Thoughts from Pontevedra, Galicia, Spain: 7.7.21

 Night’s candles are burnt out, and jocund day stands tiptoe on the misty mountain tops.

Spanish life is not always likeable but it is compellingly loveable.  

- Christopher Howse: 'A Pilgrim in Spain'

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Covid

An unusual headline: Two Men in India Were Arrested for Saying Cow Dung and Urine Aren’t COVID Cures. Click here if you want to know more . . .

Cosas de España/Galiza 

Lenox on masks.

And María on  . . . coffins.

I have my first electricity bill under the new charging system and, as with all utility bills in Spain, it 'flatters to deceive'. Initially, I was surprised - nay astonished - at how low it was, before I realised it was for only 9 day in early June. Which, strangely, didn't actually start until a week after the date of the last bill. Was the interim period free of costs?

In the Spanish way of things, the bill contains even more words and numbers than previous bills but doesn't offer an explanation for this unusual aspect. 

Looking at energy bills here in Spain can give you 'analysis paralysis' - very possibly a deliberate tactic on the part of the companies - but I eventually worked out that the large increase in an already high amount of (obfuscatory?) data was the breakdown of costs between the 3 new charging periods of punta, lano and valle. I'll leave María to give a good translation of these, as a literal one doesn't make much sense to me. Anyway, here's what the back page of the bill now looks like:-

And here's the new - multicoloured - bar chart.

Finally, for reasons I can't begin to imagine, this chart shows May's consumption at 50% more than April's, whereas last month's had this as only around 10%. Again, no explanation given. 

Así son las cosas. We consumers might be confused - and poorer - but the directors and shareholders of the electricity companies won't be much exercised about that. And neither will the government, though it has reduced VAT to partially compensate for the evident profiteering brought about by smart meters and higher costs for peak periods.

Overall, one again gets the impression of a Spanish company using cheap new technology to bedazzle the consumer and to only play at customer service - as with the companies issuing endless - nil cost - emails to demonstrate how much they care. Assisted by all those ex government ministers on their Boards.

Oh, and another thing not explained - or apologised for - is the regular blackouts. Need I add that I don't bother to adjust the clocks on the various items which show the time.

 

Rant over. 

The UK

The ‘realist' view? Covid cases are rising significantly but hospitalisations and deaths are not, which suggests the emergency is under control. We need to shift from disaster containment to threat management. Think of it as living in an earthquake zone: you’re conscious of the risk and prepare for the worst, but you don’t walk around acting like an earthquake is happening right now, with your knees bent, holding onto the furniture. Nor should we act as if Covid will kill us all, because it won’t.

Anyway, as of this morning, it looks like I'll be able to travel from Amber Spain to the UK in August without going into quarantine. Assuming the single Janssen jab is seen as equivalent to the 2 jabs of the other vaccine options.

The EU

AEP - another unhappy camper - takes his traditional jaundiced view of current developments in the article below. Sample phrases/sentiments:-

- incontrovertible 4th wave by the end of this month

- doctrinal madness

- dysfunctional pathologies.  

- treacherous circumstances facing European leaders 

-  a textbook case of how bureaucratic centralisation in Brussels can subtract rather than add value.

- The imperative of saving this year’s tourist season has paralysed political leaders.

- The 4th wave is freighted with consequences. 

English

British: They couldn’t care less

American: They could care less.

I fancy the British version is the more accurate description of insouciance at its max.

Finally  . . .

This is just one of the many hundreds - thousands? - of sketches which TV companies wouldn't dare to show nowadays. Being terrified of social media reaction from those made uncomfortable by the dictates of their own truth.

And here's something from a musically simpler - and funnier - era . . .  If it doesn’t make you smile, you are dead.

