Against a backdrop which offers an eerie parallel with events which took place somewhat to the North more than 30 years ago, Catalonia is now threatening to separate from Spain. In so doing the region seems to be putting at risk both the future of the host country and beyond that the outlook for the Euro currency and the process of European unification.
The parallel is of course with the drive for Baltic independence and its impact on Mikhail Gorbachev’s ill-fated attempt to peacefully reform the disintegrating Soviet Union. In the words of Aleksandr Yakovlev, one of his closest associates at the time, the ideas of those seeking independence were ''out of touch with reality'' and any expectation that the Baltic republics could regain the independent status they had before Soviet annexation in 1940 was ''simply unrealistic.'' As late as February 1991 Gorbachov himself was still describing the Lithuanian vote – described by the countries leaders as simply a non-binding opinion poll - as illegal, and this a matter of days before it was actually held.
Sound familiar? It should do, since these very same arguments are now being played out in another pole of Europe. Not only is the Spanish administration taking precisely the view that any vote in Catalonia on whether or not to separate from Spain would be illegal, the attitudes of those outside the country are largely being conditioned, not by the merits or otherwise of the Catalan case, but by the fear of what might happen to Spain if Catalonia left.
While Catalans busy themselves assuring each other that any new state would be economically viable, few on the outside doubt that this would be the case. To give but one example, former chief economist at the IMF Kenneth Rogoff recently commented that Catalonia taken on its own constitutes one of the richest regions in Europe. This is simply stating the obvious. What has external observers really worried is the subsequent viability of Spain, and with it the future of the Euro. If Spain is too big to be allowed to fail, then Catalonia is too small to have inalienable rights the argument seems to run.
It is for this reason, I feel, that the Catalan cause is attracting little sympathy beyond the confines of what is often called “The Principate”.
Many feel that Catalonia is being selfish – just as they felt in their day that the citizens of the Baltics were - in putting their own particularist interests (a better fiscal distribution, the right to a national football team) before those of the collective (economic recovery, closer political union in Europe, etc.). But this way of looking at things is essentially flawed, just as it was in Estonia, Latvia and Lithuania. The movement for Catalan independence is primarily, and at its core, a democratic one. So what should matter to the outside world is not whether the vote will be considered legal by the central government in Madrid, or whether the Catalans have a good case. If the Catalans vote peacefully and democratically, and by a significant majority, that they want to form a separate state, then it is clear that the region's days inside the frontiers of the Kingdom of Spain are numbered. Unless that is the Catalans be retained within those frontiers by the use of force, in which case some of the fundamental principles of the Treaty of Europe will be put in question. Hence the fundamental dilemma which the Catalan independence drive presents to the whole European Union.
Under these circumstances what outside observers should focus on is what the result of the vote, when it does finally take place, will be. After all what the Catalans are demanding at the moment is “the right to decide”, and at the end of the day it is they who will decide. My country, as the saying goes, right or wrong.
Nothing here is either unavoidable or inevitable. As in the case of Greek Euro exit, beyond the expedient there are no ex ante juridical limits to the bounds of the possible. What is important for everyone is that the eventual solution be an orderly one.
In this context messages that the new country, should one be created, would need to apply for membership of the European Union constitute nothing more than mere hot air, just as the suggestions from the Spanish administration that any such application would be met with a veto on their part is no more than an empty threat. Such talk is not in the realm of the real, or the realistic. It is simply an attempt to alter the outcome of the vote, and a bad and ineffective one at that. Not for nothing does Catalonia’s President Mas describe the speechwriters of the Partido Popular as running a production line for manufacturing separatists.
If Spain’s sovereign debt is already on an unsustainable path, then how much less sustainable would it become if the country suddenly had its GDP reduced by 20%? Common sense dictates that negotiations would be held, negotiations in which Catalonia would be asked to accept a proportion of the legacy debt, just as common sense suggests that Catalonia’s financial system, which has assets of around 500 billion Euros (i.e. it is much larger than the Greek equivalent) would be allowed to remain in the Eurosystem. The alternatives – and their consequences well beyond the frontiers of Europe – are simply unthinkable.
Naturally sometimes the unthinkable happens, especially when a majority of the key players assume it won’t. Catalonia has now decided to hold some sort of “consultation” or “opinion poll” during 2014. As in the Lithuanian case the outcome may not be binding, but few should draw comfort from that single fact and assume that the result will not be significant and even decisive for the short term future of Europe.
As I say, nothing here is inevitable, or foretold in advance. But avoiding predestination involves facing up to the facts, and not, as the IMF director general Christine Lagarde recently put it in the Greek context, engaging in wishful thinking. And the facts in this case are that dialogue between Catalonia and the rest of Spain has now broken down. Catalans feel themselves to be tired of not being listened to, while the rest of Spain feels itself tired of the Catalans and their constant demands for more autonomy. At one pole there is “Spain weariness” and at the other “Catalonia exhaustion”. Matters have now past the point where orderly solutions will be sought out and found internally.
Most external observers expected some sort of offer to be made by the central government after the last Catalan elections, but reading the result as a setback and defeat for President Mas the only “offer” which has been sent in the direction of Barcelona is one which involves “Hispanicising” children via the reform of the Catalan education system, a move which has effectively united the Catalans behind their new government. That is why a decisive intervention on the part of Europe’s political leaders is now crucial. Whether they like it or not they have no alternative but to become intermediaries in the search for viable solutions, if not neglect will only produce the result everyone seeks to avoid.
It is no accident that the Baltics saw their chance just in the moment of maximum Russian weakness, and that Catalans see their only realistic possibility of achieving their objective of having their own state just when Spain is effectively on the ropes, and possibly in terminal decline. Some, comforted perhaps by the writings of Francis Fukuyama, feel that what is happening to Spain is simply an unfortunate setback on the bumpy road to becoming a mature democracy, but darker readings are possible. The current economic crisis is not simply cyclical or conjunctural and there is a real possibility that the country’s problems are so complex that it will become impossible for Spain’s leaders to fix them without recourse to an Argentina style default. It is precisely the loss of confidence in the capacity of the Spanish political class to resolve the country’s dire economic situation, and the mounting frustration with their perpetual insistence that all will be well starting tomorrow that has the Catalans running for the exit door. If the building is about to burn down they don’t want to be trapped inside when it happens. As Janice Joplin once put it freedom is sometimes “just another word for having nothing left to lose”.
