It has been a tough week for Spanish politics.
The Spanish government announced new austerity plans squeezing next years budget for some 40 billion euros. It also came out with the results of an independent bank stress test to show international markets that Madrid can control its finances. Seven banks are in need of 59 billion euros to shore up their capital – somewhat less than expected.
The leader of the northeastern region of Catalonia, Artur Mas, called for early elections and the Catalan parliament agreed to hold a referendum on independence from the rest of Spain by the end of the next electoral term.
Thousands of protesters – students, employed, unemployed, pensioners and children – gathered on Plaza Neptuno in Madrid three nights last week to rally against the Spanish government’s many austerity measures. The most radical protesters clashed with police on different occasions leading to dozens of injured and detained.
Meanwhile, the Spanish President Mariano Rajoy was in New York to speak at the United Nations General Assembly, among other things, he called for the decolonisation of Gibraltar. A Spanish tourist caught him on camera walking down Sixth Avenue smoking a cigar.
The picture has refuelled complaints from many in Spain that Rajoy lacks the touch and determination needed to deal with the crisis his country is facing and the hardship many of his citizens are going through. One newspaper commentary read that “Rajoy doesn’t get wet neither in the shower”. In Spanish, to get wet is a synonym for committing oneself to something – to get involved.
The markets are speculating on when Rajoy’s government will ask for a partial bailout from the European Central Bank, which is widely expected. Although the last few austerity cuts have signalled that Spain is getting in line with the economic conditions a rescue would entail, the call for a rescue is deferred. Rajoy once said that there “is no hurry” for such a bailout.
Maybe the request will come after the regional elections in the Basque Country and in Galicia on October 21st, as the stigma of an intervened country could have an effect on the ballots in the two regions (it wouldn’t be the first time. Rajoy waited for the regional elections in Andalucia in March before his government published its first austerity plans). It is also argued that the Spanish government is negotiating “reasonable conditions” that comes with a bailout.
Not taking a decision is always the worst decision and the longer Rajoy hesitates to take the bull by the horn, the more painful it will be. For Rajoy and his party, for the Spanish people, and for Europe.
#1 by Victor on October 3, 2012 - 5:13 pm
Southern Europe has been in a situation where no country seems to control its destiny. Each country prepares its economic statistics and plans without knowing what economic measures others will take. So with the generalized downward trend, none of them are reliable.
Acting quickly or fast in this scenario has become irrelevant, because the effects of all the decisions are impossible to predict. Rarely have so many countries decided to apply so much austerity and reform in so little time.
The markets as well as consumers, on the other hand, know that any decisions announced could be reversed or made more radical if political circunstances or market pressures change.
Southern Europe is reforming but trying to avoid the shocks suffered in Eastern Europe after the fall of Communism. There has been a lot of outside help which makes a difference. But it doesn´t seem to be enough to prevent a real drop in living standards which could last far longer than most people think.
#2 by Marcel on October 5, 2012 - 12:21 am
@1
They could control their own destiny very easily. Ditch the wealth-destroying Euro and stop borrowing money altogether. Can’t afford to borrow? Then DON’T borrow! Throw the investors and hedge funds under the bus, not the ordinary people.
Sick of hearing the Lagardes, Blanchards, Barrosos, Draghis and Rompuys (neither of whom pays any tax and all eat lavish dinners and stay in lavish hotels) argue that ordinary people should suffer more inflation and austerity so criminal thieving manipulating banks (remember LIBOR) can be bailed out.
All of Club Med (Portugal, Spain, Italy, Greece) would be better off without the Euro. But politicians rather have people suffer rather than their banker friends. They ought to be called sociopaths. There would be no collapse if the Euro disappeared, but clinging on will cause the very thing they are claiming to want to avoid: collapse.
This socalled crisis is also another example of failed central planning. The more central planning, the worse it gets. And the Eurosoviet’s recipe? More Eurosoviet of course! More central planning. Madness doesn’t even begin to describe it.
#3 by Victor on October 6, 2012 - 1:03 am
Stop borrowing…like ordinary people don’t borrow?
And please, at least try to not overtly lie…they do pay tax.
#4 by Clarissa on October 22, 2012 - 7:41 am
Austerity leads to corruption, because the lower you pay, the more they will cheat on you. Austerity never ever helped in any part of the world. It makes things only worse.