CAN SPAIN GET TO GRIPS WITH ITS BLOATED BANKING SECTOR?

The pound has hit 1.25 against the euro this past week, its highest rate since Oct 2008, as Spain struggles to get to grips with its banking sector and Greece contemplates a euro exit. So what next for the continent in crisis, and the exchange rate?

Here is my latest update of the British pound to euro exchange rate, covering the 8th to 15th May 2012. This is intended as a brief guide to what’s affected the exchange rate this past week as well as what might happen next, to help you decide if now’s the best time for you to change currencies.

This Past Week

It looks as though the Eurozone debt crisis is escalating! The UK pound hit its highest point against the euro since 2008 this week (at 1.2540) as speculation Greece might exit the euro inside weeks gripped the market, while Spain failed to put its banking sector to rights.

The good news is that Europe has avoided falling into official recession, but while the political outlook looks so uncertain that is unlikely to aid the euro.

Spain’s Banking Headache

In Spain, the problem is that the banking sector is struggling to get to grips with the billions in bad loans it’s suffered since the housing crash in 2008.

This past week alone, Bankia (the 4th biggest bank in Spain according to assets, and itself the product of a merger of seven illiquid cajas) was nationalised, while 4 other cajas are also looking at joining forces.

This process should prevent Spain’s banks going bankrupt (which would obviously be disastrous for the public finances) but it fails to deal with the underlying problem of bad debt. The markets see this, which is why the euro has weakened in spite of Spain’s action.

In the medium term, this is likely to remain a problem too.

Is A Grexit (Greek Exit) Coming?

In Greece meanwhile, the sudden dominance of anti-euro parties on the political front means we’re facing the increasingly real possibility that Greece will exit the euro.

This accounts in large part for the decline in the euro, as the markets attempt to anticipate such an outcome by selling assets in euros and putting them in locations believed to be safer, such as the UK pound and US dollar.

The problem of course is that a euro exit is completely unprecedented, and has the potential to spark a domino effect across Europe in which all of Europe’s banks become unstuck, while other countries in the grip of austerity such as Ireland also avail themselves of the chance to leave.

So long as this remains possible, the euro looks set to remain weak.

The Next Week

In the short term, the fact that Europe has avoided official recession this week should provide some support of the euro.

However this of course will not help solve the problems in Spain and Greece. So long as Athens remains in political limbo, and the markets view Spain’s banking reforms with scepticism, the euro looks set to remain under strong pressure against the pound.

It would take a disaster in the UK to push the pound back down for long at this point.

Get in Touch

I will return with my next exchange rate update next week.

If you would like a no-obligation quote for transferring your money to Spain, don’t hesitate to fill in your details here and see all the services that we can offer at Pure FX  - where we are always delighted to provide an in-depth response to your queries, free of charge.

Peter Lavelle – Pure FX

BALTASAR GARZON

So, Judge Baltasar Garzon has been banned from acting as a judge in Spain for eleven years, having been convicted of overstepping his authority when he authorised the wire-tapping of conversations between detainees and their lawyers in the notorious (and on-going) Gurtel corruption case.

Garzon’s removal from the Spanish judiciary has been nothing if not controversial and has occurred amidst ferocious accusations that Judge Garzon is being victimised by Spain’s conservative establishment.  This is not surprising, as the Gurtel case has strong political connotations.

In fact, the Gurtel case revolves around corruption within the Partido Popular political party, which is Spain’s ‘conservative’ party and the party that now holds majority power in Spain, under Prime Minister Mariano Rajoy.  The corruption allegations centre on bribery, money laundering and tax evasion on an epic scale involving businessmen and PP politicians in Valencia, Madrid and elsewhere in Spain.

Although at the time of the corruption investigation by Judge Garzon (2007-2009) the PP party was the national opposition party in Spain, it did hold absolute power within the governments of a number of the 17 Regions of Spain.  So, the allegations of corruption had real meaning, made all the more compelling by the fact that the PP party had lost the last two national elections to the PSOE party.  With a further national election soon to be fought (November 2011), any adverse publicity that could damage the PP was extremely undesirable – and likely to offend deeply entrenched interests.

So, Judge Garzon, a notably left wing judge (an ex-PSOE minister), must have known that his appointment to investigate the Gurtel case was potentially a ‘poisoned chalice’.  Indeed, the Gurtel case clearly required the greatest circumspection, given its ‘political’ nature, and Garzon must have recognised that his every move would be analysed, in case political capital could be made, one way or another, out of any mistake or revelation.

Nonetheless, Garzon ordered wire-taps to be made of conversations between the Gurtel case lawyers and their client detainees, despite this being permissible under Spanish law only in cases of terrorism.   The reason Garzon made the decision appears to lie in the fact that he believed that the detainee’s lawyers were actively aiding their clients in hiding money that was relevant to the case.

In other words, Garzon seems to have believed that the detainees’ lawyers had moved from being ‘lawyers’ to the detainees – to ‘co-conspirators’ with the accused.

Well, few people would find Garzon’s actions either wise or, frankly, correct.  Of all people he will have known of the absolute confidentiality of conversations between lawyers and their clients – and that this sanctity must not be broken (however tempting!).  As a judge, he may even have been under a duty to ensure that it did not happen.

