Wednesday, May 30, 2018

Thoughts from Galicia, Spain: 30.5.18

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

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

  • Two comments on Spain's property market:-
  • From Lenox Napier of Business Over Tapas:- A rising number of foreign buyers, led by the British, helped sales rise to their highest level since 2014 in the first three months of 2018. Sales recorded by the Land Registry increased by 13% in the first quarter of this year, the highest quarterly figure since the third quarter of 2008, according to the latest report from Spanish property registrars. British buyers accounted for 14% of foreign sales, followed by Germans and French at 8%, Belgians at 7%, Swedes and Italians both at 6%, Chinese buyers at 4% and Russian buyers at for 3%.
  • From Don Quijones: Wall Street mega-landlords piled into Spain's rental property boom and now it hits a wall. Full story here. Oddly, this comment clashes with the previous report from Lenox: Demand for buying properties is more or less where it was last year, says the study. Different sources, I guess. That's Spain.

Life in Spain
  • Wouldn't you know it but the day after I cite someone else's criticism of Post Office(Correos) clerks, I have this chat when I go to collect something that arrived when I'd been out. The lady clerk has taken the chit left by the postman and gone and collected the item. Incidentally, it's not a 'letter' as the latter had written on the form but a large-ish packet I'd been expecting:-
Clerk: Could you let me have our ID card please. . . . . . But this is expired. Don't you have a valid one?
Me: No. The Spanish government doesn't give them any more to British residents in Spain.
Clerk: I think they do.
Me: No. I wish they did. In fact, they give us a certificate saying you have permanent residence but, as there's no foto on it, it's useless for proving identity. And you certainly wouldn't accept it.
Clerk: Well, other foreigners have cards.
Me: Yes, North Americans and other non-EU citizens but not citizens of other EU states, I believe.
Clerk: Well, I can't accept this.
Me: OK, here's my driving licence with exactly the same details on it.
Clerk: Please sign the PDA. By the way, you couldn't use your expired ID card to get on a flight.
Me: No. For that I use my passport but I'm not willing to carry my passport around all the time. And, by the way, you're only the 2nd person in 7 years to even notice that it's expired, never mind refuse to accept it as proof of my identity. The other was a notary.

The thing about all this is that, given that I turn up with the chit left by the postman and an ID card which has my foto and all the same details as the addressee on it, the chances that I'm not the person the package is meant for are extremely remote. But logic has no place. And, to be honest, my card hasn't been rejected by any other clerk in the last 7 years.

Europe: Italy
  • Ambrose Evan Pritchard is shocked at what he sees as the stunningly stupid action of the president. And he expresses concern in the article posted below on the possible consequences for Italy and the EU. The worst case scenario would involve Germany finally coming clean on its total resistance to a real monetary union and ensuring the imposition of restrictions on capital flows to Switzerland et al. But mainly Switzerland. Whose currency has started on an upwards projectory. The article contains some nice comments from Italian participants in this imbroglio. Which I'm pretty sure is an Italian word . . .
  • There's real controversy raging now around the proposal to limit the speed of cyclists to 5kph in the city's pedestrianised areas. Especially as the originator of the measure has now come out and said that cyclists should also be stopped from riding on pavements elsewhere. This, it turns out, is already illegal and the argument has been put forward that cyclists should appreciate that the law isn't being enforced against them and be a bit more cooperative. Meanwhile, the Voz de Galicia has leaped into the fray with a scientific study – 4 people on bikes passing their office door – which proves that a bike won't stay upright if it's only moving at 5kph. Which might well be true but there's a big difference between, say, an effective 8kph and a reckless 20kph-plus down the old quarter's several slopes. My question is – How is the eventual compromise going to be enforced? Perhaps it'll be via the new, portable, laser-based machines being rolled out by the Guardia Civil against motorists. If so, the task could be given to the Policia Local, the lowest ranking of the 4 or 5 forces which operate in the city. Which would mean they'd actually have something to do, other than riding round in pairs in cars or on motor bikes and arriving at crime scenes to back up, I guess, the other forces. So, everyone would be happy. Except the bastards who endanger pedestrians. But who cares about them?
  • It's reported that Pontevedra city is experiencing a tourism 'boom'. The Spanglish word used is bum and the Voz de Galicia illustrated its article with the picture of a female 'pilgrim' taken from the rear. But I doubt this verbal-visual pun was intended. Just a happy coincidence. If a bit cheeky.
Finally . . . 
  • In my Google News feed yesterday, there was an item on Spain from the Arizona Daily Star: When I tried to read it, I got the message: We’re sorry. This site is temporarily unavailable. We recognise you are attempting to access this website from a country belonging to the European Economic Area (EEA) including the EU which enforces the General Data Protection Regulation (GDPR) and therefore cannot grant you access at this time. Can this be right? It surely isn't what the GDPR is all about. Well, I checked and the Wall Street Journal, for one, doesn't have this policy. Yet. [Extract: Italy is hurtling toward a political crisis that is reigniting debate over Europe’s future]. Nor the New York Times.

