Showing posts with label Mariano Rajoy. Show all posts
Showing posts with label Mariano Rajoy. Show all posts

Friday, 27 October 2017

The EU reaction to the Catalonia crisis is absolutely unacceptable


October 27th 2017 will go down as a historic day in Catalonia no matter what happens from here on in. The Catalan parliament has voted to declare independence from Spain, and the Spanish nationalist government in Madrid has responded by launching a coup against the democratic and social institutions of Catalonia. 

Within minutes of the Catalan declaration of independence the right-wing Spanish government moved to scrap the Catalan parliament, and to give themselves to power to seize control of the Catalan police (Mossos) and independent Catalan broadcast media.

The Spanish prosecutor in Madrid has threatened that everybody involved in the independence vote will be arrested and held as political prisoners like the two Catalan civic leaders Jordi Sánchez and Jordi Cuixart who are already being held captive.

Anyone with any political sense whatever must be able to see what an atrocious mess the Spanish Prime Minister Mariano Rajoy has made of the situation with his tactics of violent repression and continual bone-headed escalation.

When he used brute force against non-violent civilians on the day of the referendum he not only created a PR disaster for Spain, he also completely destroyed his ability to cite the low poll turnout as a reason the referendum lacks legitimacy (you can't steal an estimated 700,000 votes from ballot boxes and violently intimidate people away from the polling stations, then complain the turnout wasn't high enough).

When he continually refused to enter dialogue with the Catalan secessionists after the vote, and set about plotting a coup to abolish the Catalan parliament instead, he simply spurred them on to make their independence declaration before the Spanish nationalist coup was launched.

Sadly a lot of people who oppose Catalan independence have bought into the simplistic tribal mentality that if you oppose the Catalan secession, then you need to side with and justify the idiotic and self-defeating moves that Mariano Rajoy and the Spanish nationalist establishment have made in response.

Even more disappointingly, several politicians and institutions that should have been positioning themselves as neutrals have destroyed any hope that they can mediate between the factions by openly siding with the Spanish nationalist government in Madrid.

Just hours before the Catalan parliament declared independence and Madrid responded by launching their coup, the EU President Donald Tusk issued what is likely to be remembered as on of the most ill-considered political statements an EU representative has ever made.

His absurd proclamation that "nothing changes", his determination that the EU will only talk with Madrid, and his pathetic "hope" that the Spanish nationalist government don't resort to violence (again) are unacceptable.

Whichever way you look at it "nothing changes" is a delusional rejection of observable reality. Not only has the Catalan parliament unilaterally declared independence from Spain, the Spanish government is launching a social and political coup against Catalonia.

Spain is undergoing its worst political crisis since it joined the EU. In fact it's arguably the worst crisis since the 1936-39 civil war when the fascist  military dictator Franco seized control of the country and set about brutally repressing the Catalan people until 1975.


If this kind of extraordinary political meltdown is considered business as usual in the EU, then perhaps the Brexiters were right all along that the EU is an absolutely farcical organisation that the UK is better off out of?

Tusk's declaration that Spain remains the EU's "only interlocutor" is a catastrophic error of judgement under the circumstances. If the EU leadership had any sense whatever they'd be positioning themselves as neutral mediators not openly siding with Madrid and refusing to even talk to the Catalan political leaders, because after all, the Catalan people are EU citizens too.

Then to tack a vague wishy-washy sound bite onto the end of his statement about how he hopes that the Spanish government favours "force of argument not argument of force" is simply not good enough.

The Spanish government already graphically demonstrated its willingness to resort to violence and repression on October 1st (we all saw it happening on social media) and the EU demonstrated its refusal to condemn it, so EU figures simply hoping that the Spanish government don't resort to violent repression again is clearly no disincentive whatever.

What Tusk should have done is explain that it would be unacceptable for an EU member nation to resort to violence and repression against EU citizens, because all EU citizens are entitled to freedom of speech and freedom from state repression.

Another problem with this vague hope that the Spanish government don't resort to violence and repression is that it's stark-staringly obvious that the only way that conflict and violence can be averted now is through urgent dialogue and mediation. Something that Tusk made all the more difficult in his previous sentence affirming that the EU sides with the Spanish government and has no interest whatever in talking to the Catalans or taking on the role of the neutral mediator.

It's hardly possible to be disappointed with the belligerent, violent, and anti-democratic escalations of Mariano Rajoy and his party. He was always a fool promoted way beyond his abilities, and they were always a bunch of extraordinarily corrupt hard-right fanatics. Only a fool would have expected better from that repulsive bunch.

However, the EU stance, as outlined in Donald Tusk's Twitter statement, is absolutely exasperating. 

If they continue to bury their heads in the sand and refuse to act as impartial mediators this crisis is only going to get worse, and the EU's critics will have an absolute field day when Catalonia descends into tyranny, police violence, mass civil disobedience, the taking of political prisoners, or even tanks on the streets of Barcelona.

It's bad enough that the EU allows this kind of extreme political repression to go on just across the border in Turkey without imposing sanctions and demanding the restoration of liberal democracy, but it'll be a whole new level of wrongness if they allow this kind of repression within EU borders and against EU citizens, and insist on siding with the government that is inflicting it.


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Sunday, 22 October 2017

Imagine if the Catalan situation was happening in Scotland


One of the easiest ways to get an idea of how extreme the situation in Catalonia is, just imagine if the same scenario had been playing out in Scotland.