So, however regrettable, it is difficult to believe that Garzon did not, directly and knowingly, transgress Spanish law and the human rights of those involved.  Certainly, this is the conclusion that the seven Spanish Supreme Court judges adjudicating his case seem to have come to, thus Garzon’s conviction and banishment as a judge.

My own feeling is that Garzon fell into the trap of believing that the ‘ends justify the means’ – which is a very odd line for a famed human rights lawyer to take.  After all, the logical next steps are waterboarding, followed by something like Guantanamo Bay – actions that no true democracy in the world should ever countenance.  Irrespective of the merits of a case.

Judge Garzon’s problems have not finished, however, with his conviction for ordering wire-tapping in the Gurtel case.  Indeed, he is soon set to stand trial on a matter of far greater emotional importance to the Spanish people.  This relates to his attempt in 2008 to investigate alleged atrocities during the time of the Spanish Civil War (1936-39) and the dictatorship (1939-75) of General Francisco Franco.  He did this despite an Amnesty passed in 1977 that specifically forbade any investigations into political crimes that occurred prior to 1976.

Furthermore, Judge Garzon faces a further trial – which centres upon why he dropped a case against a Santander director in 2006, following payment by the bank for courses he gave in New York in 2005 and 2006.

What are you to make of Judge Garzon- so famous for his issue of an international arrest warrant in 1998 against General Pinochet (Chile’s dictator between 1973 – 78)?

Well, it is hard not to come to the conclusion that Garzon is something of a ‘loose cannon’.

Regardless of whether Garzon was ‘right’ about the lawyers in the Gurtel case or the need to account for the atrocities of the Franco era, he had been appointed by the Spanish state to act as a judge and judges administer state law – not make it.  That is something that is done by elected representatives of the people, within a legislature, and is something that Garzon seems to have forgotten.

Indeed, I have a horrid feeling that Garzon (subject to being found not guilty of corruption in the Santander case) is a maverick judge of probably sound sentiments – who has been unhinged by his own arrogance.   The latter I think has been his downfall and there have been plenty of powerful people on the right of Spanish politics who have been waiting eagerly for it to happen…

Nick Snelling – Culture Spain

FURTHER RELEVANT INFORMATION ABOUT CORRUPTION IN SPAIN

Valencia debt and outrageous corruption

Corruption in Spain – the King’s finances revealed

Corruption in Spain – still a problem

CORRUPT POLITICIANS IN SPAIN - RIDING ROUGHSHOD OVER EVERYONE

A fascinating article was published by El Pais a few days ago, which should be required reading for anyone living in the Valencian Region (as I do).  It confirms, of course, what most commentators have suspected for years and is a powerful and stinging attack upon politicians within the Valencia Region, albeit from a left of centre newspaper.

However, the fact of the matter is that the Spanish politicians who have controlled the Valencian Region (the three provinces of Castellon, Valencia and Alicante) for years – have been from the PP (‘conservative’) party and not from the discredited PSOE (‘socialist’) party who, incompetently, led the national government of Spain for almost eight years.

And which party now holds national power in Spain? 

You guessed it – the PP party under new Prime Minister Rajoy, who has, within days of taking power, broken pre-election pledges! 

Rather more wisely, despite praising the Valencian PP party and their ex-leader (Francisco Camps) for years, Rajoy has appointed not a single Valencian PP party member out of his 38 ministers.  He is clearly distancing himself from Valencia and its mad and corrupt politicians, who have driven the Valencia Region to the edge of bankruptcy.  Self-serving and stupid they have taken corruption in Spain to a state of the art and certainly bring into question the ‘myth’ that the PP party is the ‘natural’ Spanish political party to choose for sound economic governance.

Truly, it is worth reading the very well translated article below, from El Pais – a sad eye-opener for anyone who has been wondering what has been going on over the past few years and why the Valencian Region is now in such a wretched financial state.

 Nick Snelling – Culture Spain

Valencia’s Delirium

For many decades the Valencia autonomous region was considered to be one of the Spain’s success stories – economically buoyant and always at the forefront of regional development. Indeed, a model regional government to be envied by other communities. Mariano Rajoy, Spain’s new prime minister, announced in 2008 that the Valencia Consell, under Francisco Camps, was the model he wished to emulate in Madrid if he came to power.

Today it is the most indebted region in Spain and the banks that were once proud to show the Valencia regional flag in their advertising are no more. The number of cases of corruption presently in the courts runs into double figures and even the faithful of the Partido Popular have been heard in private referring to it as Spain’s Greece. Practically every institution and official and semi-official organism and entity is up to its ears in debt. ‘If we were a savings bank we would have been taken over by the Bank of Spain’, said one PP leader in the region, adding, ‘but fortunately we are not’.

The most far-reaching corruption case is the Gürtel fraud, now shown to be a calculated plan to channel public money into private pockets with the passive collaboration of high-up officials. It began with the mega-theme park project Terra Mítica in Benidorm, funded mainly by local savings banks CAM and Bancaja. The park cost 377 million euros to build. It now belongs to Aqualandia which took it over for nothing but an agreement to clear the debts of 65 million. In order to carry out the project the Valencia government expropriated 10 million square metres of land, and when the sky started to fall in the first reaction was to get out of bankruptcy by selling off a large part of the land to a real estate developer, Enrique Ortiz, who is currently implicated in the Gürtel and Brugal cases.

