Dimitris Rapidis

Hasta cuando?

Despite austerity measures, the Spanish economy continues to shrink. Public debt is increasing, whereas the banking system is more fragile than before. The problematic real estate loans continue to increase, despite the prospective cut and the reposition to the big basket of the “evil bank”. Meanwhile, the political environment does not encourage positive developments.

In fact, there is nothing to believe that the exit from the tunnel of recession is close for the next months in a country where the quarter of workforce lives with unemployment grants or it has been completely deserted by the incessant period of skyrocketed unemployment. The government of Mariano Rajoy is keeping blaming as laicists all those discussing about the misery of the Spanish economy, despite the fact that the latest reports from the Central Bank of Spain confirm this painful reality.

Six months after the creation of Sareb, the “evil bank” that absorbed the toxic elements of the banking system, the biggest banks of the country are found in worse condition comparing to last December 2012. The rate of the non-performing loans climbed last June to 11,6% (i.e. in relevance with the entity of loans), which is in fact the very same rate as of the onset of Sareb. Practically, this means that the 30 billion euro that Spanish banks got rid of in order to achieve consolidation were pointless, as within a very short period of time the Spanish banking system is again in the same quagmire with “red loans” reaching 176 billion euro.

Meanwhile, the realty being gathered by the banks as mortgage or through auction from inconsistent debtors has significantly lost its value comparing to a six-month period. Predictions are even worse, as a growing number of bankers estimates that this fall will keep pacing ahead and loans will keep increasing in the first trimester of 2014. Above all, the problem gets even more complicated when the political establishment, and mainly the Spanish government, cannot react and change conditions and prospects.

In the almost 20-month leadership of Mariano Rajoy Spain has turned to be a gigantic experimental factory for all “remedies” of austerity politics. These “remedies” never took into consideration the fundamental elements of democracy, let alone the fact that austerity is applied to nominal economy and not to real economy. In this case, although the Spanish government has decided to push over with more austerity, even the goals of nominal economy are not met.

Alongside the facts over austerity and overdebtedness, there are some additional variables that turn the deprived and exhausted citizens against the political realm of the country. It is not only in Greece that political parties have been repeatedly bribed (e.g. by Siemens for instance), but also in Spain -and elsewhere possibly- where PM Rajoy has admitted that he has being “involved” in money laundry streaming his party over the past years. And all these, when Rajoy’s party has completely abandoned pre-electoral promises about putting the country in the growth path and efficiently combat recession. So far so bad.

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  1. I find the opening of the article quite strange. Austerity measures are not done to incentive growth, so why “Despite austerity measures, the Spanish economy continues to shrink.”?

    Spain, Italy and Greece are facing – even if in different levels – the same problem. Keep state budgets in order and reverse the declining trend of the economy, notably a vicious circle. That’s really not easy. They have to reinvent their economies, but how? Big question. I would not criticise Rajoy or other governments for not having the magic stick.

    1. Dear ClaudioB,

      Thank you very much for your comment.

      As of the opening of the article, I believe that austerity was supposed to be implemented in order to consolidate public economy, which is to reduce spending cuts, increase taxation, cut social welfare privileges. Ceteris paribus, this policy could control deficit, but in the contrary this is not happening not only in Spain, but also in Italy, Greece, Portugal. And why is that: because there is nothing left to collect, the banking system is keep devouring without control, and trust over the efficiency of austerity programs is completely lost.

      As of growth, it goes without saying that austerity and growth are two opposite policies. Growth will never come through austerity, and austerity will never come through growth. Black & white.

      Further, as of Rajoy, well I believe as in the case of Greece and Italy, that these leaders could form a lobby group and exert pressure to the EU and the foreign lenders. Sometimes the intention values more than the result, don’t you think?

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