Soon newspapers will be reporting that Spain has finally requested a bailout for its financial sector, which will be accompanied by very strict conditionality. Strict is an understatement. The terms agreed in the leaked Memorandum amount to an unconditional surrender. The Troika will be given free rein to impose its agenda. The Spanish government has betrayed its citizens. In exchange for this sacrifice of sovereignty, all Spaniards are promised in return is unending sacrifice. Never mind that this has already been tried and has failed miserably elsewhere.
When we read in the press that “Spain is being bailed out,” remember that they are obliged to observe certain norms of propriety. Imagine a more vulgar term, and obtain a clearer picture of the Spanish reality. Today we get cuts to unemployment benefits, cuts to pensions, a raise in the VAT, etc. Tomorrow will bring more of the same, just worse. These endless, self-defeating cuts are not a growth strategy. The Spanish Memorandum is an immoral document that will be impossible to implement. The whole exercise is pointless, which makes it all the more tragic. Millions of lives are being ruined on account of immense stupidity. More children will be going hungry and more adults will be living in the street in order to bailout a reckless financial sector.
The bank bailout itself will be a colossal swindle. European money will be used to set up a bad bank, an “Asset Management Company” (AMC). This bad bank will then purchase garbage mortgages from the banks that have been intervened, in exchange for cash, shares and bonds. These bonds will have the backing of the Spanish state. The junk assets purchased by the bad bank will be valued according to the “real (long-term) economic value (REV) of the assets”. This is understood to mean a price somewhere in between the fictitious price on the books and the market price. Translation: Spanish citizens will end up overpaying for these junk assets.
Prior to the bailout, the government was stuck with a dilemma: either it could swallow the losses associated with the real estate boom or it could trigger a meltdown of the financial sector. The bailout-capitulation has not even resolved this dilemma. To value Spanish assets at market prices would trigger a further meltdown, which would then eat into the balance sheets of even the strongest of Spanish banks.
The distribution of the costs is totally obscene. In the midst of the crisis, countless Spaniards were talked into converting their savings into “preferred” shares, so that banks could improve their balance sheets. They were promised, of course, that this operation contained no risk, never mind the small print. Now the Memorandum suggests that these victims of financial fraud shoulder the burden. Small savers will be wiped out so the big bankers can sleep soundly.
Mariano Rajoy and his Partido Popular have been shameless. They lied in 2004, desperate to hang onto power. They lied systematically while they were in opposition. They lied systematically during the 2011 election campaign. They lie systematically now that they are back in government. To disrespect the truth in such a manner implies a profound disrespect for the citizens of Spain. Rajoy holds the electorate in contempt. Now we get to live through the boot of austerity stomping on our faces over and over again.
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Statistics show that the countries that are in this financial crises, Greece, Portugal, Spain and Italy have an income distribution that is more unequal than those countries that are less effected and have a better control over its economy. That spells room for taxing the richer people much much more instead of cutting the government expenses
The Spanish miners may be showing the way to the rest of the 99 per cent in the world.
Have the “international investors” not learnt the lesson of Shakespeare’s Merchant of Venice – or did their education not encompass literature?
“They lied in opposition… they lied in election campaigning… they lied in government..” Oh no! Hold the front page there are Spanish Politicians that ‘lie’! Well, they will have fit right in and been completely welcome with the entire EU-Brussels Commission, bureaucrats, MEPs and almost every National Government post-Maastricht ratification! After all, this is the EU you are talking about: An EU whose Pres Barroso declared a 43% Voter Turnout in 2009 for the EU Parliament a “significant indication of progress”.The only shock I find is that so many hundreds of millions of European Citizens are still allowing these blatant, irredeemable liars to continue to carry out their duplicity and deceit across Continental Europe and the British Isles!
A political critique, full of “loaded” terms like “swindle, obscene, surrender, bondage”, and such like is cheap, dirt cheap in fact, and does not expend any brown matter.
When Spain, or Greece for that matter, faces crunch-time and can only sort herself out with outside help, she must comply with the terms attached. Otherwise, deploy all her Harvard and LSE grads to sort herself out as best she can.
Congratulations for being crystal clear in your article.