Many other projects went the same way as Terra Mítica. Initially they were promoted as being for public benefit but ended up becoming property speculations. Official bank accounts were plundered almost to the point of becoming an institutionalised activity in which the businessmen collaborating with the corrupt and negligent politicians ran little risk of failing to make zillions. A company set up to handle the sewage for Valencia and 16 other municipalities was a complete free-for-all. 28 people are accused, among them all the ex-executives of the company, Emarsa, together with PP officers and numerous suppliers.

The regional president, Francisco Camps, behaved like a ruling monarch as he revelled in his power and newly-acquired riches. He is now in court daily defending himself against corruption charges. When in 2007 Bernie Ecclestone announced that Valencia would be the venue for a new Formula 1 competition, it was on the condition that Camps won the regional elections. At first the government told the public that the new race circuit would not cost taxpayers a penny as funding would be provided by the developers of the local town’s urban redevelopment, but in fact the Consell put up 80 million. The seven races programmed for the circuit would have cost taxpayers 244 million more, to cover payments to Ecclestone, regional TV, and infrastructure.

The disastrous Castellón airport project was another open tap through which money flowed out of official coffers, and as a result of corrupt and downright bad governance Valencia has been left to all intents and purposes without a financial infrastructure. Local banks CAM and Bancaja, once the third and fourth in national ranking, have been taken over or are in forced administration, as is the Banco de Valencia.

Without the crisis and the bursting of the real estate bubble it is possible that the situation could have been kept from becoming a public scandal, but when last year the central government had to pay off a debt of due to Deutsche Bank by the Valencia Community, there was nowhere left to hide, and a feeble attempt to raise funds by trying to place 1,800 million local government bonds was a total fiasco, not helped by Moodys and Fitch rating them as junk bonds. Rajoy has imposed harsh conditions but austerity may not be the complete answer. Creditors fight daily to get paid what they are owed by official entities and the end is not even in sight.

 Translated from an article by El Pais

GANDIA BEACH, EARLY MORNING IN SEPTEMBER

I saw an interesting comment in El Pais recently, which stated that the President of Catalonia, Artur Mas, was justifying significant spending cuts as a way of ‘preventing Madrid from meddling with Catalan finances’.  This would, a colleague said: “blow away our financial autonomy” and “violate the rules of the game set down in the Constitution.”

Yes, indeed!

However, one of the questions that need to be asked at the moment is whether the Autonomous Regions in Spain should really exist – or at least have as much independent power as they do.  I say this in the light of the incredible levels of state bureaucracy that exist in Spain and what appears to be the uncontrollable financial independence of the Autonomous Regions – some of which are clearly in deep financial trouble.

Indeed, recently, the Autonomous Region of Valencia had to turn to the national government of Spain to help out with an overdue payment to the Deutsche Bank.  This was, evidently, the first time the national government of Spain has had to ‘bailout’ a Region, with Valencia (notoriously) one of the most indebted Regions in the country.  Valencia stated that this was just an ‘isolated liquidity problem’ but few people can seriously believe this.

In fact, in the case of the Autonomous Region of Valencia, it appears that the Region by the end of last year had debts of some 2.4 billion Euros, which initiated S&P in December 2011 to downgrade Valencia’s credit rating to BBB (which is just above junk bond status!).

The state system in Spain – an hilarious insight!     Government in Spain – the different levels!

Needless to say, Valencia is now frantically trying to curb spending with the new President of the Valencia Region (Alberto Fabra) announcing cuts of 1 billion Euros which, amongst other things, will mean the drastic reduction of public agencies from 46 to 6.

Of course, what is notable is that the previous President of the Valencia Region (Francisco Camps) stepped down last year because he was embroiled in the Gurtel corruption case – which provides a shocking ‘window’ into how decisions are made by many politicians in Spain and why many decision are often so poor.  All too often, sadly, they are quite simply ‘driven’ by a relentless culture of corruption in Spain.

Meanwhile, it is simply staggering that the Valencia Region has taken so long to make cuts – which have been undertaken so late that there is, undoubtedly, no choice except to make them devastatingly savage.  Indeed, so brutal may the cuts turn out to be that they may actually significantly damage the very fabric of the Valencian Region.

But why were these cuts not made before?

After all, we are now some four years into the economic crisis in Spain and even the tardy and incompetent socialist government under Zapatero (who lost the Spanish national elections in November 2011) was imposing austerity measures a year or more ago.  Clearly, Autonomous Regions like Valencia were not listening to the national government of Spain or simply refused to follow their ‘lead’.  I can only imagine that this will have been replicated by the town halls of Spain (8,137 of them!), which also have an autonomy that anyone in Northern European countries would consider extraordinary.

The Spanish economy – Are the Autonomous Regions of Spain Bankrupt?

The point I am making is that for political reasons, which go back to the death of General Franco (1975) and the Constitution of Spain (1978), the national government of Spain has limited powers over the country as a whole.  This is great, in theory, in allowing decisions and the operation of ‘democracy’ to be devolved to its lowest levels, within a country where many Regions guard their independence from central government ferociously (such as Catalonia or the Basque Country).  However, the result is that the central government of Spain has difficulty in imposing its will, within a country replete with a nightmarish bureaucracy.

