ever mask a system that is rotten to the core.
Catalan independentism is mostly a political red herring designed mainly to grab more money for the region from the central gov. and secondarily to divert people from the mismanagement and corruption of the politicians in Catalonia.
The sad part of it all is that, especially lately, it seems it has worked and it has infused hate in people who didn’t have it before. It’s sad sad indeed that morally and financially bankrupt politicians have managed to pit spaniard against spaniard while they dismantle the welfare state and ruin us all (Catalunya is the only spanish region with non free health care now).
In any case, it’s not going to happen. Politicians for all their rethoric know this would be a very bad move and are deeply against it (they will grab the money and stop there, make no mistake). Independentists are so as long as that independence is given with an open borders fashion, with more transfers from Spain and permanency in Europe and the euro. The reality is that an hipothetical independency would see them out of Europe, all their industry would move to Spain and they would end up poor and much more dependent on the rest of the peninsula than they currently are. While current surveys of independist sentiment run around the 50% mark, a real probe under the likely real conditions would fail to materialize any support.
I did find many of your articles interesting and of course subscribed to your newsletter but recently I have only received SPAM instead of normal newsletter. Could you please explain why this has happened? I am hoping that I can again count on seeing your regular offerings in the future. Thank you for your time.
Margaret Beresford
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You catalan seccessionist dogs want independence but what in the hell are you going to use to fight off the Spanish: STICKS and STONES? The corsicans want independence too and the French sent in the army and they cleaned their clocks sending the corsicans running to the hills; The Irish want Northern Ireland united with the rest of ireland and the British sent the Royal Marines to shoot civilians for years and they make sure the irish live behind walls in their own country till this day!
The seccessionist catalans are idiots beyond measure. There are 80 percent of catalans that don’t want to leave Spain; NEVER WANT TO LEAVE!!! I remember the referendums they have had since 2009 until 2011 and the highest participation rate they achieved for independence was 18.5 percent. The last one they had ran for 18 months. You catalan rats should be arrested and sent to prisons in the Canary Islands. cataluna is a Spanish region for over 600 DAMN YEARS they should already get over it. They have already been bred out of existence since most are mixed descent as it is. I realize the catalan schools don’t teach well, and if the PP of Spain decide to use article 155 of the Constitution you will realize how uneducated you seccessionist dogs really are. jajajajajajajajajajajaja!!!!!!
And Mas [The Captain] wants to jump the ship and allow the catalans to vote independence on their own and face the wrath of the Spanish Nation while he lives the pretend innocence that he had nothing to do with the whole ding dong event that will happened to catalonia. WHAT A PIECE OF CRAP THIS S.O.B IS!!!!
they couldnt run an airline how the fuck they think they could run a country. catalans only people i know who celebrate a defeat