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Monday, October 30, 2017

Thoughts from Galicia: 30.10.17

Spanish life is not always likeable but it is compellingly loveable.
- Christopher Howse: A Pilgrim in Spain. 

If you've alighted here because of an interest in Galicia or Pontevedra, see my web page here.

Cataluña: Bits of the Jig-Saw. Or: Scenes from the Ealing comedy: We Have Ways of Making You Democratic:
  • Gathered under a giant Spanish flag on Saturday, thousands of people in central Madrid shouted Prison for Puigdemont.
  • Shouting Viva España and Visca Catalunya and chanting Puigdemont to prison,  hundreds of thousands of Spanish loyalists demonstrated in central Barcelona yesterdayAmid a festival atmosphere, protesters carrying Spanish and Catalan flags sang along as speakers blared out the 1970s hit, Y Viva España. The protest was largely peaceful, though a small group clashed with police. 
  • The anti-independence Catalan Civil Society, which organised the demonstration, claimed that 1.3m marchers attended. Police put the number at 300,000. Take your pick.
  • Sr  Puigdemont is expected to turn up for work today, despite having been sacked by Madrid last Friday.
  • The Spanish foreign minister has said that Sr Puigdemont could stand in December’s elections, assuming he's not in prison for rebellion.
  • Muddying the EU waters, a Belgian minister in favour of Flemish independence has said his country could offer asylum to Sr Puigdemont.
  • Madrid has decided not to take over TV3 and Catalunya Radio, widely viewed as mouthpieces for the pro-independence Catalan government.
  • More than 1,700 companies, including the banks Caixa and Sabadell and several utility companies, have decided to move their legal headquarters out of Catalonia since the referendum.
  • On Friday, shares in Catalonian banks fell sharply on Spain’s Ibex-35. CaixaBank - Spain's third largest lender - fell by around 5% while Sabadell, the country's fifth biggest bank, fell roughly 6%.
  • The Catalans are looking at introducing their variant to Bitcoin. (The Catcoin?) See the must-read article at the end of this post on the all-important financial aspects of this madness.The Guardian's opinion: Rajoy’s is a well-played hand, but perhaps also a bluff that could end in a flop. The nationalists may finally decide not to stand in the election and, if turnout is low, the new parliament’s legitimacy will look precarious. And if the nationalists pick up the gauntlet and present a united list, they could turn the election into an undeclared plebiscite on independence. This they may win, even if their platform for a sovereign republic will look somewhat redundant and contradictory. More here.
  • Chinese flag-makers are reported to be delirious with joy. Except, of course, those who specialise on EU variants. These are said to be biding their time.

Life in Spain
The Spanish Language: Reader Perry has turned up the word transigencia for 'compromise' or – perhaps more correctly – 'willingness to compromise/tolerance'. English speakers will recognise it from its antonym 'intransigence'. I must confess to never having heard or seen it before.

In the UK, the BBC has reported that an independent enquiry has looked at energy prices over the last decade and concluded that a quadrupling of cost against a background of falling oil prices suggests that prices are 'too high'. Who'd have thought it?

Galicia: Well, I never. The origin of name of the Pontevedran city of Vigo is said by some to be the Roman Vicus Spacorum. And It is believed that it was the starting-point of Caesar’s campaign against Britannia. Something else I've never heard before.

Finally . . . A British columnist yesterday reminded me that, in my youth on Merseyside, we used turnips to carve Halloween heads (jack-o'-lanterns), not pumpkins. Though a friend told me last night they were not, in fact, turnips but the much larger swedes. Either way, they were bloody hard to hollow out. And the flaming candles would never stay upright. Said columnist added: As a kid in Middlesborough, I once saw an avocado in our greengrocer’s. “What’s that?” I asked the woman behind the counter. “Fuck knows”, she replied. “Something from London, I’d bet”. Them was the days. Before we all became effete members of the middle class.

Today's Cartoon:-

For my Catholic friends . . .


RESERVOIR DOGES
THE ARTICLE

Catalans race to create a new currency and economic fortress as independence counter-attack builds:  Ambrose Evans-Pritchard

The self-styled Republic of Catalonia is scrambling to put together the economic machinery of a sovereign state after the momentous vote for independence in the Catalan parliament, but the quixotic venture faces a devastating counter-attack from the Spanish state within days.

Large global banks and funds are no longer convinced that premier Mariano Rajoy can contain the crisis. It is one thing to invoke the nuclear option of Article 155 under the Spanish constitution: it is quite another to subdue the breakaway region.