Indeed, as I have written before (and excluding the EU), Spain’s decision making apparatus (from top to bottom) includes: the National government based in Madrid, the Regional governments (for each Autonomous Region), the Diputacións (for each province), the Mancomunitat (groups of town halls) and all the individual town halls themselves.  The cost of this absurd structure (albeit driven by the intrinsic culture of Spain) must be incredible – it is unwieldy and is the last thing any country needs in a time when everything needs to be streamlined, ultra efficient and quickly responsive.

Equally (and dangerously!), I have my doubts that the central government in Madrid really ever knows fully what is going on within the state apparatus of Spain – along with most commentators or analysts.  After all, knowing what the Spanish national government’s finances are may be one thing, but those of the Regions, Diputacions and town halls in Spain?  I suspect these ‘conceal’ massive debts that have been long out of the control of Spain’s national government and beyond any logical and controlled governance – let alone accountability …

Nick Snelling – Culture Spain

The state system in Spain – an hilarious insight!

Government in Spain – the different levels!

Corruption in Spain – the King’s finances revealed

Corruption in Spain – still a problem

2011, a summary and predictions for 2012

The Spanish economy and debt in Spain – the town halls are in trouble

The Spanish economy – how bankrupt is Spain

The Spanish economy – Are the Autonomous Regions of Spain Bankrupt?

MADRID LOOKING FABULOUS - A CITY OF CULTURE TO RIVAL THE BEST IN THE WORLD!

So, 2011 gradually ebbs away – a year that many people in Spain will be pleased to see disappear, hoping that 2012 will herald better times ahead.  Unfortunately, I fear that may not be the case and there are compelling arguments to suggest that 2012 may be more difficult and challenging for Spain than 2011.

So, how does one round up 2011?

Well, I think reactions to Spain in 2011 depend very much upon who you are, of course, as the feelings of a holidaymaker to Spain will be very different from someone living in Spain trying to sell their house or a Spaniard recently out of work.

Certainly, for the Spanish, as a whole, 2011 has been notable for a final recognition that the economic crisis in Spain is for real – and here for the foreseeable future.  This reckoning has taken some considerable time to enter the consciousness of the Spanish who, for a long time after 2007, seemed genuinely to believe that the economic crisis in Spain was just a ‘blip’ in Spain’s upward progress, rather than the Tsunami that it has turned out to be.

However, this year has dispelled any illusions, not least through raw and unavoidable facts such as the 23% unemployment rate in Spain and the fact that 49% of 18 – 24 year olds have no work – the tragedy of which touches everyone, in every strata of Spanish society.  Meanwhile, throughout the year the bank of Spain has been rescuing the appallingly badly run Cajas (savings banks) which have, notoriously, provided their failed directors with fabulous pensions and compensatory payments.

Banking scandal Spain          The Spanish economy – how bankrupt is Spain

The cause of Spain’s economic crisis has been the crash of the Spanish construction industry.  In 2007, including peripheral industries, the construction industry in Spain may have accounted for as much as 30% (or more) of Spain’s GDP and yet by this year (2011) cement use in Spain had fallen to its lowest level for 27 years – indicating that the construction industry in Spain has, more or less, ceased to exist.

If this was not bad enough there may be as many as 3 million properties for sale in Spain (no-one really knows!) of which some 1 million are new builds.  This massive excess in supply will take a generation to clear with some Spanish building projects so ill thought out and defective that they are (and always will be), to all intents and purposes, probably worthless…

The Spanish, of course, took their revenge on the incompetent socialist party of Spain (PSOE) in two elections in Spain in 2011 – the regional and local elections at the beginning of the year and the Spanish national elections in November.  Utterly discredited for their astonishingly incompetent management of the Spanish economy, the socialist party of Spain were resoundingly defeated in all the elections and replaced by the Spanish conservative party (the PP) led by Mariano Rajoy.

However, the new conservative Spanish government is unlikely to have any political ‘honeymoon’.  Indeed, it is hard to know how Mariano Rajoy can regenerate the Spanish economy in the short term as he is faced with: an economy with a probable 30% GDP hole (the Spanish construction industry), high unemployment, low income from taxes, falling house prices (down 35-50% on 2007 values), high debts and banks that are wobbling.  Further cuts of government services are inevitable, of course, but these are unlikely to actually revitalise the economy and may lead to social unrest.

Certainly, one of the most notable aspects to 2011 has been the lack of violent social unrest despite a population that has shown signs of being restive.  Indeed, instead of riots, Spain saw the emergence of the remarkable Indignado Movement (15M).  Indignado translates as ‘outraged’ and this was, understandably how many Spaniards (of all ages) felt as they filled the squares in many towns and cities in Spain during the year – albeit in a uniquely peaceful manner.

Interestingly, the Indignado Movement in Spain was most verbose about the ‘system’ in Spain failing – not democracy but the way that democracy is run here.  By this, they meant that there was little real political choice as governments in Spain, are effectively always drawn from a two party system (the socialist PSOE party and the conservative PP party).  Furthermore, the Indignado Movement was furious with the corruption endemic in politics in Spain, leading to frequent abuses of power.