THE ARTICLE

Europe’s fourth Covid wave is freighted with political consequences: Ambrose Evans-Pritchard 

Europe has again misjudged the contours, time-lags and politics of the pandemic. Large swathes of the Continent will be in an incontrovertible fourth wave by the end of this month, before they are sufficiently vaccinated to ignore the medical consequences. This will be hard to explain.

Covid cases in Catalonia are running above UK levels on a per capita basis, and the R reproduction rate is over 2.0. Portugal is tracking the UK’s trajectory with only a slight delay, while France’s health minister Olivier Veran says his country may be overwhelmed by late July. As if it were an omen, Luxembourg’s prime minister has been hospitalised with Covid days after attending a summit of EU leaders in Brussels. Yet Europe’s internal borders remain wide open. The imperative of saving this year’s tourist season has paralysed political leaders. 

In a surreal twist, the European Commission is actively threatening measures against Germany for imposing a quarantine requirement on its own residents returning from Portugal – that is to say, for trying to prevent more deaths in Germany as a result of largely unnecessary travel. Justice commissioner Didier Reynders says the rules must be exactly the same for everybody. It is doctrinal madness.

We are witnessing a fresh display of the EU’s dysfunctional pathologies. Europe has had the laboratory of the ultra-contagious delta variant before its eyes in England for weeks but the EU’s collective system has failed to heed the lesson. The mistake repeats what happened earlier this year when politicians played down the self-evident dangers of the Kentish Alpha variant, when the EU vaccine roll-out had barely begun.

To my surprise, Emmanuel Macron got away with his decision in January to overrule calls from the French conseil scientifique for a precautionary lockdown. The criticism has been muted even though the death toll proved to be an Airbus a day for two months until he was forced into a lockdown anyway. Had Boris Johnson defied Sage and Nervtag so openly in this way, he would have been crucified by Westminster lobby journalists. Mr Macron may get away with it a second time, but he has pushed his luck by telling the nation that “happy days” are here again, and then going on an insouciant tour of France’s tourist villages (where he was slapped in the face). He sent his cabinet onto café terraces to trumpet the reopening, in contrast to Downing Street’s low-key message. Mr Macron’s poll ratings jumped, but on what French epidemiologists knew to be a false prospectus. There is a curious narrative in the French media – presumably coming from Elysée briefings – that France is less vulnerable to the Delta variant than the UK because a) the British have relied heavily on the AstraZeneca vaccine: a dubious conclusion since it has proved equal to Pfizer-BioNtech in real life data. And b) because the British chose to lengthen the time between vaccinations, while France has stuck closer to the three week rule. Yet the UK has nevertheless vaccinated 51pc of the total population twice. This compares to 31pc in France, 37pc in Portugal, and 39pc in Spain and Germany.

A staggering 86%of adults in the UK have had a first dose, just about a world record and a precursor of full-dose ratios. It is a testament to social solidarity but also a political and institutional success. This brings herd immunity into view, allowing the country to open on July 19 and damn the torpedoes. Boris Johnson’s Freedom Day is viewed as an act of reckless adventurism across Europe. They assume that it will go badly wrong. But the intersecting variables of vaccines, antibodies, age and time, may equally vindicate the decision. If so, the demonstration effect of post-pandemic life in Britain will become increasingly awkward for those EU leaders still grappling with a fourth wave into the early autumn and forced back into coercive measures.

Mr Macron has reopened before reaching a plausible threshold of safety. The pace of vaccination has slowed to under 170,000 a day. There is pervasive abstention, to some degree because of his own utterings during the AstraZeneca wars. Just 57% of staff in care homes have been jabbed. His solution is to prepare for mandatory vaccination, for frontline staff at first, but not necessarily stopping there. This is political nitroglycerin, likely to provoke resistance beyond anti-vax circles. The risk is a long messy fourth wave that drags into September, contaminating the French rentrée. Mr Macron is already on thin political ice. His vanishing En Marche party was reduced to 7pc of the vote in the recent regional elections. The latest Ifop-Fiducial poll suggests that he would lose a run-off match against ex-Gaulliste Xavier Bertrand.