In the critical weeks and months that are to come, I think it important that all participants bear in mind that once the Baltic vote was taken, and once the demise of Gorbatchev became inevitable, attitudes towards the new countries rapidly changed. All three are now consolidated members of the European Union, and the past is simply that, what is over. Many Catalans tell me they are doing what they are doing, not for themselves but for their children and their grandchildren. Measured on such a timescale a few years of economic turbulence seem as nothing. In the interest of the common good solutions need to be found - solutions which are able to both satisfy the aspirations of the Catalans and guarantee stability in Europe. If this search is not initiated soon, then time will ineluctably run out and the likely will steadily become the inevitable, simple application of the rules of game theory tell us that. There isn’t a day to lose. You know it makes sense.
The above is a short chapter I wrote for the book "What's Up With Catalonia" published earlier this year by the Catalan Press.
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?
Wednesday, September 11, 2013
Q&A: The Catalan Way explained
Why are Catalans taking part in a human chain this Wednesday? The Catalan newspaper Ara has produced a series of questions and answers in English which should explain everything you want to know about why the human chain is taking place today.
What is the 'Via Catalana'?
The 'Via Catalana' (The Catalan Way) is a political demonstration which will take place this September the 11th. Inspired by the Baltic Way — a human chain formed by up to two million people on August 23 1989 across Estonia, Latvia and Lithuania — its aim is to create a 400 km long chain which will cross Catalonia from north to south. 400.000 people have signed up to take part in the human chain, although organizers hope that the actual turnout will be at least twice that figure. People will be asked to join hands at exactly 17:14 (15:14 GMT). The chain, which runs along highways, roads and city streets, will come to an end at 18:00 (16:00 GMT). If successful, it will be one of Europe's largest ever demonstrations, following in the footsteps of last year's march in Barcelona, when up to 1,5 million people walked through the streets of the capital asking for independence, the country's most massive rally ever.
What is Catalonia?
With more than 7,2 million inhabitants Catalonia is a country in the northeastern corner of the Iberian Peninsula. At a crossroads between different cultures and civilisations, it once formed part of the old Crown of Aragon, which merged with the Crown of Castile to create what later became Spain. What in medieval times was a powerful nation which extended its influence across and beyond the Mediterranean, is now an autonomous region within the Spanish State posessing restricted powers, devolved as seen fit by the central state. It has its own language, Catalan, and institutions, amongst them one of Europe's oldest Governments and Parliaments.
Why is the Catalan Way taking place today?
Catalonia was a party in the War of Spanish Succession (1701-1714), where the old crowns of Castile and Aragon fought, alongside their European allies, over who should be crowned as king of Spain following the death of Charles II. Catalonia, which favoured archduke Charles as successor, lost a war which ended with Europe recognising Philip V as the new king of Spain. The long war ended with a prolonged siege of Barcelona, Catalonia's capital, which was systematically bombarded by Spanish troops fighting for the Bourbon candidate, Philip V. After months of resistance Barcelona finally surrendered on September 11 1714. Modern Spain was born, but Catalonia was to pay a heavy price for its support for the Austrian candidate: Catalan language was forbidden and Catalan institutions abolished. Every year, on September 11, Catalans commemorate the day on which Barcelona fell, honouring those killed defending the country's laws and institutions [See video: A trip to Barcelona].
Why do many 21st century Catalans want independence?
Since the defeat of 1714 Catalonia has never been allowed to rule itself again [a Catalan history of Spain]. The old nation was forcefully transformed into a mere Spanish province. This state of affairs did not change until 1931, when the proclamation of the Spanish Republic gave Catalans the freedom to regain their old institutions. Catalan was taught in schools, the Parliament reopened, the Government was once more established... Unfortunately the situation was not to last. The end of the Civil War, with the subsequent establishment of the Franco dictatorship, meant a new blow for the country, crushed once again by a centralist state, administered directly from Madrid.
Following Franco's death, and with a new democratic regime in place, Catalonia regained its old institutions, and it was once more allowed to rule its own affairs in a number of key areas. But the centralist inertia of the Spanish state, always resisting to the last all devolved powers and continually meddling in matters which are close to the heart of all Catalans — like respect for the Catalan language — has left Catalonia’s citizens with a deep sense of frustration. This frustration was brought to a head in 2010 when an appeal by the Partido Popular over some of the clauses in the newly approved Catalan Statute (which won majority votes in both the Catalan and Spanish Parliaments) lead the Spanish Constitutional Tribunal to rule it was unconstitutional to use the term “nation” to refer to Catalonia in the document’s preamble.
Since that time the feeling of alienation from Spain has only grown, with many previously apathetic citizens suddenly becoming separatists. More fuel has been added by the economic crisis, and the gross incompetence which has been demonstrated by Spain’s political and financial leaders. This, along with the record levels of unemployment with no end in sight, has given a new impulse to Catalonia's demands, since it has left the Catalan Government in a critical financial situation, unable to access the international financial markets and totally dependent on the such funds as the Spanish Government to forward to it. This unjust situation reached its most bizarre moment when the Spanish government raised the VAT rate last year to help improve funding. The Catalan government actually lost out, since it had to pay the new rate to all its suppliers but received no refund or additional funding from the central government which was, of course, much better off.
This, in a country which contributes to Spain far more than it gets in return: figures vary, but it is reasonable to suggest that Catalonia loses between 10,000 to 16,000 million euros per year, because of this fiscal deficit. The accumulated deficit between Catalonia and Spain for the period 1986-2010 reaches a total of 213,933 million euros, five times Catalonia's current debt. The economic imbalance between what Catalans pay in taxes to the Spanish state and what they get in return, is a major contributing factor to the sense of anger and frustration felt by many [opinion: Spanish Prisoners]. It has been very hard for Catalans see their school and hospital services deteriorate under the sever cuts that have been administered while those in other regions which are arguably subsidized from Catalan taxes go virtually unscathed. [See NYT OP-ED: Spanish Prisoners]
What do the Catalan political parties say?
Since the death of Franco all Catalonia's main parties have argued for a theoretical right to self-determination, but have never taken steps towards achieving that goal. Following slow and painstaking negotiations with Madrid, only a fragile, unstable compromise has been reached: the Spanish state has devolved powers in some key areas, from education to health or police, but it still is unable to recognise Catalonia as a nation. This has left Catalan parties divided on the issue of which course of action to take. Traditionally, Catalan parties have asked for more powers to be devolved from Madrid to Catalonia, but the recent rise in strength of the pro-independence movement — which originates in social, rather than political organizations — has taken some aback [See video: Catalonia push for economic independence].