Corruption in Spain, still a problem          Spanish conservatives win general election

Of course, the Indignado Movement has spread with ‘sister’ movements across America (Occupy Wall Street) and in London.  Unfortunately, whilst some of the statements of the Indignado Movement often made a good deal of sense and had considerable support, the Indignados had no realistic solutions to Spain’s problems.  Indeed, the Indignado Movement is inchoate as an organisation and has had no perceivable impact upon ‘real life’ politics in Spain (they did not contest the Spanish national elections).

To add to the economic woe of Spain, the town halls in Spain are also in meltdown.  This has been a badly kept secret for some time but this year the Pandora’s Box of local authority debt in Spain has been opened up – to release some scary facts.  Indeed, some town halls in Spain are so broke that they have been unable to pay their staff for months with suppliers of services and goods waiting, sometimes, for over a year to be paid.  In some cases, local authority construction and infrastructure works have been left half completed with little hope of completion for years to come.  Meanwhile, the debt to income ratios of some town halls in Spain is quite simply breath-taking with any significant reduction to these debts likely to take a generation.

So, by anyone’s standards these are hard times for the Spanish and, in truth, the ‘hard times’ are far from over with the threat of collapsing banks and a Eurozone meltdown a Damocles’ sword waiting to make matters worse.

A saving grace for Spain has been the tourist industry in Spain which saw an excellent year (an 8.4% increase in tourist spending).  Unfortunately, this was not due to Spain offering something greater/better/more exceptional than usual but through the wise desire of holidaymakers to choose safe Spain as opposed to Greece or the deeply troubled countries of North Africa.  Nonetheless, this boom was welcome but should not be taken for granted as the North African countries fight to get tourists to return.

Meanwhile for foreigners in Spain life here has been defined mainly by whether they have to earn an income (incredibly hard) and or sell their property (almost impossible).  Either of these two problems has been devastating and those who have sold their properties in Spain have had to do so at heavily discounted prices – often leaving them with a greatly reduced equity for their next purchase.  If the intention had been to return to Northern Europe then this will have had significant, and obvious, consequences.

However, for those with a secure pension and no desire to sell their properties in Spain then the year will have been like any other.  The climate has not changed and is wonderful, it is cheap to eat and drink out and the quality of life here is very fine.

Perhaps more perplexing has been the problem for people thinking of moving to Spain (the subject of a book of mine published earlier this year).  The question has been whether it is the right time to buy (the bottom of the market?) and, more importantly, whether the Eurozone would crash and Spain return to the Peseta?

Well, the evidence seems to suggest that there has been a marked rise in foreign buyers coming to Spain to buy property, particularly from Northern Europe (excluding the British).  Certainly, there are countless bargain properties in Spain and a clever buyer can probably insulate himself from any further drop in the housing market by picking carefully and driving a hard bargain.

However, I suspect that the Spanish property market will fall again in 2012, possibly by between 5 – 10% – and that is not taking into account any Eurozone crash or return to the Peseta.  So, it is a time for caution, if you are a potential buyer.

Spanish property Market       Bargain properties in Spain

That said, Spain still has a terrific amount to offer both tourists and those seeking to live in Spain permanently.  The country has fantastic beaches, great mountains, endless outdoor activities, modern shopping, beautiful towns and cities and a well-developed infrastructure to deal with foreign tourists and provide them with a superb holiday.  The culture of Spain is as interesting as ever, the museums excellent and travel through Spain fun and stimulating.  It is a great country with an accessible language and a nuclear society that is still functioning well, amidst a kindly and tolerant people – who deserve better than their lousy political leaders and the awful year that they have just experienced…

Nick Snelling – Culture Spain

FURTHER RELEVANT ARTICLES CONCERNING SPAIN IN 2011

Book on: How to Buy Spanish Property and Move to Spain – Safely!

The Spanish economy – how bankrupt is Spain

Corruption in Spain, still a problem

Demonstrations in Spain what the Indignados are saying

Spanish property Market

Bargain properties in Spain

Banking scandal Spain

The Spanish economy and debt in Spain – the town halls are in trouble

Spanish conservatives win general election

Indignado translates as ‘outrage’ and is an apposite name, given the fury of the Indignados at the failure of the Spanish ‘system’ to provide fair and proper governance.  Indeed, the lack of it in Spain has resulted in the present desperate economic crisis in Spain with unemployment at 22% and a future for most people that is gloomy, beset by debt and lacking in hope.

Of course, the lunacy of the past few years has not been restricted to Spain.

Indeed, the outrage of the Spanish Indignados is mirrored by the populations of many First World countries who feel betrayed by their governments and the existing democratic system.  Self-serving and ignorant politicians, corruption, incompetence, abuse of power, two party politics and the dominance of vested interests have led to an inevitable and terrible economic crash across the Western world.  Jobs are being lost, homes repossessed and the future of people, young and old, has been put on hold – possibly for a generation.

And all of this – after a long economic boom!

Clearly, there is something fundamentally wrong, made even worse by the fact that those most responsible for the problems have not even been sanctioned.  Governing politicians have retired scot-free, state financial regulators have continued in their jobs and bank directors have left their bankrupt institutions for better work or outrageously lucrative pensions.

