Monday, October 04, 2010

The day after last week’s general strike, the Spanish government published its budget for next year and we were instantly deluged by numbers and analyses. Most of the latter in Galicia seem to be based on the premise this region is getting shafted worse than any other in Spain. And I’ve little doubt the same line is being taken in regional and local papers throughout the country. But, anyway, the best comment I read was “After the presentation of yesterday’s budget, there are some pertinent questions. Do we really know what’s going to happen to our money in 2011? Do we even know what happened to it in 2008 and 2009? Or what they’re doing with it in 2010?”

The other comment I liked was someone’s (presumably sarcastic) remark that, after the crisis, Galicia will need three magnificent airports to accommodate all the young people who are leaving for work overseasn and then returning for their holidays.

On a wider front, here’s a sheleighly for Ireland and a bouquet for Spain – “Irish bankers were delusional and sometimes malign, and deserve all the brickbats they are getting. But ultimately the blame rests squarely on the Fianna Fáil Government. At such times, only government can step in to regulate the banking system, in order to prevent delusion turning into disaster. That is what happened in Spain, which enjoyed a similar property boom and bust, but from which its big banks have emerged relatively unscathed thanks to tight and far-sighted financial regulation.” Which is fair enough but I believe the legislation was introduced here after a previous boom in the 90s and not during this one. My impression is things were also left to roll here between 2000 and 2007, under both the PP and the PSOE governments. And that, while the major banks have emerged OK, the politically-controlled regional banks haven’t. Hence the raft of mergers among the latter since 2007.

As for Ireland’s option of leaving the EU, a Times columnist had this to say today: - “Like Greece, Ireland is trapped by its own past mistakes. As with Greece, the consequences for the eurozone are, first, that Ireland may well need to tap the special rescue programme assembled earlier this year by the International Monetary Fund and European governments. But also, as with Greece, if the Irish economy continues to decline, it may need to negotiate a restructuring of its foreign debts to reduce that burden. Some may say that it should also leave the euro, but that is extremely unlikely both for political reasons and because, at least in the short term, the ensuing economic disruption would make things even worse.”

At least one leading economist believes, however, the EU will have little choice but to accept reality and see peripheral economies blessed with their own – devalued – version of the euro:- “History suggests that austerity without loose monetary policy can be self-defeating. Never mind: Eurocrats will pay any price to avoid the humiliation of restructuring and unleashing inflation worries in Germany. So a combination of austerity and tighter credit is in store, to the applause of the rating agencies, those infallible appraisers of risk that endowed securitized subprime mortgages with triple-A credit ratings. . . . The reality is that Euroland now consists of a core and a periphery, or the best and the rest. The latter cannot meet their debt obligations without a combination that includes restructuring, a heavy dose of inflation, more than a touch of austerity, and a separate, depreciated, euro - what economists (before the full extent of Ireland's problems became obvious) call Eurosud"

Finally . . . . As if this post weren’t heavy enough, here’s another Wall St. Journal, this time on how Spain’s local councils are dealing with the collapse in revenues. The fiestas, it seems, have been sacrosanct todate. Can this possibly continue? Probably. Having fun is a serious business here.

Tailnote for new readers: My elder daughter has now net-published six chapters of a novel which is “A fast-paced political thriller but, above all, a personal tale of pride and paranoia.” Set in a fictionalised Cuba, it’s being e-published at the rate of at least a couple of chapters a week. If this entices you, click here.


Sierra said...

Re: the budget - I was intrigued by the following in El Progresso (Lugo):

"Otros que tienen cantidades consignadas para Lugo son Defensa (490 euros)"

What do you get for €490 in defence terms these days? Don't tell al-Q____a!

moscow said...

Don't know if Irwin Stelzer is a leading economist, but I think it would only be nice if you would mention where the article was published. The WST like the Times are part of the Murdoch press. The Murdoch press has literally been waging a war to death against the Euro since its inception. I, for that matter, would have refrained from opening the article in the first place.

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