Centre Right Nationalist CiU, Catalonia's current governing political coalition, has evolved from a pro-autonomy stance to being more clearly inclined towards independence. It is, though, a coalition of parties with different views; officially, it wants a referendum on independence, but stresses the need to reach agreement on this with the Spanish Government. The once powerful Socialist party PSC, which has strong ties with the Spanish Socialist PSOE, is torn too between conflicting approaches. In theory, it recognizes Catalans the right to self-determination, but rather than asking for independence, it wants Spain to move towards a more federal political structure. The left republicans ERC, for years the only party actively seeking independence, are the rising star in the current Parliament and, according to some surveys, could become the country's main party if elections were to take place now; they want to hold a referendum as early as 2014.
Left-wing ICV, political successors of the old communist party, support the idea of a referendum, although their views on independence are not so clear. Finally, the Popular Party, which is now in power and Spain, and Ciutadans, are both opposed not only to independence but even to an eventual referendum on the issue. However, they are a minority in the Catalan political landscape: the Catalan Parliament has passed a declaration which states that Catalonia is a country with the right to decide its own future. The declaration was passed with 104 votes in favour of a referendum, for only 27 against [See video: Will Catalonia say adios to Spain?].
What does the Spanish Government say?
The Spanish Government bitterly opposes the organization of a referendum in which Catalans can choose whether they are in favour or against an independent Catalonia. The official position is that the government has to abide by the Spanish Constitution, which states that there is only one nation, the Spanish one, and that sovereignty is exclusively held by the Spanish people in its entirety; this means that what is seen as being simply one part of the Spanish nation cannot on its own decide on matters which affect all, effectively denying the principle of the right of peoples to self determination. Since, according to the Constitution, only the Spanish Government can organize a referendum, the Catalan demand faces an insurmountable barrier. Spanish main parties — PP, now in power, and the socialists, the main party in opposition — do not want Catalans to express their views on a referendum [See video: Should Catalonia seek independence?].
What is the position of the EU?
The official position of the EU is that it is not for the institution to take into consideration hypothetical declarations of independence following the possible breakaway of part of an existing member state. The official line of the EU Commission is that Catalonia's independence demand is a Spanish internal affair and, as such, they cannot comment on the issue. This has proved to be a controversial idea, though, since the Spanish Government has tried to influence the debate by assuring that an independent Catalonia would be automatically expelled from the EU, and should start from scratch new negotiations with Brussels to rejoin the institution. Some commissioners have denied this, stating that there is no precedent for a situation like this, and that Europe could not possibly deny membership to 7,2 million people who are now EU's citizens.
Why is Scotland holding a referendum, while Catalonia is not?
Because they are both nations without a state Scotland and Catalonia have often been compared, and the fact that both countries are engaging in an open debate about their possible future as sovereign states has only increased the parallels being drawn between them. Yes, they are both old European nations, with institutions of their own, but the similarities end here. It was not until recently that Westminster Parliament devolved some of its powers to Scotland, but the UK has a tradition of decentralised power in many areas. Citizens are used to the fact that laws — from smoking to gay marriage to university taxes — are different on both sides of the border. This is not the case of Spain, which for most of its history has been a heavily centralized state. However the main and most glaring difference is to be found in the very different approach to recognizing a separate identity: whereas the UK – as a plurinational society - has no real problem in acknowledging that Scotland is a nation, Spain as a whole has been unable to move beyond the idea that Catalonia is simply just one more autonomous region. Unlike Scotland, Catalonia cannot take part in official sports competitions around the world, which leaves Barcelona football club as the unofficial national symbol [See Video: cry for Catalan independence during the 'classic' Barça – Real Madrid]. The consequence of this different approach is that, while the British Government is allowing the Scottish government to organize a referendum on independence, the Spanish government is completely opposed to allowing the Catalans to be consulted about an eventual secession and has promised to fight any move by the Catalan government to organize a referendum [Catalonia and Scotland: how they compare to EU nations and Europe's other separatists]
What is Catalonia's level of autonomy?
Catalonia has a restricted autonomy. The Catalan Parliament has the power to pass laws on all sort of issues, from education to housing, but this theoretical autonomy has many strings attached. To begin with, the Spanish Government is unwilling to hand over some key powers, from allocating student grants to administering pensions, and tries to legislate on areas of devolved power, a situation which leads to constant conflicts between the governments in Barcelona and Madrid, with the Spanish Constitutional Court deciding which of the two is entitled to legislate the disputed area. Crucially, all main taxes are collected by the Spanish Government, which is then responsible for distributing the money raised between the various receiving institutions. In practice, Catalonia's Parliament is legislating on affairs without having the money to implement its laws.
How strong is the popular support for independence?
Surveys vary significantly, but they show two consistent trends. First, support for independence has been growing year after year. Second, from being the option favoured by a minority of Catalonia's citizens, independence is now supported by the majority of the population. The latest official figures show that, in an eventual referendum, 55,6% of Catalans would vote in favour of an independent state, with those against being 23,4% and roughly a 20% showing no clear preference or saying that they are not interested. When asked which form of relationship with Spain do they prefer, 47% favour an independent state, 22% want to maintain the current status quo, and 21% would like Spain to become a federal state.
What happens next?
A Council for the National Transition, with academics and experts from a number different fields, is working on the establishment of a timeline for an eventual referendum. Catalonia's main political force, CiU, which governs thanks to the support in Parliament of pro-independent ERC, argues that a referendum should take place before the end of 2014. The problem is that, according to the Spanish Constitution, only the Spanish Government can authorize the referendum, something the ruling PP party is firmly opposing. Other options include organizing a referendum without Spanish Government consent — which would make it technically illegal — or dissolving the Catalan Parliament and organizing new elections, with pro-independent parties sharing part of their manifestos. After months of bitter disputes, the Catalan president, Artur Mas [profile], is holding discrete talks with his Spanish counterpart, Mariano Rajoy, to try to find a way out of the current deadlock.
Could an independent Catalonia become a viable state?
As with all the other aspects of the argument, the viability of a future state is a contested issue. Those opposing independence argue that a Catalan state would inherit a huge deficit which would make it very difficult to pay pensions or salaries. Besides, they take for granted that Catalonia would be expelled from the European Union, depriving Catalan companies from the benefits of a single market. On the other side of the debate, those in favour of independence argue that, without the burden of the huge deficit which results from the difference between what Catalans pay in taxes to Spain, and what they get in return, Catalonia — Spain's most vibrant economy — would have a GDP level in line with some of Europe's wealthiest nations, and its government could reduce the current debt and improve the quality of public services. In addition they doubt that Catalonia would find itself outside the frontiers of the EU, pointing among other precedents to the fact that the EU Treaty held that national bailouts of member states were illegal, until in fact one was urgently needed. [Keys on the independence of Catalonia].