If this was happening in Scotland

Imagine that Nicola Sturgeon had used her democratic mandate from the Scottish parliament to unilaterally call another independence referendum, and that Theresa May's responses were to launch a sustained campaign of cyber attacks against the Scottish government and pro-independence websites.

Let's say that the cyber-attacks were an inconvenience, but the referendum went ahead anyway, so on the day of the referendum Theresa May sent thousands of police from English forces into Scotland to steal ballot boxes, drag women out of polling stations by their hair, beat up Scottish pensioners, and brutally attack crowds of non-violent Scottish civilians, all recorded by onlookers and broadcast to the world via social media.

Let's say that Theresa May refused to condemn, or even acknowledge the violence.

Then let's say that the Queen makes a speech in which she also refuses to condemn the violence, and blames the Scottish government, and the Scottish people for what is happening, and in front of a portrait of Henry VIII (who sent Edward Seymour to pillage and slaughter in Scotland).

Now let's say that a loud-mouthed member of Theresa May's cabinet decided to issue a veiled death threat against Nicola Sturgeon, but Theresa May and the Tories refuse to reprimand, let alone sack the blabber-mouthed gibbon who made the threats.

Now let's say that the ruling establishment in London decide to arrest the heads of civic Scottish independence groups (Common Weal, Radical Independence Campaign) and imprisoned them without trial.

Let's say that in response to calls for dialogue from Nicola Sturgeon, Theresa May's next move is to continue refusing to talk, and to actually collude with Jeremy Corbyn in order to shut down the Scottish parliament, take over control of the Scottish police force, and impose direct Westminster rule on Scottish broadcast media.

Do you think this sequence of events would crush Scotland into submission to London rule, or do you think it would probably have completely the opposite effect?

Similarities and differences

Of course it's not possible to draw exact parallels, but the similarities are uncanny. Both Theresa May and Mariano Rajoy are hard-right Prime Ministers with too few MPs to form a majority government. Both are far too weak to sack ministers who speak out of line (Boris Johnson and Pablo Cascado who issued the veiled death threat against the Catalan President spring to mind). Additionally both the Catalan President Carles Puigdemont and the Scottish First Minister Nicola Sturgeon have established clear democratic mandates from their own parliaments to hold referendums on independence.

There are a few obvious differences too though. Although Scotland has obviously suffered tragic levels of economic neglect at the hands of the Westminster establishment, and been used as a testing ground for vile Tory policies like Poll Tax and the Bedroom Tax, they haven't suffered anything like the scale of repression that Catalans have. It's important to remember that within living memory Catalonia was ruled from Madrid by the fascist Franco dictatorship who banned the Catalan language, executed the Catalan President (Lluís Companys), and tried to eradicate the Catalan cultural identity.

Another major difference is that although I believe in the abolition of the British monarchy, I'm reasonably confident that the British royal family would not be anything like as foolish and unstatesmanlike as king Felipe. Although their inclination would obviously be to side with the Westminster establishment, there's no way they would make such an obviously biased political intervention. Even if Theresa May pleaded with the Queen to do it, she would be unlikely to agree to dramatically escalate the situation by spewing British nationaist rhetoric, condemning Scotland and the Scottish people, and actually doing it in front of a portrait of one of her ancestors who attacked and repressed the people of Scotland.

And one other obvious difference is that although Jeremy Corbyn opposes Scottish independence, there's absolutely no way he'd imitate the mistake of the Spanish socialist leader Pedro Sánchez by colluding with Theresa May to shut down the Scottish parliament, seize control of the Scottish police, and impose Westminster rule on Scottish broadcasters. Love him or hate him, Corbyn has stuck by his principles for decades, so anything other than calls for dialogue and deescalation would be a massive betrayal of the hundreds of thousands of people who have flocked to the Labour Party to support his leadership.


Conclusion

Although it's obviously impossible to draw an exact parallel between what is happening in Catalonia, and what could be imposed on Scotland if Nicola Sturgeon were to push on with another independence referendum, there are many similarities.

Just imagine for a moment that the Westminster political class responded in a similar manner to the way the Spanish nationalists in Madrid have (cyber war, violent repression of non-violent Scots by English police, taking of political prisoners, Tory government ministers issuing death threats, abolition of the Scottish parliament, and politically motivated take overs of the Scottish police and broadcast media).

Do you think the Scottish people would take this lying down and meekly submit to continued London rule? Or do you think this kind of violent and profoundly anti-democratic display of British nationalism would have precisely the opposite effect and fuel the campaign for Scottish independence?



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Tuesday, 17 October 2017

Spain is taking political prisoners while allowing convicted fraudsters to walk free


A lot of people tend to get very angry when you point out that the Spanish political establishment is rapidly descending towards right-wing tyranny.

"But the vote was illegal" they say to excuse the shocking wave of brutal police repression against non-violent Catalan citizens that the whole world witnessed on October 1st. "But they don't represent all Spanish nationalists" they say about the Franco-worshipping fascist-saluting Falangists thugs who are gleefully celebrating the violent repression of Catalonia. "But everyone knows he's a nasty piece of work" they say about the Spanish government minister who wasn't even sacked for issuing a veiled death threat against the Catalan President Carles Puigdemont ...

And now they have something else to make excuses for. The Spanish establishment has resorted to taking Catalan civic leaders as political prisoners.

