Spanish
(non)Government: Can it be that the charisma-less
Marion Rajoy is about to emerge triumphant from the repeated
elections next month, having seen off – at least for now – the
prospect of a Catalan referendum and the threat from the Left? Much
as I hate to admit it, this is looking more and more likely, as
what's left of Spain's middle class is increasingly viewing the
right-wing PP austerity party as the the least worst option.
Especially when compared with the Podemos-IU coalition, which makes
Jeremy Corby's UK Labour party look like neo-conservatives. Said
middle class, by the way, is said to have lost 3m members, as result
of the economic havoc wreaked by La Crisis.
More Police Abuse: Down
in Madrid, a woman has copped an on-the-spot fine for carrying a
bag that declared "All Cats Are Beautiful", plus the
acronym ACAB. Despite the fact it also carried the image of a cat,
the police claimed this stood for "All Cops Are Bastards".
The relevant law is the ludicrously misnamed Citizens Security Law,
which criminalises 'disrespecting' the police. In their judgment. I'd hazard a guess the police are even more disrespected
now, as a result of this action. Can one imagine this happening
elsewhere in Western Europe? Not sure about Eastern Europe.
Spain v the USA: My net
colleague Lenox of Business Over Tapas cited this blog post the other
day, describing it as 'silly'. I think it's very illustrative.
The EU: See The Times
article at the end of this post for a sceptical view of what's being
done – or not – to solve the Greek debt crisis.
The Brexit: My personal
view aside, I've always insisted this isn't going to happen. The
leading brain of the Out camp, Dr Richard North, long ago despaired
of the strategy and tactics of his (estranged) colleagues in this
movement. Today he sums things up thus: All Vote Leave needed was a
sensible exit plan and most of the scaremongering would have
evaporated. Instead, they based their campaign on a lie and chosen a
serial liar[Boris Johnson] to lead it, having rejected the very idea
of an exit plan. The last comment is a reference to his own detailed
plan, Flexit. You can read this here. Though I very much doubt that
(m)any of you will do this. The guy deserves a medal of some sort.
Galician Gypsies:
Shoot-outs between different clans are not uncommon here. But I
imagine everyone in an Ourense hospital was rather surprised by the
one which took place there a while ago. At the trial last week, the
defence of the accused was based on the claim that “They started
it a while ago. In another place”.
Pontevedra Internet:
After 16 years of complaints about only getting 0.5 megas, Telefónica
have finally extended their cable network up our hill overlooking
Pontevedra. Given that they'll surely get 100% take-up of '300 megas'
at €62-82 per month, I'm lost as to why this took so long . I say
€62-82 but the flier from Telefónica neglected to tell us
there's also a 30 megas option at €50. Much better, of course, than
€25 for 0.5 megas but still probably way above what you'd pay
elsewhere in Europe. Is it any surprise that the Telefónica board is
stuffed with ex-government ministers?
Finally . . . RT TV: Yesterday morning: Russia hasn't invaded any country – not Georgia, not Crimea, nor
Ukraine. Anyway, Georgia started that war. Russian is not guilty of
any aggression at all. It's all anti-Russian Western propaganda.
Reflective of the meme of a 'dangerous Russia'. It's laughable.
Thank God younger people have access to get the truth from the
internet.
Why the EU is keeping quiet about Greek debt. Ed Conway
In the 5th century BC
the Greek philosopher Zeno described what became known as his
paradox. An arrow fired towards a target will cover half the distance
to the target, then half what remains, then half what remains after
that, and so on. On this basis, while the arrow might get ever closer
to its target, it will never actually hit it.
Zeno’s paradox isn’t
much cop in the real world, or archery contests, but it does at least
help to explain modern Greek economics: the closer we get to a deal,
the more apparent it is that the country’s crisis will never be
fully resolved.
In case you haven’t
been following Greece recently, here are the three things you need to
know.