What is the 'Via Catalana'?
The 'Via Catalana' (The Catalan Way) is a political demonstration which will take place this September the 11th. Inspired by the Baltic Way — a human chain formed by up to two million people on August 23 1989 across Estonia, Latvia and Lithuania — its aim is to create a 400 km long chain which will cross Catalonia from north to south. 400.000 people have signed up to take part in the human chain, although organizers hope that the actual turnout will be at least twice that figure. People will be asked to join hands at exactly 17:14 (15:14 GMT). The chain, which runs along highways, roads and city streets, will come to an end at 18:00 (16:00 GMT). If successful, it will be one of Europe's largest ever demonstrations, following in the footsteps of last year's march in Barcelona, when up to 1,5 million people walked through the streets of the capital asking for independence, the country's most massive rally ever.
What is Catalonia?
With more than 7,2 million inhabitants Catalonia is a country in the northeastern corner of the Iberian Peninsula. At a crossroads between different cultures and civilisations, it once formed part of the old Crown of Aragon, which merged with the Crown of Castile to create what later became Spain. What in medieval times was a powerful nation which extended its influence across and beyond the Mediterranean, is now an autonomous region within the Spanish State posessing restricted powers, devolved as seen fit by the central state. It has its own language, Catalan, and institutions, amongst them one of Europe's oldest Governments and Parliaments.
Why is the Catalan Way taking place today?
Catalonia was a party in the War of Spanish Succession (1701-1714), where the old crowns of Castile and Aragon fought, alongside their European allies, over who should be crowned as king of Spain following the death of Charles II. Catalonia, which favoured archduke Charles as successor, lost a war which ended with Europe recognising Philip V as the new king of Spain. The long war ended with a prolonged siege of Barcelona, Catalonia's capital, which was systematically bombarded by Spanish troops fighting for the Bourbon candidate, Philip V. After months of resistance Barcelona finally surrendered on September 11 1714. Modern Spain was born, but Catalonia was to pay a heavy price for its support for the Austrian candidate: Catalan language was forbidden and Catalan institutions abolished. Every year, on September 11, Catalans commemorate the day on which Barcelona fell, honouring those killed defending the country's laws and institutions [See video: A trip to Barcelona].
Why do many 21st century Catalans want independence?
Since the defeat of 1714 Catalonia has never been allowed to rule itself again [a Catalan history of Spain]. The old nation was forcefully transformed into a mere Spanish province. This state of affairs did not change until 1931, when the proclamation of the Spanish Republic gave Catalans the freedom to regain their old institutions. Catalan was taught in schools, the Parliament reopened, the Government was once more established... Unfortunately the situation was not to last. The end of the Civil War, with the subsequent establishment of the Franco dictatorship, meant a new blow for the country, crushed once again by a centralist state, administered directly from Madrid.
Following Franco's death, and with a new democratic regime in place, Catalonia regained its old institutions, and it was once more allowed to rule its own affairs in a number of key areas. But the centralist inertia of the Spanish state, always resisting to the last all devolved powers and continually meddling in matters which are close to the heart of all Catalans — like respect for the Catalan language — has left Catalonia’s citizens with a deep sense of frustration. This frustration was brought to a head in 2010 when an appeal by the Partido Popular over some of the clauses in the newly approved Catalan Statute (which won majority votes in both the Catalan and Spanish Parliaments) lead the Spanish Constitutional Tribunal to rule it was unconstitutional to use the term “nation” to refer to Catalonia in the document’s preamble.
Since that time the feeling of alienation from Spain has only grown, with many previously apathetic citizens suddenly becoming separatists. More fuel has been added by the economic crisis, and the gross incompetence which has been demonstrated by Spain’s political and financial leaders. This, along with the record levels of unemployment with no end in sight, has given a new impulse to Catalonia's demands, since it has left the Catalan Government in a critical financial situation, unable to access the international financial markets and totally dependent on the such funds as the Spanish Government to forward to it. This unjust situation reached its most bizarre moment when the Spanish government raised the VAT rate last year to help improve funding. The Catalan government actually lost out, since it had to pay the new rate to all its suppliers but received no refund or additional funding from the central government which was, of course, much better off.
This, in a country which contributes to Spain far more than it gets in return: figures vary, but it is reasonable to suggest that Catalonia loses between 10,000 to 16,000 million euros per year, because of this fiscal deficit. The accumulated deficit between Catalonia and Spain for the period 1986-2010 reaches a total of 213,933 million euros, five times Catalonia's current debt. The economic imbalance between what Catalans pay in taxes to the Spanish state and what they get in return, is a major contributing factor to the sense of anger and frustration felt by many [opinion: Spanish Prisoners]. It has been very hard for Catalans see their school and hospital services deteriorate under the sever cuts that have been administered while those in other regions which are arguably subsidized from Catalan taxes go virtually unscathed. [See NYT OP-ED: Spanish Prisoners]
What do the Catalan political parties say?
Since the death of Franco all Catalonia's main parties have argued for a theoretical right to self-determination, but have never taken steps towards achieving that goal. Following slow and painstaking negotiations with Madrid, only a fragile, unstable compromise has been reached: the Spanish state has devolved powers in some key areas, from education to health or police, but it still is unable to recognise Catalonia as a nation. This has left Catalan parties divided on the issue of which course of action to take. Traditionally, Catalan parties have asked for more powers to be devolved from Madrid to Catalonia, but the recent rise in strength of the pro-independence movement — which originates in social, rather than political organizations — has taken some aback [See video: Catalonia push for economic independence].
Centre Right Nationalist CiU, Catalonia's current governing political coalition, has evolved from a pro-autonomy stance to being more clearly inclined towards independence. It is, though, a coalition of parties with different views; officially, it wants a referendum on independence, but stresses the need to reach agreement on this with the Spanish Government. The once powerful Socialist party PSC, which has strong ties with the Spanish Socialist PSOE, is torn too between conflicting approaches. In theory, it recognizes Catalans the right to self-determination, but rather than asking for independence, it wants Spain to move towards a more federal political structure. The left republicans ERC, for years the only party actively seeking independence, are the rising star in the current Parliament and, according to some surveys, could become the country's main party if elections were to take place now; they want to hold a referendum as early as 2014.