Jordi Sanchez, the leader of the ANC movement, and Jordi Cuixart, who heads the Ómnium Cultural association have been arrested and are being held without bail on possible charges of sedition because of their involvement in a spontaneous political protest on September 20th.

Jailing non-violent citizens without trial is obviously bad enough in its own right, but then if you look at some of the criminals from the Spanish political establishment who have been let off for massive corruption and fraud scandals, the shocking bias of the Spanish legal establishment becomes absolutely clear.

Rodrigo Rato (a former finance minister for the ruling Partido Popular) was found guilty of embezzlement from the Spanish bank Bankia, but was released on a technicality instead of serving a single day of his four year jail sentence.

Iñaki Urdangarín (the Spanish king's brother-in-law) was found guilty of tax fraud and corruption in Mallorca, but was released on a technicality instead of serving any of his six year jail sentence.

The Spanish nationalist establishment have got a proven track record of refusing to jail their own, even when they've actually been found guilty of incredible levels of corruption, fraud, and embezzlement. But when it comes to Catalan secessionists, they lock them up and throw away the key before there's even been a proper investigation, let alone a trial!

The crazy thing is that supporters of Spanish nationalism will immediately begin making excuses for the taking of political prisoners. They'll claim "it's for the good of Spain", and spread Orwellian propaganda about what a wonderful liberal place Spain is (while they're simultaneously excusing imprisonment without trial!). They'll turn a blind eye to the double standard that allows the convicted fraudsters Rato and Urdangarín to walk free, while Catalan civic leaders who haven't been found guilty of anything are locked up.

The big problem with this Spanish nationalist attitude is that it's massively counter-productive.

Their refusal to condemn the images we all saw of Spanish police brutalising pensioners, stealing ballot boxes, wading into unarmed and non-violent crowds with batons, and dragging women around by their hair; their blind acceptance of the belligerent escalations by the Prime Minister Mariano Rajoy and the king of Spain; their excuse-making over the taking of political prisoners ...

These people don't even seem to realise that all of this violence,oppression and Spanish nationalist rhetoric has the appearance of a Francoist resurgence, and their blind support for it terrifies people who remember the same kind of blind support that millions of Spanish nationalists gave to the savage Franco dictatorship until his death in 1975.

If people are unwilling to condemn the wave of police brutality against non-violent citizens, Spanish government ministers making death threats (and not even getting sacked for it), and the taking of political prisoners, how far will they actually go in their appeasement? 


Would anything actually be too much for them? 

Would they still be making excuses and attempting to glorify Spain as a wonderful "liberal democracy" if the government in Madrid scrapped the democratically elected Catalan parliament? If the Spanish political establishment abolished free speech to make talking of Catalan independence a crime? If they sent the army in to occupy Barcelona? If they reintroduced Francoist concentration camps to punish political thought crime?

As far as I'm concerned, they've already gone way too far if they're making excuses for the state violence and political repression that's already happening.

If they can watch a video clip of a Spanish police officer violently dragging a woman around by her hair and believe that "she deserved it" because she was trying to vote in a referendum they didn't want to happen ... or if they're prepared to actively celebrate imprisonment without trial for Catalan civic leaders while establishment fraudsters like Rato and Urdangarín still walk free, then they'll likely find an excuse for pretty much anything the Spanish ruling elite do.

But what is worse, from a pragmatic perspective, is the sheer self-defeating idiocy of it. Every step the Spanish political establishment takes towards the resurrection of the Franco dictatorship is another step towards the eventual secession of Catalonia.

When the king of Spain refuses to condemn the violent oppression of his own people, when the Prime Minister of Spain refuses to discipline his own government minister for making death threats against the elected Catalan President, and when the corrupt Spanish establishment turn Catalan civic leaders into high-profile political prisoners while allowing convicted fraudsters from their own class to walk free, they're not dampening Catalan secessionism, they're wilfully pouring fuel on the fire.


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Sunday, 1 October 2017

If this was happening in Venezuela or Cuba the UK media would be spinning a very different story


The hard-right Spanish government in Madrid shipped thousands of police from across other regions of Spain into Catalonia in an attempt to forcibly and violently repress the Catalan independence referendum, resulting in hundreds of injuries and a social media tsunami of appalling clips and images.

The Guardia Civil (the "civil police" who operated as Franco's paramilitary bully boys during the 1939-1975 fascist dictatorship) and the Spanish federal police have been filmed attacking peaceful citizens with batons, tear gas and rubber bullets, dragging women around by their hair, deliberately breaking people's fingers, throwing people down stairs, confiscating ballot boxes, and even attacking fire fighters who were attempting to defend the public from their brutality (see embedded video clips).






Mainstream media bias

We all know that if such scenes of repression were coming out of countries like Venezuela, Cuba or Bolivia the UK mainstream media would have been howling condemnation.

However because Spain is ruled by the hard-right neoliberal PP (the Spanish version of the Tory party) the British media have repeatedly attempted to downplay the levels of violence and the deliberate repression of democracy.

The BBC tried to sanitise the violence with an ludicrously Orwellian headline casting voters as "protesters" and using the term "rubber projectiles" instead of "rubber bullets".
Sky News even posted a disgraceful (and now sneakily deleted) Tweet claiming that the peaceful victims of police brutality were getting what they deserved for daring to defy the Spanish nationalist government in Madrid.