First, in spite of
various “deals” hatched over the past few years, most recently
the bailout last summer, the country still faces the same problems it
always has. Growth is non-existent. In fact the economy is shrinking
again, by 0.4 per cent in the first quarter of 2016. Total national
income is smaller than it was before the turn of the millennium.
House prices are still falling and are now barely more than half
their pre-crisis value. Shop prices are down too, leaving the country
in deflation, while unemployment is still running at almost 25 per
cent, or more than 45 per cent of under-25s. The national debt is set
to reach about 200 per cent of gross domestic product this fiscal
year according to the International Monetary Fund’s most recent
analysis, which is already out of date.
The second thing to
remember is that Greece’s creditors are divided. Most economists
believe the country cannot recover unless a significant chunk of its
debt is simply written off. However the majority of that debt is now
owed not to private investors but to other eurozone governments. The
Germans have resisted any immediate effort to cancel the debts; the
IMF says it will not take part in future bailouts unless Germany does
precisely that.
Third, the participants
are doing everything they can to disguise the crisis until Britain’s
referendum is out of the way. One thing worse than Greece being
thrown out of the euro would be Britain leaving the EU, so the more
they can suppress news of the continent’s own entrenched problems
the better. It is worth being more sceptical than usual about any
apparent breakthroughs in the coming weeks.
There are two ways of
helping Greece, both of which originate from the UK
Eurozone finance
ministers meet on Tuesday for another effort to resolve the crisis.
We are told that creditors seem to be putting aside their
differences, which is excellent news if it is to be believed. Behind
the scenes they are hatching plans to extend the maturity of Greece’s
debt so that some of it is not repaid until as late as 2080. Another
idea is to hive off some of the debt owed to other eurozone countries
to the European Stability Mechanism, which is more or less the same
as mutualising it into Europewide debt.
While such proposals
would be progress, they pussyfoot around the real issue, which is
that Greece will never be able to pay off its debts. Quite simply,
the liabilities have risen far beyond the country’s capacity to
service and repay them.
Since the crisis began
half a decade ago, the strategy has been “extend and pretend”:
keep Greece on life support and hope that the country’s economy
eventually recovers. In some cases, such plans work a treat, but in
Greece it has clearly failed. Some 16 years of economic progress has
been wiped out; national income has collapsed by 28 per cent —
greater than anything witnessed in a developed economy. Now, once
again, Greece is close to running out of money, unable to make its
July debt repayments of €300 million to the IMF and €2.3 billion
to the European Central Bank.
Yet there are at least
two other ways of reducing the effective debt burden without
forgetting it entirely, both of which originate not from Brussels but
from the UK.
The first would be to
do what Britain used to do when faced with enormous war-sized debts,
and issue war loans. Consols, as they are sometimes called, are
perpetual loans for which the borrower makes regular interest
payments but does not repay the debt itself until they see fit,
perhaps centuries later. George Osborne repaid some of Britain’s
First World War debt only a couple of years ago.
Far better for Greece
to convert its debts into consols and remove those painful capital
repayments altogether than to pretend that they will be repaid in
2050 or 2080.
The second idea comes
courtesy of the Bank of England, which for the past year or so has
been quietly working on plans to create bonds linked to gross
domestic product. Given that a country’s capacity to pay its debt
often hinges on its national income, the attraction of such
instruments is clear. Borrow in GDP-linked bonds and when your
economy faces a recession, your liabilities shrink alongside your
economy rather than ballooning out of control as they did for Greece.
Some countries, Greece
included, have issued some primitive GDP bonds in recent years but
they have been crude and niche. With the Bank poised to agree
standards on such bonds, that might be about to change.
Such ideas might seem
outlandish but finding a remedy for unsustainable sovereign borrowing
is not just a Greek imperative. From the UK to the US and beyond, the
world is more mired in government debt than it has been for decades.
Either it will need to be paid back or, like Zeno, we must find a way
of ensuring the arrow never reaches its target. Greece might be a
useful test case for the rest of us.
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