Spain Real Time Data Charts

Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Spain related comment. He also maintains a collection of constantly updated Spain charts with short updates on a Storify dedicated page Spain's Economic Recovery - Glass Half Full or Glass Half Empty?

Monday, September 21, 2009

Will Zapatero Be Out By Xmas?

Vengence, they say in Spain, is a dish which is best served cold. Looking at the pace with which things are now moving here, maybe the waiters are getting themselves ready.

According to Bloomberg the Spanish Dept Agency now has a new head - Gonzalo Garcia - who previously lead the Spanish Treasury’s financial analysis department. Garcia is 35 years old, and already has ten years experience working for the Spanish Treasury in the head that is sitting on those ever so young shoulders, while the person he will replace - Enrique Ezquerra - himself only 37, now becomes economic adviser with Spain’s Permanent Representation to the European Union based in Brussels. Something, it seems to me, is afoot, and it isn't that hard to work out what. With Spain's banks having something like 75 billion euros in short term loans which need to be renewed with the ECB in Frankfurt next June (see this post for a full explanation of the background to all this), and the Spanish government having a similar (or before we get to the end of the year possibly somewhat greater) quantity of debt outsanding in one year bonds which will need to be renewed next year along with all the extra debt they will also need to finance next year, and with a domestic banking system which is already struggling to refinance existing household and domestic loans, it isn't hard to see that the position of Head of the Spanish Debt Department and direct coordination with Brussels are two of the key items on next years Spanish government agenda.

And the only issue left in my mind is whether the head which will need to be served up on the proverbial plate as the ritual offering to ensure the free flow of communication (and money) will not be none other than that of the existing President of the Spanish government, José Luis Rodriguez Zapatero.

Certainly all the early warning signs are there, and no one can watch Spanish television news, or listen to the radio here without becoming immediately aware that something has now changed, and that he who was once all powerful is now, himself, in his turn steadily being subjected to that big squeeze of which he was, in an earlier epoch, such an admirable exponent himself. Basically I have no doubt that, whether the coup de grace comes later or sooner, Zapatero is now on his way out, and the only real outstanding question I have is whether he will in the end go before xmas (the start of Spain's EU Presidency) or after June (when it finishes). The decision is I suppose in the hands of the Spanish people, and it is just a question of how much more unemployment they are willing to stomach before those inevitable "casserolades" start to break out.

Interestingly, for those us who follow this kind of thing, one of the obvious candidates, if not to replace him, then at least to take a key role in the new government of economic technocrats which is undoubtedly being prepared even as I write - ex Public Administration Minister Jordi Sevilla - recently left his seat in the Spanish Parliament - in an ominous and deeply significant leaving of the sinking ship with two other ex-ministers Pedro Solbes and ex-Defence Minister José Bono - to go and work for Price Waterhouse Coopers. And irony of all ironies, he had earlier been replaced in the Public Administration Ministry by the unfortunate Elena Salgado, who may well be about to see her short term in the Economics Ministry abruptly brought to an end. But Sevilla's latest move becomes even more charged with symbolic significance when you consider that the role model for what may now be about to befall Zapatero, Ferenc Gyurcsany, was replaced by the current Hungarian Prime Minister Gordon Bajnai, who immediately called the now Finance Minister Péter Oszkó away from his labours at Deloitte. And Gyurcsany in what could be an early anticipation of what Zapatero may now need to do, resigned while muttering "I am leaving as I am being told I am the biggest obstacle to the structural economic reforms my country is said to so badly need". Who exactly it was that was telling him this it may be judicious not to ask, but one thing is obvious, you can't have people always coming from the same consultancy group, now can you? It just wouldn't look right.


Chistopher said...

Zapatero is showing increasing signs of realising at last that his actions or non-actions aren't going to work. His facial expression reveals a lot. I think he may go soon because it's difficult to imagine him as EU president if his own economy is in tatters.

Very intersting idea Edward about Jordi Sevilla as his replacement. He is being very cagey saying his departure is for "personal, family" reasons. But we're not going to believe that are we? We could see a huge political shake-up if he becomes leader because all Zapatero's cabinet ministers have been apparently in full support of the measures he's taken or not taken.

I can't figure this out though. Zapatero doesn't understand how the economy works, that's clear. But surely his scores of economic advisors do. Did they not advise him about where this would lead?


Edward Hugh said...