Even the supposedly left-leaning Guardian continued to run an extraordinary opinion piece casting doubt on the legitimacy of the referendum as one of their leading articles for hours after the scale of the Spanish nationalist violence had become all too clear on social media.

If these displays of state violence had been committed by a left-wing regime like Venezuela or Cuba we all know the "look at the evils of socialism" spin UK corporate hacks would have put on it, but nobody in the UK mainstream media is using these disgraceful displays of state violence to say "look at the evils of this brutal right-wing government right on our doorstep" or to raise concerns that the increasingly dictatorial government in Madrid is driven by the exact same virulent form of hard-right neoliberal economic dogma as the Tory party in the UK.

Spanish fascism

As police shipped in from the rest of Spain were repressing democracy, dragging women around by their hair and deliberately breaking their fingers supporters of Mariano Rajoy's increasingly tyrannical regime gathered in Madrid to make Nazi salutes and sing right-wing Falangist songs from the Franco era, which is absolutely outrageous given horrors that all regions of Spain suffered under the brutal fascist government of Francisco Franco between 1939 and 1975. 


Again, as with the police brutality, these disgusting outburst of extreme-right Spanish nationalism received muted, or non-existent criticism from most of the UK mainstream media.

In their efforts to paint the disorder as a product solely of Catalan nationalism the UK mainstream media have absolutely failed to observe that the violence is actually a product of a grotesque form of dictatorial and rabidly right-wing Spanish nationalism.

Rajoy's ineptitude

You don't need to be any kind of supporter of Catalan independence to recognise that Rajoy has handled the situation dismally. Instead of sending in police from across Spain to attack the polling stations, undermine democracy and brutalise peaceful voters, he could simply have let the referendum go ahead unmolested and then simply refused to accept the result.

The repressive tactics of arresting the referendum organisers on trumped up charges, confiscating ballot papers, shutting down pro-independence media outlets, launching cyber attacks on the polling station software, and the orgy of repressive state violence on the day of the vote have dramatically escalated the situation.

Only the most partisan of observers could look at the countless clips and images of Spanish police beating and abusing peaceful Catalan citizens as they attempted to vote and fail to see how these images will inevitably be interpreted by many as the violent and repressive face of right-wing Spanish nationalism as it attempts to disrupt and destroy the peaceful and democratic civic nationalism of the Catalans.

Just as the brutal and merciless repression of the 1916 Easter Rising fuelled the Irish independence cause resulting in the declaration of the Irish Free state just seven years later, the bombardment of violent and repressive images is sure to fuel the fightback against Spain's fanatically right-wing and increasingly dictatorial government, not just in Catalonia, but in other regions of Spain too (especially the Basque Country).


The blame game

Even people who strongly oppose Catalan independence should be horrified at the images, because this level of violence and repression by the Spanish state can only increase the probability of Catalan independence happening eventually. 

But we all know that a lot of people are so easily led that they can be distracted by us vs them blame games, so that they end up actually believing Spanish government ministers who claimed that the police behaved "professionally and proportionately", and totally ignoring Rajoy's catastrophically inept handling of the situation.

People will actually swallow the propaganda that the victims of the violence are to blame for bringing it upon themselves.

Of course flag-waving Spanish nationalists will delight in seeing the Catalans "put in their place" once again by the systematic brutality of the Spanish state, but sadly an awful lot of British people will fall for the biased mainstream media framing of events and end up believing that this savage right-wing state repression of non-violent citizens was somehow proportionate and justified when they would have undoubtedly been herded like sheep towards hysterical condemnation had these exact same events played out in left-wing countries like Venezuela or Cuba, rather than in hard-right Spain.



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Tuesday, 19 June 2012

Reaction to the 2nd Greek election

The fact that the pro-austerity New Democracy party crept into first place in the re-run of the 2012 Greek legislative elections has been greeted with unmitigated joy from the Euro fear mongerers that did so much to frighten the Greek electorate into voting against their own interests.

Shortly after the first inconclusive Greek election in May 2012 the Euro fear mongerers initiated their campaign of lobbying in favour of the pro-austerity parties. German Chancellor Angela Merkel telephoned the Greek President Karolos Papoulias in order to advise him to run the election as an unofficial referendum on Greece's membership of the Euro, in order to frighten the electorate into voting pro-austerity.  British Prime Minister David Cameron waded into the discussion, putting the threats in much more explicit terms with his statement that "we now have to send a very clear message to people in Greece: there is a choice – you can either vote to stay in the euro, with all the commitments you've made, or if you vote another way you're effectively voting to leave."

The unelected technocrats also joined in with the policy of Euro fear mongering in the lead up to the second Greek vote. Christine Lagarde of the IMF chose to sanctimoniously lecture the Greek people, claiming that she had no sympathy for the suffering Greek civilian population, insisting that it is "payback time" for Greece and making it clear that the IMF would never consider softening the terms of the country's austerity conditions. All in all a very clear message to Greek voters that they must vote for austerity or the IMF will pull the plug. 

The Belgian Finance Minister Steven Vanackere continued the fear mongering by stating that contingency planning for a Greek exit from the Eurozone was taking place. The mainstream western press got in on the fear mongering act with CNN even going as far as to claim that Greece could not only be thrown out of the Eurozone, but the European Union too, dependent on the election results. On the eve of the election the German tabloid Bild addressed a threatening letter to the Greek electorate, demanding that they vote for the pro-austerity parties or face "complete disaster".