Ruin an economy, destroy a business and be negligent seems to be the message and all will be well – with no fear of prison sentences or civil action for negligence or fiduciary mismanagement.  So long, of course, as you are a politician, a bank director or a senior state employee too influential or ‘knowledgeable’ to be indicted.

The ‘man in the street’, however, has been left debt burdened, with his business on the point of collapse and his adult children jobless.  Stressed and desperate, he has no chance of being bailed out by anyone.  In fact, he is somehow expected to ‘tighten his belt’ and bail out his own mismanaged country and the institutions he hates most: the banks and, in the case of EU citizens, the EU and its (unelected) government.

Is there any wonder then that people of all ages are outraged and saying much the same thing – that the system does not work!

Of course, it is not democracy that outrages people but the current operation of the democratic system and this has little to do with the triteness of ‘conservatism’ or ‘socialism’ or other political shades.

Indeed, most people treasure democracy but have no doubts that the democratic system itself is simply not functioning as it should: it is not nurturing people, protecting and caring for them and it is not inclusive, fair and helping people to enrich their lives.  In fact, it is the very reverse with the democratic system distorted so much that the welfare of the common man is bludgeoned into irrelevance by vested ‘big’ business interests and the self-serving lunacies of cumbersome central governments run by mediocre politicians.

But is there a better way?

That is the question – and one that has not yet been answered by the Spanish Indignados, within their incoherent fury, or the outraged ‘man in the street’ in other First World countries.

However, there are signs that there are other ways that democracy can work, although they require a change in culture: one centred on inclusiveness and mutual support that can help and enrich everyone – and this has nothing to do with communism!

Two extraordinary examples (Ubuntu and WordPress) can be found on the Internet and these may provide a route map for democratic countries, if the philosophy and actions that they encapsulate can be transposed from cyberspace to the reality of daily living.

On the Internet there is a Content Management System (CMS) called WordPress.  This is an amazingly powerful, sophisticated, effective and user-friendly system used by some 14% of all web sites in the world.  It is ‘industry’ standard, being continually upgraded by experts and is – free.

Yes, free, to anyone!

Why?

Because WordPress has been developed by experts throughout the world, who have a passion for the Internet and a belief that they can help others by providing a vital resource so good that it can empower all those who use it.  The experts involved in WordPress voluntarily provide their time and skill (without centralised leadership), expect no financial reward and do so as their contribution to something that exists to benefit everyone, knowing that, correctly used, any WordPress site can become an income generator.  In essence, they are providing, advice, help and solutions freely (with no ‘strings attached’) to a wonderful system that can make people independent – and help them to take charge of their lives and destinies.

Meanwhile, recently another astonishing (free!) resource has made its appearance on the Internet.  This is called Ubuntu and is a virus free computer operating system (think Microsoft Windows – but better!) which can be installed on virtually any computer.  It is user-friendly, simple to operate, industry standard, fast, secure and stylishly simple– and free! Indeed, not surprisingly, the Ubuntu operating system is already being used by 20 million people worldwide every day.

Why?

For the same reasons as WordPress – because it has been developed and placed on the market by a collaboration of experts who want to make a top quality, essential resource freely available to everyone.

Ubuntu has been ‘led’ by Mark Shuttleworth (one of the first commercial astronauts) who has placed his own resources behind the Ubuntu project, whilst encouraging experts to contribute, for free, across the world.  This he has done through a sense of noblesse oblige (having made a fortune earlier in his life) and through a belief in the African philosophy of Ubuntu.

Ubuntu has many meanings but could be said to be: ‘I am because we are’ – a philosophy of stunning simplicity that is all about the inter-connection of individuals within a society and the mutual commitment we all have to help, contribute and enrich each other’s lives.  This is in direct contrast to societies in the First World where the credo, so well exemplified by the banks, for example, is that ‘greed is good and damn the consequences’.

So, can the philosophy behind WordPress and Ubuntu be brought to play within the democratic system to make it work as it should?

Yes – but a fundamental change in our culture needs to occur.

We all need to develop a profound sense of Ubuntu and retrieve the qualities of integrity and noblesse oblige that seem to have vanished from our societies over the past few generations.  If this is mirrored by our political leaders and industrial oligarchs (and expected of them) then the democratic system will be made to work again.  That way, we shall avoid repeating the ridiculous, horribly destructive, man-made crisis that we face now – which has produced such a dangerous (and justifiable) cause for outrage amongst so many people.

Nick Snelling – Culture Spain
Nick is the co-author of The Laptop Entrepreneur
(being published this week!) and several other books.

THE SOCIALIST PARTY IN SPAIN ARE ON THE ROCKS HAVING SUFFERED A SHATTERING DEFEAT - BUT CAN THEY RECOVER?

Of course, as everyone now knows, the Spanish elections on the 20^th November 2011 resulted in an overwhelming victory for the Spanish conservative party (the PP – Partido Popular).

Interestingly, the turnout for the Spanish elections was very high with 24,590,557 votes cast, which equated to a turnout of 73.85% of those eligible to vote.

The Spanish conservative party (PP) obtained 10,830,693 votes, which was 44.62% of the votes cast whilst the socialist party of Spain (PSOE – Partido Socialista Obrero Español ) gained 6,973,880 votes and 28.73% of all possible votes on the day.