Left-wing ICV, political successors of the old communist party, support the idea of a referendum, although their views on independence are not so clear. Finally, the Popular Party, which is now in power and Spain, and Ciutadans, are both opposed not only to independence but even to an eventual referendum on the issue. However, they are a minority in the Catalan political landscape: the Catalan Parliament has passed a declaration which states that Catalonia is a country with the right to decide its own future. The declaration was passed with 104 votes in favour of a referendum, for only 27 against [See video: Will Catalonia say adios to Spain?].
What does the Spanish Government say?
The Spanish Government bitterly opposes the organization of a referendum in which Catalans can choose whether they are in favour or against an independent Catalonia. The official position is that the government has to abide by the Spanish Constitution, which states that there is only one nation, the Spanish one, and that sovereignty is exclusively held by the Spanish people in its entirety; this means that what is seen as being simply one part of the Spanish nation cannot on its own decide on matters which affect all, effectively denying the principle of the right of peoples to self determination. Since, according to the Constitution, only the Spanish Government can organize a referendum, the Catalan demand faces an insurmountable barrier. Spanish main parties — PP, now in power, and the socialists, the main party in opposition — do not want Catalans to express their views on a referendum [See video: Should Catalonia seek independence?].
What is the position of the EU?
The official position of the EU is that it is not for the institution to take into consideration hypothetical declarations of independence following the possible breakaway of part of an existing member state. The official line of the EU Commission is that Catalonia's independence demand is a Spanish internal affair and, as such, they cannot comment on the issue. This has proved to be a controversial idea, though, since the Spanish Government has tried to influence the debate by assuring that an independent Catalonia would be automatically expelled from the EU, and should start from scratch new negotiations with Brussels to rejoin the institution. Some commissioners have denied this, stating that there is no precedent for a situation like this, and that Europe could not possibly deny membership to 7,2 million people who are now EU's citizens.
Why is Scotland holding a referendum, while Catalonia is not?
Because they are both nations without a state Scotland and Catalonia have often been compared, and the fact that both countries are engaging in an open debate about their possible future as sovereign states has only increased the parallels being drawn between them. Yes, they are both old European nations, with institutions of their own, but the similarities end here. It was not until recently that Westminster Parliament devolved some of its powers to Scotland, but the UK has a tradition of decentralised power in many areas. Citizens are used to the fact that laws — from smoking to gay marriage to university taxes — are different on both sides of the border. This is not the case of Spain, which for most of its history has been a heavily centralized state. However the main and most glaring difference is to be found in the very different approach to recognizing a separate identity: whereas the UK – as a plurinational society - has no real problem in acknowledging that Scotland is a nation, Spain as a whole has been unable to move beyond the idea that Catalonia is simply just one more autonomous region. Unlike Scotland, Catalonia cannot take part in official sports competitions around the world, which leaves Barcelona football club as the unofficial national symbol [See Video: cry for Catalan independence during the 'classic' Barça – Real Madrid]. The consequence of this different approach is that, while the British Government is allowing the Scottish government to organize a referendum on independence, the Spanish government is completely opposed to allowing the Catalans to be consulted about an eventual secession and has promised to fight any move by the Catalan government to organize a referendum [Catalonia and Scotland: how they compare to EU nations and Europe's other separatists]
What is Catalonia's level of autonomy?
Catalonia has a restricted autonomy. The Catalan Parliament has the power to pass laws on all sort of issues, from education to housing, but this theoretical autonomy has many strings attached. To begin with, the Spanish Government is unwilling to hand over some key powers, from allocating student grants to administering pensions, and tries to legislate on areas of devolved power, a situation which leads to constant conflicts between the governments in Barcelona and Madrid, with the Spanish Constitutional Court deciding which of the two is entitled to legislate the disputed area. Crucially, all main taxes are collected by the Spanish Government, which is then responsible for distributing the money raised between the various receiving institutions. In practice, Catalonia's Parliament is legislating on affairs without having the money to implement its laws.
How strong is the popular support for independence?
Surveys vary significantly, but they show two consistent trends. First, support for independence has been growing year after year. Second, from being the option favoured by a minority of Catalonia's citizens, independence is now supported by the majority of the population. The latest official figures show that, in an eventual referendum, 55,6% of Catalans would vote in favour of an independent state, with those against being 23,4% and roughly a 20% showing no clear preference or saying that they are not interested. When asked which form of relationship with Spain do they prefer, 47% favour an independent state, 22% want to maintain the current status quo, and 21% would like Spain to become a federal state.
What happens next?
A Council for the National Transition, with academics and experts from a number different fields, is working on the establishment of a timeline for an eventual referendum. Catalonia's main political force, CiU, which governs thanks to the support in Parliament of pro-independent ERC, argues that a referendum should take place before the end of 2014. The problem is that, according to the Spanish Constitution, only the Spanish Government can authorize the referendum, something the ruling PP party is firmly opposing. Other options include organizing a referendum without Spanish Government consent — which would make it technically illegal — or dissolving the Catalan Parliament and organizing new elections, with pro-independent parties sharing part of their manifestos. After months of bitter disputes, the Catalan president, Artur Mas [profile], is holding discrete talks with his Spanish counterpart, Mariano Rajoy, to try to find a way out of the current deadlock.
Could an independent Catalonia become a viable state?
As with all the other aspects of the argument, the viability of a future state is a contested issue. Those opposing independence argue that a Catalan state would inherit a huge deficit which would make it very difficult to pay pensions or salaries. Besides, they take for granted that Catalonia would be expelled from the European Union, depriving Catalan companies from the benefits of a single market. On the other side of the debate, those in favour of independence argue that, without the burden of the huge deficit which results from the difference between what Catalans pay in taxes to Spain, and what they get in return, Catalonia — Spain's most vibrant economy — would have a GDP level in line with some of Europe's wealthiest nations, and its government could reduce the current debt and improve the quality of public services. In addition they doubt that Catalonia would find itself outside the frontiers of the EU, pointing among other precedents to the fact that the EU Treaty held that national bailouts of member states were illegal, until in fact one was urgently needed. [Keys on the independence of Catalonia].
Tuesday, September 10, 2013
Doing Nothing Is Not An Option!
The recent IMF proposals to help stimulate growth and job creation in Spain at least deserve serious consideration.
In a blog post which sought to defend the recent IMF proposal to for a social compact involving a 10% reduction in Spanish wages and salaries, the EU Economy and Finance Commissioner Olli Rehn cited a line from Bob Dylan - "Something is happening here, but you don't know what it is".
He was talking about the evident uncertainty surrounding the kind of economic recovery Spain might be having. But the line could equally be applied to the across-the-board response of Spanish society to those very Fund proposals he was defending. From employers to unions to government and opposition the country has spoken with one voice, “something is going on here and we don’t want to know what it is”.