© David Colin Davies, Pontevedra: 30.5.18


Europe's soft coup d'etat in Italy is a watershed moment: Ambrose Evans Pritchard.

Italy’s pro-euro elites have overreached disastrously. President Sergio Mattarella has asserted the extraordinary precedent that no political movement or constellation of parties can ever take power if they challenge the orthodoxy of monetary union.

He has inadvertently framed events as a battle between the Italian people and an eternal ‘casta’ with foreign loyalties, playing straight into the hands of the insurgent Five Star ‘Grillini’ and anti-euro Lega nationalists. He unwisely invoked the spectre of financial markets to justify his veto of euroscepticism. Taken together, his actions have made matters infinitely worse.

Risk spreads on 10-year Italian bonds jumped almost 30 basis points to a four-year high of 235 on Monday as investors woke up the horrible implications of constitutional convulsion: a rolling crisis through the summer that can only end in fresh elections that resolve nothing.

Much had been been made of falling bank bank equities over recent days. They are falling even harder now. Banca Generali was down 7.2%, and Unicredit down 5%

Whether or not it is a ‘soft coup’, it is certainly dangerous territory. President Mattarella stated openly that he could not accept the Lega-Gillini finance minister - Paulo Savona - because his past criticisms of the euro “could provoke Italy’s exit from the euro” and lead to a financial crisis.

In one sense, this veto should have been expected. The Berlusconi government was toppled in 2011 by Brussels and the European Central Bank. Whistleblowers have since revealed that they manipulated bond spreads to exert maximum pressure. The EU even tried to recruit Washington. The US refused to help. “We can’t have blood on our hands,” said the US Treasury Secretary, Tim Geithner. What is new is that euro sanctity should be formalized as an Italian constitutional imperative.

“We have a problem with democracy because the Italian people are sovereign and they cannot be ruled by spreads,”said Matteo Salvini, the strongman of the ascendant Lega. “ It is a very serious matter than Mattarella chose the markets and EU rules over and above the interests of the Italian people.”

“Why don't we just say that in this country it's pointless voting, since it is the ratings agencies and the financial lobbies who decide the governments?" Luigi di Maio, the leader of the Five Star Movement.

President Mattarella has certain powers under the Italian constitution but they are mostly untested and in a grey area. He can make a case that the Lega-Grillini fiscal blitz violates Article 80, and that he has a duty to safeguard the EU treaties. Yet he has no direct mandate from the people. He was picked as low-profile compromise in a backroom deal. He has no blanket authority to lock Italy into the euro in perpetuity.

Mr di Maio is now leading calls for his impeachment under Article 90. "I want the president to be put on trial. I want this institutional crisis to be settled by parliament to avoid popular discontent getting out of hand,” he said. The insurgents have the votes to remove him.

What is remarkable is that pro-EMU elites have acted so crudely and pushed matters to such a dangerous impasse. The proposed finance minister was not a hot-head. Mr Savona was a former official at the Bank of Italy, a former minister, and a former chief of the industry lobby Confindustria, as well as directing a London hedge fund.