The third most popular party were the Izquierda Unida (a left wing party) which had a mere 6.92% of the votes cast and 1,680,810 votes in total.  In itself, this yet again shows that the two party political system in Spain is effectively unassailable – despite the Indignado Movement’s protests that it provides the electorate with little real electoral choice of government.

In fact, the PP party in Spain won 186 seats in the Spanish parliament (out of a possible 350), which was the greatest turn around that they have had since the 1978 Spanish Constitution – when Spain became a modern democratic state following General Franco’s dictatorship (1939-75).

However, in turn, the Spanish socialist party (the PSOE ) had their worst defeat since the Spanish Constitution and now have only 110 seats in parliament.  This was probably as bad as they had expected but it is, nonetheless, a punishing result.

Politics in Spain          Politics and democracy in Spain

Indeed, so badly have the PSOE party been mauled that there is even talk now about who will be the successor to the head of the PSOE now that Prime Minister Zapatero is retiring (thank Heavens!).  This was always expected to be Zapatero’s long standing deputy Alfredo Pérez Rubalcaba but there are rumblings that other candidates may step forward for election at the party’s national convention.

The problem for any successor to Zapatero is that of disassociating themselves from the disastrous socialist government of the past seven years – if the electorate are to be seduced again by the socialist party in Spain.  This means that someone like Rubalcabe, who has been in the Spanish government since Zapatero won his first election in 2004, may not be the right person to take over the leadership.  Inevitably, Rubalcabe will be identified with every poor decision that the socialists took during their recent seven years of government in Spain and thereby be an easy political target.

But who is there better qualified than Alfredo Pérez Rubalcaba?

Well, that is a moot point and only time will tell as to who replaces Zapatero.  However, I suspect that a fresh leader of the Spanish socialist party is needed and one who can take advantage of the inevitable forthcoming unpopularity of Prime Minister elect Mariano Rajoy, as he is (inevitably) forced to make deep cuts to Spanish government spending.

To date, Mariano Rajoy has yet to appoint his ministers and he has made no precise explanation of how he is going to resolve the economic crisis in Spain, even though he is under tremendous pressure to do so.  Certainly, the markets have provided him with no honeymoon, as Spanish short term bonds were, on Tuesday, more expensive than those of Greece – which is ominous.

Unfortunately, the Spanish Constitution means that Mariano Rajoy will not take over as prime minister of Spain for around another month – however unbelievable that may sound!

Under the Spanish Constitution of 1978, any in-coming government needs to wait for 14 days after elections in Spain to make sure that there have been no miss-counting of votes or problems with the electoral procedures.  After that, there are various formalities that mean any actual transfer of power occurs at a progress that is positively stately – with Mariano Rajoy unlikely to take the reins of power until around the 20^th December.  This slow progress in the middle of a crisis is absurd and the last thing that Spain needs…

Nick Snelling - Culture Spain

FURTHER RELEVANT ARTICLES ON POLITICS IN SPAIN

Politics in Spain

Politics and democracy in Spain

THE YEARS HAVE PASSED...BUT THE DOGS ARE THE SAME ONLY THEIR COLLARS HAVE CHANGED'

So, as widely anticipated, the Spanish conservative party (the PP – Partido Popular) has won an overwhelming majority of seats in parliament after yesterday’s General Election in Spain.  Meanwhile, the Spanish socialist party (the PSOE – Partido Socialista Obrero Español) has been badly defeated and has finally been punished by the electorate for its gross negligence in mishandling the Spanish economy over the past seven years.

The new prime minister of Spain will now be Mariano Rajoy and he will take over on the 20^th December 2011 and walk into one of the least envious jobs in Europe because, somehow, he has to prevent Spain from going into meltdown.

Mariano Rajoy

Certainly, the sheer scale of the problems facing Mariano Rajoy as Prime Minister (Presidente) of Spain are daunting in the extreme and I suspect that any ‘popularity’ is illusory and will be brief.  Indeed, like so many general elections, the reality is that the existing Spanish governing party (the socialists) lost the election rather than the Spanish conservatives winning it by merit and popularity.

In truth, in Spain there was no other viable alternative to the Spanish electorate than the conservative party in Spain – a point made by the Spanish Indignado Movement, who have stressed repeatedly that the ‘system’ does not work, as effectively the national Spanish government is only ever drawn from one of two parties.

Indeed, as the Indignados state, there was therefore no real choice and I am reminded of the Spanish saying about political parties and politicians: ‘los perros son los mismos, solo han cambiado sus collares’.  This translates as ‘the dogs are the same, only their collars have changed’, a wonderful expression that shows how (justifiably) world-weary and sceptical the Spanish are about their politicians.

Spanish economy – meltdown?

Protests in Spain – is democracy in Spain in danger?

Of course, rather like the UK, the Spanish conservative party is perceived to be able to manage the Spanish economy better than the Spanish socialist party.  So, I think they were the obvious choice for most of the Spanish electorate who are now more than aware of how profound are the problems of the Spanish economy.  That said, it has taken a few years for them to realise the true horror of the crisis that started with the property bust in 2007.  Certainly, for a couple of years, the Spanish economic downturn was considered as no more than a temporary dip, before the economy would power forth again… a fat chance, to coin a phrase, and a delusion brought on by far too many years of easy money!