I say “don’t want to” since most of the comments appearing in the Spanish press have had little to do with the arguments that are being advanced or even with trying to understand them. Some journalists simply focused their attention on the salaries received by the Fund’s own economists (which recently went up).
Others argue, citing the example of the Brazilian representative who refused to sign-off on the latest payment to Greece, that the institution is not democratic, since the emerging countries are not adequately represented. Little does it matter that what these countries are in fact complaining about is too much European influence on Fund policy and too much simplistic optimism. The prize for irrelevance though must surely go to the La Razon writer who thought it worth dedicating a whole article to the fact that German wages have risen 20% more than Spanish ones during the crisis.
What this latter point has to do with anything I’m not sure, but all these arguments do share one feature, they fail to take notice of the fact that Spain is in deep crisis. They ignore the fact that unemployment, and especially youth unemployment, is unacceptably high, that the country’s future is leaving by the day on planes, boats and trains, that the economic growth outlook is pathetically weak, and that, en fin, something most definitely needs to be done.
As Spain IMF Mission Head James Daniel puts it, “we see a recovery, but only a weak one”.
What the IMF are saying is that if you leave the situation as it is then growth will not be sufficient to make any significant change in the unemployment rate. Thus they estimate that on the basis of present policies the rate will still be 25% in 2018.
In addition they draw attention to the way the impact of the crisis has been so unfairly distributed, with those aged under 30, who surely have little responsibility for what actually happened, being asked to carry the biggest part of the burden. Given this, is it really so surprising that many of them are now leaving to seek a brighter future elsewhere? Still being unemployed in 2025 is hardly an enticing prospect!
Much has been done to protect those members of our society who, like me, are over 60, but we need to remember that it isn’t the increase in life expectancy that represents a threat to future pensions, the real threat is not having enough young people left around to pay them!
To avoid this catastrophe, as James Daniel says, “Growth needs to be stronger and needs to become more job rich”. This, he argues, is something that requires action in many areas, among which he includes “increasing wage flexibility so that growth produces more jobs” and creates “a more even playing field between those with permanent jobs and those with temporary jobs”. Does any of this ring any bells?
By chance this week I spoke with a journalist from Estonia, a country whose recent progress many in Spain would like to identify with. What he explained to me was that in his country the highest average wages go to those in the 30 to 35 age group, while in Spain the top paid workers are aged between 50 and 59. This situation doesn't make any economic sense whatever and something is seriously wrong here if we want a country which is open to initiative, creativity, entrepreneurship and imagination.
The Fund’s proposal is effectively for a new set of “Pactos de la Moncloa”, a series of agreements between all parties and social agents arrived at during the transition from dictatorship to democracy in the 1970s, to agree not only wage reductions, but for employers at the same time to make employment commitments while measures are also agreed which could bring down prices.
This is the so called “internal devaluation” that macroeconomists like Paul Krugman, Dani Rodrik and myself have been advocating for some 6 years now. It isn’t a perfect plan, having the Euro doesn’t make things easy, but it is a damn sight better than doing nothing and watching and waiting while things get worse. Certainly it is a proposal worth studying and discussing and not simply dismissing out of hand.
The above is an adapted version of an article that originally appeared in the Catalan newspaper Ara.
In a blog post which sought to defend the recent IMF proposal to for a social compact involving a 10% reduction in Spanish wages and salaries, the EU Economy and Finance Commissioner Olli Rehn cited a line from Bob Dylan - "Something is happening here, but you don't know what it is".
He was talking about the evident uncertainty surrounding the kind of economic recovery Spain might be having. But the line could equally be applied to the across-the-board response of Spanish society to those very Fund proposals he was defending. From employers to unions to government and opposition the country has spoken with one voice, “something is going on here and we don’t want to know what it is”.
I say “don’t want to” since most of the comments appearing in the Spanish press have had little to do with the arguments that are being advanced or even with trying to understand them. Some journalists simply focused their attention on the salaries received by the Fund’s own economists (which recently went up).
Others argue, citing the example of the Brazilian representative who refused to sign-off on the latest payment to Greece, that the institution is not democratic, since the emerging countries are not adequately represented. Little does it matter that what these countries are in fact complaining about is too much European influence on Fund policy and too much simplistic optimism. The prize for irrelevance though must surely go to the La Razon writer who thought it worth dedicating a whole article to the fact that German wages have risen 20% more than Spanish ones during the crisis.
What this latter point has to do with anything I’m not sure, but all these arguments do share one feature, they fail to take notice of the fact that Spain is in deep crisis. They ignore the fact that unemployment, and especially youth unemployment, is unacceptably high, that the country’s future is leaving by the day on planes, boats and trains, that the economic growth outlook is pathetically weak, and that, en fin, something most definitely needs to be done.
As Spain IMF Mission Head James Daniel puts it, “we see a recovery, but only a weak one”.
What the IMF are saying is that if you leave the situation as it is then growth will not be sufficient to make any significant change in the unemployment rate. Thus they estimate that on the basis of present policies the rate will still be 25% in 2018.
In addition they draw attention to the way the impact of the crisis has been so unfairly distributed, with those aged under 30, who surely have little responsibility for what actually happened, being asked to carry the biggest part of the burden. Given this, is it really so surprising that many of them are now leaving to seek a brighter future elsewhere? Still being unemployed in 2025 is hardly an enticing prospect!
Much has been done to protect those members of our society who, like me, are over 60, but we need to remember that it isn’t the increase in life expectancy that represents a threat to future pensions, the real threat is not having enough young people left around to pay them!
To avoid this catastrophe, as James Daniel says, “Growth needs to be stronger and needs to become more job rich”. This, he argues, is something that requires action in many areas, among which he includes “increasing wage flexibility so that growth produces more jobs” and creates “a more even playing field between those with permanent jobs and those with temporary jobs”. Does any of this ring any bells?
By chance this week I spoke with a journalist from Estonia, a country whose recent progress many in Spain would like to identify with. What he explained to me was that in his country the highest average wages go to those in the 30 to 35 age group, while in Spain the top paid workers are aged between 50 and 59. This situation doesn't make any economic sense whatever and something is seriously wrong here if we want a country which is open to initiative, creativity, entrepreneurship and imagination.
The Fund’s proposal is effectively for a new set of “Pactos de la Moncloa”, a series of agreements between all parties and social agents arrived at during the transition from dictatorship to democracy in the 1970s, to agree not only wage reductions, but for employers at the same time to make employment commitments while measures are also agreed which could bring down prices.