Thanks for the link. I love this quote:

"De las relaciones entre Gobierno y oposición, Sevilla dijo que a veces el discurso tapa la realidad y lo cierto es que el principal apoyo de esta legislatura del PSOE ha sido el PP."

"Did they not advise him about where this would lead?"

Well yes, but some of them were expelled from the government for trying to do just that, while others may simply be prepared to get their monthly pay check and keep their doubts to themselves. Government works in strange ways.

Also, the banks used to think they could ride it out, so the whole position made sense from that view. But know the people on the tightrope are having doubts, and that's when they could wobble and fall.

Anonymous said...

I've recently discovered your blog and I really like your analysis of all the posts i've read because they are very thorough.

But about today's the article, two thoughts: 1. It's probably that in a few months Elena Salgado resigns for personal reasons.

But sadly, I'm not so sure that the society will kick Zapatero out of the presidency.
The goverment has put a lot effort in using the word international when talking about our economic problems. So I think they have done a very good job convincing part of the population that this is a problem that every country suffers.

Carlos said...

I've recently discovered your blog and I really like your analysis of all the posts i've read because they are very thorough.

But about today's the article, two thoughts: 1. It's probably that in a few months Elena Salgado resigns for personal reasons.

But sadly, I'm not so sure that the society will kick Zapatero out of the presidency.
The goverment has put a lot effort in using the word international when talking about our economic problems. So I think they have done a very good job convincing part of the population that this is a problem that every country suffers.

Ferrim said...

Edward, I feel that you are highly overestimating the Spanish people's intelligence (and I'm a Spaniard by the way).

I can't see "caceroladas" against Zapatero. Here in Andalousia we have around or over 30% unemployment and nobody protests about that. No Spanish government has ever fallen (after the dictatorship I mean) because of high unemployment, and I can't see why this time it should be any different.

Things would have to get very, very dire for something like Zapatero's dismissal to happen, and I can't see it happening before the end of the year.

Edward Hugh said...

Hello Carlos and Ferrim,

I understand your scepticism about the idea that Zapatero will leave. I'm not saying it is a sure thing by any means, although I am sure it would be the best for everyone. I agree that the capacity of the Spanish people to simply accept the latest piece of unsubstantiated optimism seems without limit. Only yesterday the Barcelona papers and radio were busy explaining how flat rentals were about to start rising, which is strange when every day I see more "to let" signs as I walk along the street.

But then again, isn't Spain the country where everyone said house prices will never fall, and look what is happening now. So times and peoples attitudes can change.

And remember, Spain has always had "poderes facticos" lurking in the background, with opinions which are very important for any government and governing party, and Spain now also is on life support from Brussels and Frankfurt.

The first group - in this case the banks - may now be more willing to accept that Spain needs some sort of strategy to get out of the crisis, while the EC and the ECB want to be able to start switching off the life support at some point. So I think it is at this level that the pressure will come, and frankly I think Zapatero has gone just to far to be now credible outside Spain, which is why I think it is his head that is now being asked for.

I am not sure when popular exasperation will arrive. I am sure we will one day see "caceroladas", but I don't know any better than anyone else when that day will come. Basically this autumns unemployment numbers will be a difficult time for the authorities. Confidence has been steadily going up and up since July 2008, and at some point reality has to enter and this run has to snap, and then we may be all quite surprised by how swiftly things move, since underneath the surface things are pretty unstable. So I am saying we may reach some sort of "tipping point". We will see.

Chistopher said...

FAO Ferrim:

Very interesting point you made with Andalucia example. Many of my Spanish friends are telling me similar things but I always reply to them in the same way.

While the unemployment benefit, PER, subsidies, e.t.c continue to be paid, these people will continue to vote PSOE. You don't bite the hand that feeds you. Only this can explain why strawberry growers in Huelva can't find local people to work in the fields. With 30% unemployment!

But what happens when the economy is so jodido that funds start running out? At the end of the day, a good welfare state always requires a sound economy. It's only a question of time until this all blows up but really no one knows exactly when and how this will happen.

Saludos, Chris.

Anonymous said...

Let us be realistic: shall a PP government address the problems faced by Spain? Do you really think that Mr Rajoy will implemenet the unpopular measures hat need to be taken? I do not think so.

Edward Hugh said...

Hello JH,

"Let us be realistic: shall a PP government address the problems faced by Spain?"

No, I'm not suggesting that. I'm suggesting a Brussels lead and Franfurt backed initiative to foment a technocratic "transition government" between now and the next elections. This is why I mentioned Sevilla, since he is evidently not PP, although he could possibly count on the PP for support.