Even after this co-ordinated campaign of fear mongering, significantly more Greeks voted for anti-austerity parties than for the pro-austerity establishment, making it quite astonishing to see how the mainstream press have been joyfully misleading the public with their coverage of the results. Instead of focusing on the extremely significant fact that the majority of Greek voters actually cast their votes for anti-austerity parties, the UK press has been gleefully describing the results as a victory for the pro-austerity minority, simply because New Democracy managed to sneak into first place with only 29% of the vote, meaning that they could claim the 50 bonus seats handed out to the single biggest party. Thanks to the bonus 50 seats the political establishment parties ND and PASOK (the people that led Greece into the crisis in the first place) can potentially form a coalition government to continue the policies of defunct neoliberal pseudo-economics dressed up as "austerity" and vast bailouts that flow straight back out of Greece to pay out on what should have been losing financial sector bets made by the reckless European financial sector.

Considering only 42% of Greek voters were intimidated into voting for the pro-austerity parties, whilst 55% of the Greek electorate voted for explicity anti-austerity parties, the undisguised glee of the pro-austerity Euro-bullys is particularly hard to stomach.

Angela Merkel telephoned ND leader Antonis Samaras to congratulate him on his victory, saying that she was confident Athens would "abide by its bailout pledges". Barack Obama's press secretary Jay Carney congratulated Greece and said that "we believe that it is in all our interests for Greece to remain in the euro area while respecting its commitment to reform". Italy's unelected puppet Prime Minister, Mario Monti, said he was delighted with the Greek vote, "which is also a great sign for Europe". The right-wing austerity fetishist Spanish Prime Minister Mariano Rajoy was also delighted that New Democracy had come in first, which he described as "good news for Greece, very good news for the European Union, for the euro and also for Spain".

As unpleasant as it is to see the pro-austerity forces gleefully celebrating this result and the mainstream media spinning it as if the Greek electorate had handed the pro-austerity forces a resounding victory, in the long run a continuation of the neoliberalisation of the Greek economy against the wishes of the majority of the electorate may actually do more to damage the credibility of the austerity fetishists than a win for the anti-austerity parties.


See also

 
 

Thursday, 7 June 2012

The Spanish Euro sunset

The sun sets behind one of Ibiza's many abandoned property developments.
Take a trip to Ibiza this summer and you would hardly know that Spain is in the grip of the worst socio-economic crisis since democracy returned to the country in 1975. The beaches are crowded, the Superclubs are open and still charging €40 or €50 just to get in and €10 just for a 275ml bottle of partially refrigerated beer once you're inside. The signs are there, but the casual holiday maker is unlikely to notice that dozens of partially constructed property developments around the island haven't progressed in the last year, or even since the Spanish property bubble burst in 2008.

People travel to Ibiza to relax and have a good time, they don't go to the most famously hedonistic island in Europe to assess the state of the economy or consider what the implications for the European single currency might be, should the entire Spanish banking sector submerge into the ocean of debt they created for themselves during the boom years.

The recently elected right-wing Spanish government are playing an unprecedented game of Euro brinkmanship in the desperate hope that the unelected technocrats at the European Central Bank and European Commission decide to treat Spain as a different case to other struggling Eurozone economies such as Ireland, Greece and Portugal, who were forced to accept harsh austerity measures in return for bailouts to help them avoid defaulting on their external debts.

Mariano Rajoy's Popular Party have already inflicted €27 billion in self inflicted austerity measures and drastically undermined Spanish labour laws in the hope that by inflicting voluntary austerity measures they might avoid the national humiliation of accepting bailouts and externally imposed austerity drawn up by the ECB and the IMF and might receive preferential treatment in the form of direct intervention to prevent the imminent collapse of the entire Spanish banking sector.

Adopting a different approach for Spain is likely to infuriate the populations of the three smaller Eurozone countries that have had to eat the EU "shit pie" of a vast bill to cover the cost of bailouts that flow straight back out of the country to their French, German and British financial sector creditors and the socio-economic chaos of brutal externally imposed and self defeating austerity measures. Watching Spain get preferential treatment when they themselves have already been made to suffer enormously, would almost certainly cause a dramatic rise in anti-EU sentiments in the three "periphery" states.

Even nine months ago talk of a potential Greek exit was being scorned as inconceivable scaremongering, in recent weeks high profile politicians have made calls for Greece and the Eurozone to "make up or break up" and financial experts have gone as far as calculating the potential economic damage of a Greek exit at €1 trillion. Now there is talk of a Spanish exit too. If the European authorities are unprepared to modify their bailouts and austerity prescription in Spain's case and the Spanish government are too proud to accept the same brutal treatment as Ireland, Greece and Portugal an exit looks like the only remaining option.

In the Spanish case, the Euro-technocrats will struggle to stick with the same strategy of inflicting another self-defeating cycle of austerity and bailouts because the stakes are much higher with Spain than with the previous three, meaning that Spain has a much stronger bargaining position. The Eurozone could conceivably take the exit and default of Greece, which represents only 2.65% of the Eurozone economy. The scale of the economic damage has been estimated at almost three times the size of the Greek economy, but surviving an 8% of Eurozone GDP (€1 trillion) hit seems conceivable. Irealnd and Portugal are even smaller, accounting for less than 4% of Eurozone GDP between them. Spain on the other hand is the fourth largest economy in the Eurozone accounting for over 8.4% of Eurozone GDP and using the Greek exit damage estimate as a rule of thumb (3x national GDP in economic chaos), a Spanish exit could end up creating up to 25.3% of European GDP (€3,151 trillion) in economic fallout.