Antonio Montilla from Citigroup said Catalonia’s leaders are now in “open rebellion against the Spanish state”, precipitating a drastic response that has its own dreadful logic and risks spinning out of control. “Violent confrontations and widespread civil unrest could possibly follow. We do not believe the current impasse will escalate into a civil war, even if we cannot rule out this scenario anymore. We doubt any international mediation will occur – even if it did, we doubt much progress could be made,” he said.

Catalan separatists in the regional assembly voted for their republic with stone-faced, funereal expressions, aware of the enormous dangers. The Spanish judicial authorities (Fiscalia) plans to launch criminal probes for ‘rebellion and sedition’ as soon as Monday, with a prison tariff of 30 years. This is not like Brexit. Nobody talks lightly of “having their cake and eating it”.

Fintech experts in Barcelona are working feverishly behind the scenes to create a blockchain currency beyond the control the Spanish state and the European Central Bank, relying on advice from pioneers in Estonia and from Etherium founder Vitalik Buterin. The desperate initiative is akin to Syriza’s contingency “Plan B’ for a parallel currency at the height of the Greek drama in 2015, which was never activated in the end.

George Danezis, an expert on crypto-currencies at University College London, says such a scheme could create a ring-fenced infrastructure that would be hard for Madrid to shut down. But blockchain has inherent problems of scale. It is difficult to see how it could replace euro-based transactions overnight and service a sophisticated economy.

The Catalan rebels say Spain’s fateful decision last week to imprison two grass-roots leaders – ‘Los Jordis’ – for peaceful resistance poisoned the political waters irreparably. Mr Rajoy’s Partido Popular has stated from the outset that there can be no dialogue with ‘golpistas’ (putschists). The chasm seems unbridgeable.

Mr Rajoy now has the grim task of implementing Article 155. This means evicting the region’s leaders by force and taking over the Catalan state: the Mossos d’Esquadra (police), the TV3 television station, and the administrative apparatus of the Generalitat.

Catalan leader Carles Puigdemont has hinted at mobilisation on the streets. The hard-left CUP party vows “massive civil disobedience” in what it now calls full resistance (lluita i de resistència).

The great unknown is whether the 17,000-strong Mossos will take their instructions from Madrid or Barcelona. If large numbers rally to the new republic, there will be a showdown with the 11,000 members of the national police and Guardia Civil. The army might have to step in.

Investors are struggling to keep up with the fast-moving events on the ground. The euro fell to $1.1578 against the dollar on Friday after the sharpest two-day drop this year.  But this is hard to separate from reactions to the ECB’s open-ended plan to stretch bond purchases until September 2018.

The IBEX index of equities in Madrid fell 1.45%, led by Catalan lenders Sabadell and Caixabank as well as BBVA, which holds a quarter of the Catalan market. Risk spreads on Spain’s 10-year bonds jumped seven points to 120 but there is no sign of serious alarm.

It is a muted response to a declaration of independence by the country’s most dynamic region, commanding a fifth of GDP.  Yet the crisis is already inflicting economic damage. Spain’s Target2 deficit in the ECB’s internal payments system has risen to a record €384bn (£339bn), a sign of underlying capital flight.

The national fiscal body (AIReF) has halved its growth forecast to 1.5pc next year and warned of recession in Catalonia, which has seen an exodus of 1,700 Catalan companies switching their legal headquarters to other parts of Spain.

Mr Rajoy’s minority government is on borrowed time. The budget has been delayed. He needs Basque votes but regional leader Inigo Urkullu says he is “radically opposed” to use of Article 155. The Basque PNV party has denounced what it calls an assault on Catalonia’s “legitimate institutions”.

The Spanish finance minister warned before the referendum that Catalonia would be thrown out of the euro and face “brutal pauperisation”, with a devaluation of up to 50%. GDP would collapse by 25 to 30%. The new state would be a pariah, without trade access to the EU single market or to Spain.

The trouble with this scenario is that it would entail a break-up of the euro, setting off systemic panic. It would be a traumatic shock to the Spanish economy. The acrimonious split would push Spain’s public debt to 120pc of GDP and cause the fiscal deficit to explode.

It is clearly impossible to separate a Catalan crash from a Spanish crash. Bond purchases by the ECB are for now keeping a lid on Spanish yields but trouble may start once the pace of purchases is halved in January. IHS Markit warns that Spain may ultimately need an EU bail-out, if the political drama festers.

Active mediation by the EU might have defused the crisis earlier. Brussels has instead backed Madrid at every step of the way, even describing the treatment of Catalan voters by the Guardia Civil as “proportionate” use of force.   

It is has fallen to the non-EU Council of Europe to call for restraint and subtler statecraft. This has been noticed by dissident movements across Europe. It will have consequences.  

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