Spain’s Unique Financial Crisis

Well what concerns me the most is that non of the really financially troubled countries in the EU have much in the way of what we might describe as a multi-party democratic history.
I clearly remember this little footnote to history happening on the telly.

http://news.bbc.co.uk/onthisday/hi/dates/stories/february/23/newsid_2518000/2518825.stm

It might be thirty years ago but I wonder what lays beneath the surface of Spanish politics today??
Greece, Spain and Portugal were all military dictatorships relatively recently and although the reptiles in the media talk as if multi-party democracy is the norm and therefore set in stone–we (and in that I include most here) with a better grasp of history knows that it is not.
Interesting times.
A.

I agree Andy….the EU has been cloud cuckoo land for many years :rolleyes:

rgds baz

It chills me to think our EU payments will be going to those fish stealing, chlamydia harbouring no-gooders!

Isn’t that sort of comment a bit unnecessary??
I’m sure the ordinary folk of Spain aren’t a great deal different from the ordinary folk anywhere.
They get up, go to work, pay their taxes and like the rest, get screwed over by politicians and the rich–and probably want a better life for their children.

As to the EU, it is as Charlie says, little short of a disaster.
The real crisis is still coming in my opinion.

Andy.

Creaking Door, gives a masterly precis of this program. My emotions at the end were of great sadness for the trials and tribulations of ordinary Spanish citizens.

One statistic tells all. What precise size and size of population it is I know not but, the province of Valencia, about the size of the Isle of Wight is in debt to the tune of 25 billion euros ! Incomprehensible.

EU….Euro – Eurozone – all synonymous in reality. If the IMF was involved they would give no quarter and Spain would have little choice. For the EU apparatchiks everything is subservient to their doomed enterprise.

Surely it would be the Euro’s and IMF’s job to save Spain, not the EU’s? It chills me to think our EU payments will be going to those fish stealing, chlamydia harbouring no-gooders!

[QUOTE=Creaking Door;1964021
Spain thinks that it is too big to be allowed to fail and so the EU will be forced to save it…
[/QUOTE]

And of course it is quite right to think that!! Nothing can stand in the way of the EU bandwagon as it rolls inexorably to collapse!!:(

Would you like to summarise it…

Not really, but I’ll have a go. 😮

Firstly, I was surprised that the UK entered the EU (or the EEC) before Spain…..I would never have guessed that!

Anyway, Spain seems to be the latest country that is in need of a bailout from the EU but the way that Spain got into this position seems to be different from most other EU countries (with the possible exception of Ireland).

The programme charts Spain’s incredible growth from one of the most backward European countries, under the dictator General Franco, to one of the major economies of the World.

Initially very low labour rates brought foreign investment and a good climate brought tourism to produce very rapid growth but also the autonomy of the various, (almost) self-governing, regions in Spain and very little regulation of the many local banks brought a housing boom. This housing boom, later fuelled by low interest rates (for Spanish banks and government) thanks to entry into the Euro, brought its own prosperity and led to over-confidence and a ‘housing bubble’. House prices continued to rise despite massive house-building schemes. The availability of cheap credit to the local banks encouraged them to overreach themselves, offering 90% – 110% mortgages to those that couldn’t really afford to borrow so much, but the banks were happy because most of them also owned their own estate agents, and (of course) their own estate agents happily overvalued the property the bank loans were made against.

Then suddenly, in 2008, there was the ‘sub-prime’ mortgage crash in the US (that had many similarities to the Spanish mortgage market). International credit suddenly became much more expensive and the local Spanish banks were unable to service the vast loans that they had taken out. With no more money to lend the local Spanish banks cut-off the supply of cheap mortgages and this brought about a property crash. Suddenly the market seemed flooded with unsold property, prices slumped, the vast house-building schemes ground-to-a-halt and thousands of construction workers started to be laid-off. People began to default on their mortgages and the banks found themselves with large international debts, which they couldn’t service, plus huge numbers of repossessed houses; houses that they had artificially inflated the value of.

Ironically, the central government of Spain was doing a much better job than most other economies in Europe; Spain was earning more in tax that it was spending on its population. But there were problems: the local banks were on the point of collapse and had attempted to hide their debt problems, the local governments had also borrowed huge sums of money for ‘vanity’ projects and could not afford to repay their debts and there were now high levels of unemployment in Spain after the collapse of the house-building construction industry. This drastically cut tax income and raised unemployment costs.

The Spanish central government tried to solve the banking crisis by merging the failing local banks into much larger national banks but, as one commentator put it, ‘if you build a big bank out of bad small banks, surprise, you get a bad big bank’! So this is where Spain needs a bailout for its big banks. The problem seems to be that Spain doesn’t seem to want to accept the austerity package that the EU is offering in return for the bailout; Spain thinks that it is too big to be allowed to fail and so the EU will be forced to save it…

…these are dangerous, uncharted waters for the EU to be entering!

I wouldn’t recommend watching it through as it is presented by Paul Mason who is only marginally less irritating than Robert Peston!! Why does the BBC struggle to find correspondents who speak standard, straightforward English without quirky vocal mannerisms and irritating regional inflections?

Would you like to summarise it for those of us who don’t want to sit through an iPlayer re-run please?

Moggy