My proposal, since I am putting it as a proposal I think, is the Zapatero go (now) and that we get a government of technocrats who agree not to stand in March 2011, and in return introduce a package of really painful, drastic, but necessary measures, that no government depending directly on the popular vote would ever dare to introduce in a country like Spain.

My view is that it is either this now, or direct rule from the IMF after the next (possibly advanced) elections - I doubt, and especially given what is now about to happen in Latvia and Hungary, the IMF would agree to head a restructuring package in a country heading into elections, things just get too unstable.

Well, OK, this all seems very "other wordly", and we probably won't get it, but then just you wait and see how surreal and "other wordly" the crisis then gets of its own accord.

Anonymous said...

Hi, Edward,(et all)

I basically agree with you in your analysis of the Spanish economy, but I do not agree in the outcome. Or, at least, I do not see such a dramatical outcome to unfold.

Spain can still live on its only strenght: the relative low level of public debt to GDP. Spain can go through 2009, 2010 and 2011 with a deficit/GDP ratio of 10% annually, pile up to 110% ratio of total debt to GDP, and still be in betteer shape than Italy. The ultra-low financing cost will allow the government to finance this huge buildup of debt. So, I would not bet on an early election until 2011

Once there, the situation can take a sharp turn to the worse if Europe and the US have managed their way out of the crisis. Higher interest rates would be the "coup de grace" for the economy, and an IFM programme would not be an unrealistic option, I see your point there. But if the crisis is still on in 2011, and the ECB is still keeping the QE, the country will just keep "surviving" on assisted breathing. You know for sure this old spanish saying "mal de muchos, consuelo de tontos", which more or less means: if the illness affects everybody, the stupid guy is relieved.

The tax hike announced this weekend is a good harbinger of things to come: when the sage and necessary measures have not been taken in good times, when bad times come the paths available are limited to bad or worse. As John Mauldin said, there are no easy alternatives on the horizon, only very tough ones.


Anonymous said...

Malaga Province is aparently already there in terms of unemployment..

JOSÉ VICENTE RODRÍGUEZ. MÁLAGA El Colegio de Economistas de Málaga quiso ayer poner los pies en la tierra y, en medio de los mensajes que apuntan a una posible mejora de la situación, dejó claro que los datos siguen mostrando que la crisis "no ha tocado fondo", al menos en la provincia, y que el otoño que se nos presenta pueden empezar a pasar una seria factura en términos de empleo al sector turístico, el único que venía resistiendo en este año 2009. La tasa de paro en Málaga, actualmente en el 27% y la mayor de España en estos momentos, podría llegar así al 30% al final del ejercicio.

From La Opinion De Malaga

In my opinion the fact that we have a socialist government has kept many of the protests that might have been happening on hold ? Or are people too disorientated by events to understand and take position ? A bit hard to strike over deflation 'pay us less!!!' ? Current private debt levels do not allow for that, so only unemployment and write offs are of the order maybe ?


Anonymous said...


gives public and private debt levels for various European countries. Combined they are equivalent to the debt burden of that country. Italy for example is around 212 %, Spain is at 240 % ..amongst the highest.


Chistopher said...

Hello, JH, Br, Edward.

Is this time frame of 2 years before the debt situation becomes unsustainable in Spain a realistic one?

Italy is chronically ill but I think the disease currently facing Spain is moving far more viciously. If we are not yet at Italy and other countries' levels of debt v GDP, it's because there was a lot of flesh on the bones of the Spanish economy just 18 months ago. But just look at the rate of decay!

The official forecasts being made for 2010 regarding income, unemployment, GDP and public expenditure are wishful thinking in the extreme. Every time the PBI for 2009 is revised, it is in a downward direction. It will not be accurate until Xmas! Next year will be something similar. The forecast of -1% growth( the worst of any major state) will be woefully short. A series of inevitable tax hikes, which may not even produce the revenues expected, combined with a big reduction in domestic demand as the new unemployed begin to run out of funds is going to have a sharp negative effect on consumption.

So the equation that the government is working on is basically flawed because of completely erroneous forecasting. They seem to be living in "cloud-cuckoo land". I believe the day of reckoning will come much sooner than end 2011.

Anonymous said...

Hello Edward,

Thanks for your post, I fully agree with your idea of a technocratic, independent, government lead by EU. Let´s Europe come to our rescue from this fancy-man, please, please, please. Today better than tomorrow.
Rgrds: Ellen