This is the so called “internal devaluation” that macroeconomists like Paul Krugman, Dani Rodrik and myself have been advocating for some 6 years now. It isn’t a perfect plan, having the Euro doesn’t make things easy, but it is a damn sight better than doing nothing and watching and waiting while things get worse. Certainly it is a proposal worth studying and discussing and not simply dismissing out of hand.
The above is an adapted version of an article that originally appeared in the Catalan newspaper Ara.
Monday, September 09, 2013
The Recession May Be Ending But The Crisis Continues
What follows is an interview I did over the summer with the Madrid based publication The Local.
Let's start with the basics: what are Spain's current economic problems?
Spain's economic problems are a knock-on effect of the end of Spain's property boom. The collapse of the property market led to a drop in incomes, depressed demand for goods and — slightly — lower wages.
At the same time, apart from property prices haven't come down.
In addition over one adult in four isn't working.
So consumption is steadily falling.
On top of that we have a debt overhang — which means it is difficult for Spain to borrow. Larger companies are struggling to get credit so they are delaying payments to smaller suppliers, which means smaller companies are finding it harder to get money. It's a vicious cycle.
We are also seeing imbalances within Europe with the Germans doing 'well' and young Spaniards leaving the country to work elsewhere.
And how has the Popular Party (PP) government led by Prime Minister Mariano Rajoy tackled these problems?
One of the main objectives has been to avoid a financial rescue from the European Union. This was important for a number of reasons.
National pride was definitely one factor. Also, it is unlikely any Spanish government could have survived a bailout. Then there is the fact that Europe would have had a greater say in how the Spanish economy operated if a bailout had taken place. The EU would have been telling Spain which taxes to raise or lower, for example, or how to go about pension reform.
How do you rate the government's attempts to cut spending?
At the end of the day, this government is made up of 'middle of the road politicians' and they are basically economically liberal. Which means they would like to see less government. So if the deficit hasn't come down very far it hasn't been for want of trying.
I would probably have to say their least recognized achievement has been their attempt to reform the public administration. This hasn't been easy for the PP as some of the areas where the party has a lot of support are also places where there is not a lot of industry, and where government is a big employer. This being said Spain still had the biggest deficit in the EU last year (government spending exceeded tax revenue by 10.6 percent).
In addition, reform of the financial sector still has a long way to go as well because while there is increased liquidity in the system, more recapitalization is constantly required as the high unemployment and low demand for products means more bad loans are created with each passing day.
Recently, Spain's Economy Minister Luis de Guindos asserted the recession may be over. He didn't mention the crisis though.
That's an important distinction. Luis de Guindos is an intelligent man and recognizes that while the crisis is ongoing, recessions are a normal part of the business cycle. Spain's second recession since the crisis began could well be over.
And yes, we could well see two, or three, or even four quarters of weak economic growth but this is just part of the cycle. Indeed, our double-dip recession could eventually turn into a triple-dip one. This is because none of the underlying problems have been adequately addressed.
We were told house prices would bottom out with the creation of a bad bank, but they are still falling. There is probably some way to go still, maybe two or three more years of falling prices. The organization charged with handling failed banks' property assets, the "bad bank" Sareb, isn't operating very well either. Sales are very low and the costs for potential buyers from Sareb is too expensive as the organization doesn't have depositors and has to make deals with other banks to give mortgages which end up making interest costs too expensive to make the purchase attractive.
And even while some of the old imbalances are adjusting new ones are being created since young people are now leaving Spain to work elsewhere in ever greater numbers. We don't know exactly how many are leaving because Spain's electoral roll doesn't keep accurate track of where native Spaniards are living and working. What we do know is that last year Spain's population fell for the first time in modern history, and that it will continue to fall as far ahead as the eye can see. A turning point of some kind has been passed.
What do you make of the spate of claims the crisis is over?
I believe these predictions play to two audiences. The first issue is a confidence issue. Politicians would like to give the impression to the Spanish people that the crisis is ending to encourage them to spend.
At the same time, Prime Minister Rajoy is fighting for his political survival. One of the likely consequences of the current lack of government credibility, in my opinion, is that Spain could - in time – become effectively ungovernable in a way which has become common in other southern European countries. Fresh elections are unlikely in the short run, but when they do come there is unlikely to be a clear majority party, the outcome is likely to be fragmented, and indeed the Catalans want a vote on whether to leave.
The (opposition socialist) PSOE party continues to have a huge credibility problem following the fiasco of the Zapatero government. They are currently polling at very low levels (21.6 percent according to a July poll run by Metroscopia).
It's also very hard to imagine a political party in Spain making an alliance with Catalonia's ruling CiU party given there is an independence referendum in the pipeline.
So what does the term crisis actually mean after five years?
My feeling is that it's totally unrealistic to expect a 'return to the old reality'. We are now in a change of paradigm process.
We all need to change our expectations and find ways to live with the new situation, since whether we like it or not we will have to. There is no quick fix - these have all been tried and failed - and Spain is now condemned to going through a painful long-term shift. The country will have to deal with its legacy debt.
Personally, I think the International Monetary Fund could have played a more important role. It could have acted as a kind of referee between Spain and the European Central Bank (ECB) and the EU, coaxing the country into adopting more fundamental changes. It could have pushed for the "front loading" of the deep reforms the country needs (especially the much needed internal devaluation) coaxing the country into making changes at a time when the population was still receptive. But unfortunately even though the Fund is now trying to recover lost ground, most of the principal social actors turn a deaf ear. No one wants to hear more about harsh sacrifices, they only want "sweet words" about a looming recovery and regeneration.
In addition I believe the IMF is now increasingly trying to distance instance from Europe because it has become tired of playing the part of public relations officer for what are effectively EU-lead programmes. It is clear from the Greek case - and the recent IMF "mea culpa" - that this way of doing things doesn't work. Further, non-European members of the Fund like Brazil, China and India are now increasingly pressuring the organisation to stop molly coddling Europe's leaders. Look, for example, at how little money is being offered to Egypt and how much has been spent on Greece.
But what this means is that the organisation is now unlikely to play the role it once could have.
To what extent is Spain responsible for its crisis, and to to what degree are international circumstances to blame?
When the Euro was rolled out, the single currency idea clearly wasn't thought through well enough. The EU leaders didn't envisage the problems that have arisen.
Another part of the problem lies in an idea that existed in Europe before the crisis — this was the idea that all countries all had equal levels of risk. And this clearly wasn't true. So to some extent the EU itself needs to assume responsibility.
