Hiya!
The last few days the headlines have all been about Spain's struggling economy and how they are going to meet the rising level of debt the nation has now incurred given that they are paying well above the 'unsustainable' 7% level that triggered bailouts for Greece, Portugal and Ireland. Stock markets around the world plummeted on Monday and again yesterday as investors ran for cover amid fears that several regional governments in Spain would be asking the central government for further funds to pay debts they are currently unable to meet. Both Valencia and Murcia yesterday asked for further funds to stave off the possibility of complete bankruptcy and this morning Cataluna followed suit in what, commentators say, is the most cash-starved and debt-ridden Province in Spain.
The 7.52% interest rate that Spain is now paying for it's 10 year loans is surely unsustainable in a country with little or no manufacturing industry, an unemployment rate of 24.4% and an economy so firmly entrenched in depression that without drastic and prompt intervention will surely cease to operate in any functional way. In Brussels yesterday Spain's Secretary of State for EU Affairs, Inigo Mendez de Vigo, tried to deflect attention from the immediate problem by pointing his finger at the "worrying gap between the decisions which are taken at the European Council and their implementation" following the last Euro summit (in June) where it had been agreed that part of the EU's €700bn bailout funds could be used to purchase bonds of those nations struggling to meet their debt repayments, thereby easing borrowing costs. However, inaction seems to be the order of the day with Germany also under pressure following the notice given by Moody's (ratings agency) that they may face a downgrade in their credit rating if things don't change, sparking mounting speculation that Germany may end the year in in an unprecedented recession.
In the Independent (Hamish McRae-The Independent) Hamish McRae talks about the 'inevitability' of the break-up of the Eurozone with Greece surely on way its' way out. Discussion, he says, has now switched to the pluses and minuses of Spain and/or Italy leaving as well as Greece, putting Euro politicians in a sort of political no-mans land, unsure of what to do or say in the face of an unheralded economic depression.
Faced with mounting fiscal debt and strife governments have previously been able to devalue their way out of a loss of competitiveness or inflate their way out of excessive debt in order to conceal any fiscal shortfalls, but within the Eurozone such tactics are not possible. Not so long ago when the Eurozone was visibly strong, standing shoulder to shoulder added not only financial strength and clout but increased political and social stability within the continent. But once the cracks started to appear the shoulder to shoulder aspect has been shown to be a weak and one dimensional policy that is now threatening to undermine the very core of the zone itself. Greece, then Ireland, then Portugal have wobbled. Now comes the turn of Spain, and possibly Italy too who may well be getting sucked into the same cycle of over-hiked interest rates and unsustainable repayment levels that is causing all the worry in Spain. Now in place of fiscal strength and political power we have so many political dominoes lined up, just waiting to be toppled over by the next financial earthquake.
In Spain, as well as in most of the developed world, we are facing rising dependency rates with more and more people unemployed and rising numbers of pensioners each year, and all at a time when tax revenues are dropping globally and people are demanding and expecting more from both their hard earned pennies and their hard-pressed governments.
So what is the answer?
There is no simple, one rule which can be applied to every situation in every nation with guaranteed success. Politicians the world over are facing new challenges and will need to find new answers to new problems if the Eurozone and the rest of the developed (or capitalist, if you prefer) world is to return to some sort of stable profitability. I don't believe that breaking up the Eurozone will be the saviour that many suggest. The investment, financially, socially and morally is surely too great now to enable a gangrenous limb or two to be severed in order to save the torso. At this stage treating the affected areas is a far better course of action than just lopping southern Europe off, a policy that would without doubt lead to a 2-tier Europe, and have disastrous social and political consequences around the Mediterranean nations that may well spill over into a more serious and violent reaction that could drag the whole of Europe into renewed military conflict.
A bit extreme perhaps but extreme conditions provoke extreme measures. Poverty, hunger and strife have led to many a revolution and should such a 2-tier Europe arrive then jealousy, bitterness and anger would be added to the list of grievances in the poorer, sunnier regions of Europe. I can't talk about how people in the cities of Spain are coping because I have no experience of this, but in the campo, in the countryside you can see the desperation on the gaunt, hungry faces of the people. With more and more imported cheap foods and crops the arable land of Spain is being left to rot. Young kids do not want to work the fields for an income that is dropping relative to the cost of living each and every year. More and more fields are just left to rot and overgrow. Whole crops wasted because it now costs more to pick and transport the yield than it can be sold for - signs at the sides of roads inviting passers-by to 'help themselves' to the crop are becoming a sad but increasingly desperate sign of the times.
Hardship is felt most by those at the bottom of the pile and in Spain, as in most countries, it is the rural areas that suffer the most. People try to hide their strains behind a smile and a wave, but once the smile has dissipated you can see eyes shooting furtive, worried glances at the faces of their children, at the holes in their clothes and the vacant places in their wallets. When they talk of their children's future it is not of Spain now, but of getting out. This is something new in a society where the family is, by tradition, everything. Now they talk of their children's future being elsewhere, somewhere apart from Spain, somewhere far away from the hardships of the parents. And for many parents now, that is all there is left. Many of those middle-aged men and women who are currently unemployed truly never expect to get a job again in their lives. Spain, they say, is finished. This economic depression will last a generation or more here by which time they will dead and their children will be gone.
And as for Spain? They don't know, but whatever future lies ahead for Spain it is not envisaged to be a bright one. I can only hope they are wrong.
P XXX
No comments:
Post a Comment