The treacherous circumstances now facing a string of European leaders dates back to the EU’s vaccine strategy last year, a textbook case of how bureaucratic centralisation in Brussels can subtract rather than add value. The EU drew the conclusion – as ever – that the answer is more Europe, not less. The ideological push for an EU vaccine certificate in a rush to head off national border controls is in much the same vein.

My guess is that the pandemic has fundamentally changed German public attitudes towards the EU. It has done so at a delicate moment when Germany has also been badgered into large fiscal transfers through the €800bn Recovery Fund, initially presented as a Covid relief plan but in reality a patronage fund for a European Commission with insatiable ambitions. It is striking that the Christian Democrat (CDU) manifesto released under Armin Laschet lays down in no uncertain terms that this fund is a one-off instrument, and not the start of a Hamiltonian fiscal union with shared debts. Indeed, the CDU text is an ice-cold douche for advocates of an EU superstate.

What is clear is that the “Grand Reopening” of the European economy flagged by Standard & Poor’s a week ago has already been spoiled. The Club Med summer is in trouble. Jacob Nell from Morgan Stanley says the hit to GDP could be 1.5C for Italy, 1.7%for Portugal, 2.3%for Greece, and 2.5& for Spain in a “severe scenario”. That is not the end of the world in itself, but amounts to another asymmetric shock along existing lines of cleavage. It further widens the North-South chasm, rendering the European Central Bank’s one-size-fits-all monetary policy ever less tenable. Italy and Spain will not regain their pre-pandemic levels of output until well into 2022 at best. Germany will have closed the gap by the fourth quarter of this year. It is already in a full-fledged boom, at risk of overheating as services catch up with manufacturing. The IHS Markit index for German services hit a 10-year high in June, with input costs rising at the fastest pace since the series began a quarter century ago.

Bundesbank chief Jens Weidmann says German inflation is heading for 4% later this year, a level unseen since the Reunification boom in the early 1990s when interest rates were near double digits – not minus 0.5%. He has called for early tapering of pandemic bond purchases well before the current scheme expires next March, and a total halt to quantitative easing as soon as the pandemic is over. In a remarkable speech to the Ludwig-Erhard-Stiftung (note the venue), Mr Weidmann explicitly warned the ECB not to slide into the trap of fiscal dominance or to “put the sustainability of public finances above the goal of price stability”. He invoked the Trojan war: the wrath of Achilles and the near-fatal rupture of the Greek alliance (following a plague). Interpret that how you wish, but it sounds like a shot across the bows. Does he mean that Europe should not take the German cash cow for granted?

The ECB has been funding the entire budget deficits of the Latin bloc throughout the pandemic, drawing a veil over the underlying deterioration of sovereign debt profiles. The Banco de España says Spain’s debt has jumped 30 percentage points to 125%of GDP since Covid arrived. Portugal has hit 137%. Italy is flirting with 160% of GDP this year. It is an open question whether these countries can finance themselves on the global capital markets without the QE debt shield. A taper tantrum in Europe is an order of magnitude more dangerous than a US taper tantrum.

It would be inaccurate to say that the ECB is politically captured by the debtor states, though there is an element of this. It is captured by New Keynesians, who have abandoned the original “twin pillar” regime (remember M3?) inherited from the monetarist Bundesbank. The effect is much the same. Their policy is incompatible over time with German economic needs or cultural traditions, and must ultimately end in a struggle for monetary control. Nobody should underestimate last year’s incendiary decision by the German constitutional court when it ruled that the ECB has been acting ultra vires, using bond purchases to carry out disguised fiscal rescues in violation of EU treaty law.

Covid-19 has led to a short-term truce and muffled the tensions. But it has deepened the underlying problem and may ultimately bring forward the reckoning between Europe’s creditor and debtor blocs. The fourth wave is freighted with consequences.