The Eurozone would undoubtedly suffer enormously from a Spanish exit, however after a year or two of intensified economic chaos it is possible that Spain could actually emerge in a much healthier state following an exit and default. A return to the Peseta would allow Spain to devalue their currency providing some blessed relief for the struggling Spanish manufacturing sector, create employment, dramatically slow down the flow of capital out of the country and also create a much stronger incentive for holiday makers to choose Spanish destinations like Ibiza for their holidays.

It seems certain that mainland Spain would soon begin to experience a manufacturing boom as the Spanish exports become much cheaper in comparison to produce from countries still locked into the Euro and tourist destinations like Ibiza would benefit from a large tourism boom as visitors find their money goes much further than in Eurozone destinations. Both of these factors would create extra employment and increase aggregate demand, putting Spain on the road to recovery.

The problem for the Spanish government is that whatever happens someone is going to have to lose face. If Spain accepts the same kind of austerity and bailouts "shit pie" the previous three have been forced to eat, it will be a massive national humiliation, if the ECB back down and intervene directly to prevent the Spanish banking sector collapse, they will look like a bunch of malicious thugs that lost their vindictive streak when the stakes got too high and if neither side are prepared to lose face in the short term, they will both lose face as the Spanish are forced out of the Euro and the Euro technocrats are forced to watch the disintegration of their beloved Single European Currency project.

If Spain does bail out of the Euro, I don't suppose the hedonists holidaying in Ibiza would notice anything but the change in currency. The sun will still be blazing down, the beaches will still be packed and the superclubs will still be brazenly ripping off their customers with eye watering markups on their beer, just like the European financial sector will still be lending on their ultra-low interest ECB "giveaway loans" to create mind boggling profit margins at the expense of the "real economy".

 
See also

 
 
 
  

Friday, 1 June 2012

Spanish capital flight and ECB inertia


More than 10% of national GDP has flowed out of Spain
since Mariano Rajoy came to power in December 2011,
but it seems he was to busy inflicting brutal austerity
measures on his own countrymen to even notice.
Only a few days after one of Spain's biggest banking groups went cap in hand to the Spanish government to ask for a €19bn bailout, the Spanish Central Bank revealed the astonishing level of capital flight out of Spain for the first three months of the year. The figures revealed that €97bn flowed out of the country between January and March 2012, representing 9.2% of Spanish GDP (based on the 2011 figure of €1,051bn).

The data for April and May isn't even in yet, but given the absurd levels of economically destructive austerity being voluntarily inflicted by Mariano Rajoy's right-wing "Popular" Party (in order to prevent the national humiliation of accepting European Central Bank bailouts and austerity measures) and the enormous scale of the Spanish banking crisis it would come as no surprise at all if the scale of Spanish capital flight had intensified further over the last two months.

To put the mind-boggling level of wealth flowing out of Spain into perspective, is only two weeks since the Daily Telegraph described the €4 billion a week in capital flight out of Greece in the wake of the democratic uprising against austerity as a "tsunami". If the flow of €4bn a week out of the Greek economy over the course of a few weeks is being described as a "tsunami" what on Earth could be an appropriate metaphor for an average of €7.7bn a week pouring out of the Spanish economy over the course of an entire economic quarter? A "megathrust tsunami"? A "meteor impact tsunami"?

One of the most remarkable things about the Eurozone crisis is that economic difficulties in one or more of the Eurozone nations doesn't even seem to have been considered as a possibility by the ruling technocrats, hence the lack of coherent contingency planning. The traditional consequences of economic turmoil and large scale capital flight have been devaluation of the currency and depreciation of asset value, however the first consequence is not possible within the Eurozone economic area given the single currency. The ECB have repeatedly stated that they will not even consider a slight devaluation of the Euro through quantitative easing or changes in the extremely low interest rates they insist on maintaining in order to keep inflation down to the arbitrary "ideal level" of 2% they have set for themselves. Without currency devaluation, the socio-economic consequences of Spanish asset depreciation in combination for the brutal levels of self-inflicted austerity are going to be extremely severe.

A lot of economics commentators have drawn parallels between the Spanish situation and Britain and the gold standard in the 1920s, however a much more recent and apt comparison can be made with the former Spanish colony Argentina who spent the 1990s enacting neoliberal reforms at such a pace that they became the poster boys of the IMF and pegged their currency directly to the US Dollar, meaning a complete loss of monetary autonomy, which creates enormous constraints on fiscal policy.  The IMF admitted as much in their Lessons from the Argentine crisis review in which it was noted that  “A currency board [currency peg] puts much more stringent demands than other regimes on fiscal and financial policies, as well as on the flexibility of trade and the labor market.”.

Spain has undergone a similar process, the European Union is built on a foundation of "orthodox neoliberal" pseudo-economics and Spain effectively ceded their monetary autonomy to the ECB when they joined the Eurozone, meaning that their fiscal policy is heavily constrained by the monetary policy decisions of the ECB.