He had made conciliatory noises, dropping past suggestions that the euro was a “German cage”. He insisted that his 2015 ‘Plan B’ to leave the euro was no longer operative and that his real objective was to return to a fairer euro, rooted in Article 3 of the Lisbon Treaty calling for economic growth, jobs, and solidarity. His legal arguments were impeccable.

With a little subtlety, Italy’s ‘poteri forti’ and the mandarins could have worked with Mr Savona and found a way to soften the hardline agenda of the Lega-Grillini. That was almost certainly their instinct. The push to exclude him altogether - and in doing so to try to smother of the eurosceptic rebellion, as they smothered Syriza in Greece  - came from Berlin, Brussels, and the EU power structure. Time will tell whether they blundered into a trap.

“In a way I am very happy because we have finally wiped the bull**** off the table,” said Claudio Borghi, the Lega’s economics spokesman. “We now know that it is a choice between democracy or comfortable bond spreads. You have to swear allegiance to the god of the euro in order to be allowed to have a political life in Italy. It worse than a religion."

"What we are seeing is the fundamental problem with the eurozone construction; You can't have a government that displeases the markets or the spread club. The ECB and the Eurogroup will use this to crush your economy. You are very lucky in the United Kingdom that you still live in a free country,” he said.

President Mattarella has picked Carlo Cottarelli - an IMF-veteran and a symbol of austerity  - to form a technocrat government. This desperate venture has no chance of winning a vote of confidence in the Italian parliament. It will exist in constitutional limbo. “It is incredible that they are even trying to do this. It is going to lead to riots and mass political protest. The vast majority of Italians don't give a damn about spreads any longer,” said Mr Borghi.

The calculus of those around the president is that chastened Italians may change their minds as they look into the financial and political abyss and recoil from insurgency. The bet is that political attrition will reshape the landscape by October, deemed the mostly month for a fresh vote. This may succeed but it is a dangerous assumption.

The Lega’s Matteo Salvini has already gained eight points in the polls since the last election. He has seized on events of the last 24 hours to capitalize on the heady nationalist mood, like Gabriele d’Annunzio at Fiume in 1919. “We will never be serfs and slaves of Europe,” said Mr Salvini.

He has already proclaimed that the next vote will be a plebiscite on Italian sovereignty, and an act of national resistance against “ Merkel, Macron, and the financial markets”.

But there is another danger. Capital flight has its own relentless logic. It visible in the surging exchange rate of the Swiss franc. There is a risk that outflows will accelerate and push the internal Target2 payment imbalances of the European Central Bank towards breaking point.

The Target2 credits of the German Bundesbank are already €923bn. They are likely to blow through €1 trillion in short order, prompting loud demands from Berlin for a freeze. The IFO Institute in Germany has already warned that there must be limits. Any move to restrict liquidity flows would signal that Germany is close to pulling the plug on monetary union and would set off an unstoppable chain-reaction.

Mr Mattarella faces a gruelling summer. He risks ending ending with exactly the same Lega-Grillini alliance in four months, with an even bigger majority and a thunderous mandate for their “government of change”.

He may go the way of France’s legitimist president Patrice de MacMahon, who tried to impose his government “Moral Order” on a hostile Chambre des Deputies in the 1870s by invoking his theoretical powers under the Third Republic. The bid failed. Parliament confronted him with an ultimatum: “submit or resign”. Democracy prevailed.


Maria said...

A number of US newspapers are not allowing anyone in Europe to access their sites because of the change in privacy policy. They are simply not willing to abide by the new law here. The Washington Post now obliges Europeans to pay to access it, whereas before they had a limit of, I think, five free articles a month. It's frustrating, to say the least. And the free access to different viewpoints, necessary for a broadly educated mind, is being worn away. We are being taken down the cowpath, led to where those who rule want us to feed.

Lenox said...

The difference in the two real-estate items is that foreigners tend to buy in coastal pueblos, where vulture funds operate in the main cities.