But on the Spanish side, it's obvious the political parties were up to their necks in fomenting the boom by letting regional savings banks keep lending money, and by allowing builders to keep building.
During the building boom, many Spaniards also became property speculators in their own right, buying more houses than they really needed. As the saying goes, "When the music plays you have to dance".
Let's start with the basics: what are Spain's current economic problems?
Spain's economic problems are a knock-on effect of the end of Spain's property boom. The collapse of the property market led to a drop in incomes, depressed demand for goods and — slightly — lower wages.
At the same time, apart from property prices haven't come down.
In addition over one adult in four isn't working.
So consumption is steadily falling.
On top of that we have a debt overhang — which means it is difficult for Spain to borrow. Larger companies are struggling to get credit so they are delaying payments to smaller suppliers, which means smaller companies are finding it harder to get money. It's a vicious cycle.
We are also seeing imbalances within Europe with the Germans doing 'well' and young Spaniards leaving the country to work elsewhere.
And how has the Popular Party (PP) government led by Prime Minister Mariano Rajoy tackled these problems?
One of the main objectives has been to avoid a financial rescue from the European Union. This was important for a number of reasons.
National pride was definitely one factor. Also, it is unlikely any Spanish government could have survived a bailout. Then there is the fact that Europe would have had a greater say in how the Spanish economy operated if a bailout had taken place. The EU would have been telling Spain which taxes to raise or lower, for example, or how to go about pension reform.
How do you rate the government's attempts to cut spending?
At the end of the day, this government is made up of 'middle of the road politicians' and they are basically economically liberal. Which means they would like to see less government. So if the deficit hasn't come down very far it hasn't been for want of trying.
I would probably have to say their least recognized achievement has been their attempt to reform the public administration. This hasn't been easy for the PP as some of the areas where the party has a lot of support are also places where there is not a lot of industry, and where government is a big employer. This being said Spain still had the biggest deficit in the EU last year (government spending exceeded tax revenue by 10.6 percent).
In addition, reform of the financial sector still has a long way to go as well because while there is increased liquidity in the system, more recapitalization is constantly required as the high unemployment and low demand for products means more bad loans are created with each passing day.
Recently, Spain's Economy Minister Luis de Guindos asserted the recession may be over. He didn't mention the crisis though.
That's an important distinction. Luis de Guindos is an intelligent man and recognizes that while the crisis is ongoing, recessions are a normal part of the business cycle. Spain's second recession since the crisis began could well be over.
And yes, we could well see two, or three, or even four quarters of weak economic growth but this is just part of the cycle. Indeed, our double-dip recession could eventually turn into a triple-dip one. This is because none of the underlying problems have been adequately addressed.
We were told house prices would bottom out with the creation of a bad bank, but they are still falling. There is probably some way to go still, maybe two or three more years of falling prices. The organization charged with handling failed banks' property assets, the "bad bank" Sareb, isn't operating very well either. Sales are very low and the costs for potential buyers from Sareb is too expensive as the organization doesn't have depositors and has to make deals with other banks to give mortgages which end up making interest costs too expensive to make the purchase attractive.
And even while some of the old imbalances are adjusting new ones are being created since young people are now leaving Spain to work elsewhere in ever greater numbers. We don't know exactly how many are leaving because Spain's electoral roll doesn't keep accurate track of where native Spaniards are living and working. What we do know is that last year Spain's population fell for the first time in modern history, and that it will continue to fall as far ahead as the eye can see. A turning point of some kind has been passed.
What do you make of the spate of claims the crisis is over?
I believe these predictions play to two audiences. The first issue is a confidence issue. Politicians would like to give the impression to the Spanish people that the crisis is ending to encourage them to spend.
At the same time, Prime Minister Rajoy is fighting for his political survival. One of the likely consequences of the current lack of government credibility, in my opinion, is that Spain could - in time – become effectively ungovernable in a way which has become common in other southern European countries. Fresh elections are unlikely in the short run, but when they do come there is unlikely to be a clear majority party, the outcome is likely to be fragmented, and indeed the Catalans want a vote on whether to leave.
The (opposition socialist) PSOE party continues to have a huge credibility problem following the fiasco of the Zapatero government. They are currently polling at very low levels (21.6 percent according to a July poll run by Metroscopia).
It's also very hard to imagine a political party in Spain making an alliance with Catalonia's ruling CiU party given there is an independence referendum in the pipeline.
So what does the term crisis actually mean after five years?
My feeling is that it's totally unrealistic to expect a 'return to the old reality'. We are now in a change of paradigm process.
We all need to change our expectations and find ways to live with the new situation, since whether we like it or not we will have to. There is no quick fix - these have all been tried and failed - and Spain is now condemned to going through a painful long-term shift. The country will have to deal with its legacy debt.
Personally, I think the International Monetary Fund could have played a more important role. It could have acted as a kind of referee between Spain and the European Central Bank (ECB) and the EU, coaxing the country into adopting more fundamental changes. It could have pushed for the "front loading" of the deep reforms the country needs (especially the much needed internal devaluation) coaxing the country into making changes at a time when the population was still receptive. But unfortunately even though the Fund is now trying to recover lost ground, most of the principal social actors turn a deaf ear. No one wants to hear more about harsh sacrifices, they only want "sweet words" about a looming recovery and regeneration.
In addition I believe the IMF is now increasingly trying to distance instance from Europe because it has become tired of playing the part of public relations officer for what are effectively EU-lead programmes. It is clear from the Greek case - and the recent IMF "mea culpa" - that this way of doing things doesn't work. Further, non-European members of the Fund like Brazil, China and India are now increasingly pressuring the organisation to stop molly coddling Europe's leaders. Look, for example, at how little money is being offered to Egypt and how much has been spent on Greece.
But what this means is that the organisation is now unlikely to play the role it once could have.
To what extent is Spain responsible for its crisis, and to to what degree are international circumstances to blame?
When the Euro was rolled out, the single currency idea clearly wasn't thought through well enough. The EU leaders didn't envisage the problems that have arisen.
Another part of the problem lies in an idea that existed in Europe before the crisis — this was the idea that all countries all had equal levels of risk. And this clearly wasn't true. So to some extent the EU itself needs to assume responsibility.
But on the Spanish side, it's obvious the political parties were up to their necks in fomenting the boom by letting regional savings banks keep lending money, and by allowing builders to keep building.
During the building boom, many Spaniards also became property speculators in their own right, buying more houses than they really needed. As the saying goes, "When the music plays you have to dance".
Subscribe to:
Posts (Atom)