 Both experiments in neoliberalisation and loss of monetary and fiscal autonomy resulted in economic meltdowns. The Argentine economy tanked in 1999 leading to a vast scale of capital flight, the eventual breaking of the tie to the US Dollar and the biggest sovereign default in World history. The Spanish economy tanked in 2008 when the Spanish property crisis hit and the scale of capital flight is indicating that "the markets" are beginning to see a Spanish Eurozone exit and default as almost inevitable.

There are two positives to this comparison: Argentina managed to rebuild their economy by paying off the IMF and tearing up the IMF handbook of socially and economically destructive ideologically driven pseudo-economics they force upon recipients of their loans through neoliberal Structural adjustment conditions. Once they were rid of the toxic IMF ideology they could introduce tried and tested growth based strategies, such as taxing capital flight in order to reinvest in fiscal multipliers such as infrastructure projects, welfare payments, house building and education, resulting in a 9% of GDP per year growth rate between 2002 and 2009. The other positive is that the ECB are not a totally disinterested party like the United States Federal Reserve were in Argentina's case. There is still time for the ECB to come to their senses and adjust European economic policy to prevent the creation of a socio-economic catastrophe triggered by the economic annihilation of the fourth largest economy within their jurisdiction, resulting in the almost certain breakup of their Single European Currency dream.

Mario Draghi, head of the ECB. Who's interests is he serving
by sticking to austerity & bailouts instead of trying some
 coherent, tried and tested economic recovery strategies?
It was hardly surprising that the ECB refused to change pan-European economic policy because of the economic woes of Greece, a relatively small country (2.65% of Eurozone GDP) on the European periphery that "cheated their way in" by employing Goldman Sachs to "cook their books" in order to gain access to the Euro club in the first place. However failing to intervene to prevent a socio-economic catastrophe in Spain, the 4th largest economy in the Eurozone (almost twice the size of the Netherlands in fifth) which makes up almost 12% of Eurozone GDP and was actually outperforming Germany by many economic indicators as recently as 2007, is beginning to look like feeble minded political inertia.

Of course providing direct assistance to the Spanish when they refused to do so for smaller economies such as Ireland and Greece would be a very public u-turn which would be spectacularly unpopular with the the Irish and the Greeks who were made to suffer years of punishing austerity measures as the vast bailout funds were used almost exclusively to support the financial sector creditors of these countries. It would signal the end of the road in the careers of many an unelected European technocrat and for Angela Merkel, the most visible democratically accountable austerity pusher. On the other hand if they don't intervene directly and stick with their catastrophically unsuccessful strategy of inflicting neiliberal reforms under the guise of "austerity" and using vast bailout loans to fund payouts on what should have been losing financial sector bets (on Greek, Irish & Spanish government bonds) in order to prop up the utterly dysfunctional neoliberalised financial sector they have created, the Eurozone meltdown begins to look almost inevitable. It seems that by maintaining their policies of austerity and bailouts instead of direct investment and coherent economic growth strategies, the Eurozone technocrats may be only acting out of ideological determination to perpetuate their utterly discredited neoliberal pseudo-economic theories at the expense of everybody else in order to preserve their own short term career interests. Jobs they could hardly keep upon the admission that their entire strategy so far has been nothing more than a sequence of terrible economically destructive mistakes.

If worsening socio-economic conditions force Greece to bail out of the Euro, the scale of the economic damage has been estimated by the Institute of International Finance at a potential €1tn (or almost exactly three times the size of the entire Greek economy €329,9bn GDP). It is conceivable that the Eurozone could survive an economic catastrophe reducing the entire Eurozone GDP by over 8%, however using the same rule of thumb calculations to extrapolate the potential damage of a Spanish exit (three times Spanish GDP) gives us a ballpark figure of €3.153 trillion, or 25.3% of Eurozone GDP. Add this estimate to the estimated 8% of GDP annihilated by a Greek exit and we have a potential pan-European economic meltdown costing almost exactly one third of Eurozone GDP!

Providing direct assistance to Spain would be a massively controversial u-turn, but what does it say about the Euro tchnocrats at the ECB and European Commission if they are unwilling to intervene to protect the fourth largest economy in the Eurozone from socio-economic meltdown? It also provokes the question of who's interests they are actually serving or whether they are serving anyone's interests at all by sticking with their catastrophically broken neoliberal economic models?  If things do play out like this, resulting in the almost unimaginable socio-economic chaos of a full scale Eurozone meltdown, then the ECB's hard line stance against direct intervention is certain to be cited by future generations of economists and historians as a case study in unforgivable political inertia.


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Wednesday, 30 May 2012

The Bankia bailout

On Friday 25th 2012 Spain's largest banking group Bankia went cap in hand to the Spanish government in order to ask for a €19bn state intervention, in order to prevent them from going bankrupt. The banking group already received a €4.5bn "investment" in 2010 meaning that the Spanish taxpayer is going to foot the bill for a €23.5bn "investment" in return for something like a 90% stake in the debt riddled banking group.

The markets obviously took the news badly, Bankia shares plummeted 13.38% before trading in the company was suspended, the rest of the Spainsh banking sector took a hit, The blue-chip Ibex 35 has been in free fall and the yields on Spanish government bonds began rising towards the 7% mark that is widely regarded as unsustainable.

The president of the Bankia group José Ignacio Goirigolzarri further panicked the markets by saying that "We don’t need to talk about giving any of it back" but changed his tune over the weekend to imply that he meant the unprecedented bailout could be used as a "state investment" and that it would be up to the Spanish government when to sell its stake in Bankia to obtain the highest possible price to benefit taxpayers.

This narrative about bailouts being "investments to benefit the Spanish taxpayer" will sound remarkably familiar to residents of the UK who were told in 2007-08 that the £850bn package of bailouts and emergency nationalisations of debt riddled financial institutions like Northern Rock, Bradford and Bigley, Lloyds and RBS should be considered as lucrative government investments instead of a wanton act of using taxpayers' money to prevent the bankruptcy of unviable debt laden businesses.

Northern Rock was split up into a "good bank" and a "bad bank" with the government keeping the bad bit and selling the "good" bit to Virgin Money at a loss of £2bn. A similar trick was played with Bradford and Bingley, with the government keeping the debts and flogging off the "good bank" on the cheap to Spanish banking group Santander, who rebranded it (as well as the other former building societies it had acquired) under the Santander name. By far the biggest intervention was the RBS nationalisation, which cost £45.5bn for an 83% stake. As of 2012 the British taxpayer is looking at a £22bn (48%) loss on RBS alone.

Common sense alone should be enough to tell the Spanish taxpayer that this is going to be absolutely nothing like an "investments to benefit the Spanish taxpayer". If it is such a lucrative investment opportunity, where is the enormous queue of private sector investors lining up to grab their share of this wonderful investment opportunity?

On the Monday the Spanish Prime Minister Mariano Rajoy continued the charade at a news conference by insisting that the intervention was not a "bailout" but an "investment" and that  there would be no "bailout" for the wider Spanish banking sector either. The right-wing Popular Party leader said he was confident the €23.5 billion being injected into BFA-Bankia would be recovered. "Once the bank has been cleaned up, as the leading financial institution in Spain, it will be sold and the state will get back its investment".

Given the massive losses on UK bailouts/investments in debt riddled banks, Rajoy must either be delusional or utterly disingenuous to claim that the Spanish taxpayer will somehow spin a profit out of the creation of a zombie bank, that should have been allowed to die from its terminal debts.

Rajoy and the Popular Party have stated that the method of providing the "investment" has yet to be decided after several commentators began reporting that the only way that the debt laden Spanish government would be able to provide funds for the insolvent bank is through swapping Spanish government bonds in return for at least a 90% stake in the company, which would then redeem the bonds at the European Central Bank to create liquidity. The reason this is supposed to work is that the ECB still treat government bonds as if they are high quality collateral, rather than the extremely risky assets as the markets do. The Financial Times then ran a piece claiming that the ECB had flatly rejected the idea of indirectly bailing out Bankia via bond transfers only for the ECB to retort with the statement that "contrary to media reports published today, the European Central Bank has not been consulted and has not expressed a position on plans by the Spanish authorities to recapitalise a major Spanish bank, the ECB stands ready to give advice on the development of such plans."

There has been a wave of public indignation after it was revealed that the departing financial director of one of a Bankia subsidiary company Aurelio Izaquierdo had accrued a huge €14m pension fund. This too is reminiscent of the UK banking crisis where executives at debt stricken banks walked away with vast pension funds and golden goodbyes. The most notorious example being Fred Goodwin who was rewarded for his work in leading RBS to a £24.1bn loss with a pension fund worth £700,000 a year and a 2.6m bonus for the year in which the bank posted the biggest loss in UK corporate history.

The Prime Minister has steadfastly refused to hold an official inquiry into the Bankia crisis, presumably out of loyalty to former chief executive Rodrigo Rato, who served as the Spanish finance minister for Rajoy's Popular Party between 1996 and 2004 and also served as the head of the IMF between 2004-07.

An abandoned construction project in Ibiza, still displaying the ludicrous
182,500€ asking price. There are an estimated 700,000 such properties in Spain.
One question that should be under serious consideration is, how on Earth Bankia posted 2011 profits of €302m in February 2012 under the leadership Rodrigo Rato, only to revise them downwards to a loss of €2,979m a few months later after he had stepped down?

Perhaps some of the executives at Bankia are relaxed about waiving their pension funds and severance pay because they have already had their payoff through the sale of massively overvalued shares thanks to the creative accounting that allowed them to overestimate their performance in 2011 by well over €3bn. The excuse for this absurd "miscalculation" is that the bank are sitting on a vast amount of "toxic" property assets, however the Spanish property crisis happened back in 2008. The Spanish banks have had four years to establish their exposure to toxic property assets, they would have to take people for cretins if they expect anyone to believe that they only just found out the enormous scale of  recklessly speculative property investments on their books.

This latest financial crisis is making one thing very clear, that Mariano Rajoy and his right-wing Popular Party are much more determined to protect Spanish corporate interests than they are to protect the interests of ordinary Spanish people. It was only a couple of months ago that the Spanish industry minister Manuel Soria spoke out against Argentina's oil renationalisation plans, saying that  "If there are hostile moves towards [Spanish corporate interests] anywhere in the world, this government will interpret them as hostile moves against Spain" only a couple of weeks after vast public protests across Spain against the draconian new pro-corporate anti-worker labour reforms that PP have introduced. This Bankia intervention is going to cost an additional €19bn, either from their bond swapping plan or raised directly from the markets, which represents a huge proportion of the €27bn in austerity measures inflicted on ordinary working Spaniards in the 2012 budget with the justification that Spain can no longer afford luxuries like pay rises, welfare and infrastructure investment or labour rights.


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