The question is what can Mariano Rajoy and the new conservative government of Spain do to reduce the horrendous unemployment in Spain (currently around 22%), relieve the property crisis and straighten out the debt laden banks?

Politics in Spain

Politics and democracy in Spain

Frankly, apart from tinkering around the edges of the economic problems in Spain, I can see no easy or quick solutions – despite those being required with the very greatest urgency.

As I mentioned in a previous article, whilst clearly severe cuts and austerity measures will be undertaken they are the ‘easy’ part of sorting out the problems.  However, as any businessman knows, you can only cut so much of anything before you run out of things to cut and start to damage more than you are trying to fix.  Meanwhile, really clever and creative solutions are needed to regenerate growth, reduce unemployment, satisfy a restless population and gain tax receipts.

Does Mariano Rajoy have ‘really clever and creative solutions’?

Well, no-one knows because Mariano Rajoy and the conservatives in Spain were exceptionally careful not to reveal much about what they would do to rectify Spain’s problems during the Spanish election campaign.

The trouble is that if the new government of Spain does have genuine solutions then most people will, I suspect, be amazed.  Most hope so (obviously) and sentiment will rise in Spain for a short time based upon this optimism.  But, I fear, that naïve ‘optimism’ is all that it will be and that the structural problems of the Spanish economy are so serious that no short term solutions exist – only a period of increasing (and frightening) hardship with potentially severe social unrest to be expected.

Nick Snelling – Culture Spain

FURTHER RELEVANT ARTICLES ABOUT POLITICS IN SPAIN

General Election Spain – problems ahead or solutions?

Spanish economy – meltdown?

Protests in Spain – is democracy in Spain in danger?

Politics and democracy in Spain

Demonstrations in Spain what the Indignados are saying

Spanish Revolution

Banking scandal Spain 

AN APPROPRIATELY TATTY ADVERT FOR THE SOCIALIST PARTY (PSOE) IN SPAIN

We are now only singular days away from the General Election in Spain due for the 20th November, with the consensus being that the current socialist (PSOE) government will meet with a resounding defeat.  Indeed, all the indications are that the conservative (PP) party will gain power and probably with an overwhelming majority.

Of course, the big issue for the Spanish General Election is the economy: its future  management and the urgent need to reduce the current devastatingly high rate of unemployment in Spain (around 22%).  This is a major source of concern to all Spaniards, few of whom do not know someone who is not unemployed – with some 50% of 18-24 year olds now unable to find work.  This is devastating and a terrible indictment of the economic mismanagement of the socialists in Spain over the past seven years of  their government and is unlikely to be forgiven by the electorate.

Certainly, the socialists must be reeling and despiring of any chance of victory in the forthcoming General Election in Spain as the bad news  just keeps coming.

Economic growth this year (no surprises!) is not going to meet the 1.3% target of the government who now believe that growth will be only 0.8% – a figure in line with IMF and a touch above that estimated by the EU.  Meanwhile, the risk premium on Spain’s debt is at frightening heights (6.975%, a 14 year high and close to bailout time!) as international markets fear that Greek and Italian problems will soon carry over into Spain.

Interestingly, according to the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) even the use of cocaine in Spain (virtually manadatory for businessman during the boom) has dropped, which must be final confirmation, if any was needed, of the acute economic problems amongst the common population!

Hooked – the Gateway to Hell (Spain’s battle with cocaine)

Spanish economy – meltdown

Making matters worse for the socialists in Spain is the fact that over the past 18 months they have been forced to do a U turn in a (belaated) attempt to save the Spanish economy and adopt harsh economic policies considered right wing.  This has not been popular with their own supporters who feel betrayed and may, as a consequence, vote for other left wing parties (or possibly abstain from voting altogether).

So, for the socialists in Spain there really is no good news with which to seduce the Spanish electorate.

However, the obvious question is: what can a newly elected government in Spain (of whatever persuasion) do – given the huge problems it will face?

Spain, the Euro and the future of property in Spain

The Spanish economy – how bankrupt is Spain?

Well, Mariano Rajoy the leader of the conservative (PP) party in Spain and the likely winner of the Spanish General Election has been long on talk and very short on saying precisely what he will do.  The only thing that seems crystal clear is that there will be futher austerity measures and that these will be extremely harsh.  Indeed, a pointer to how ‘harsh’ these measures may be was given this week when the regional premier (María Dolores de Cospedal) of Castilla-La Mancha said that there would be a ‘lot of protests” – a scary thought.

AN EQUALLY BATTERED ADVERT FOR THE CONSERVATIVE (PP) PARTY IN SPAIN

The trouble is that cuts are one thing and the rebuilding of the economy quite another with the former ‘easy’ and the latter very complicated – particularly when combined with the added horror of the instability of the Eurozone.

So, what will happen?

It is difficult to imagine the conservative (PP) party not gaining power after the Spanish General Election but I am less confident about the PP’s ability to govern well.  This is certainly not something that they can claim to have done in the Regional and Local governments in Spain that they have controlled over the past few years.  Far from it.

The cost of living in Spain the lethal difference between 1981 – 2011

The Spanish economy – Are the Autonomous Regions of Spain Bankrupt?

In fact, it seems the regional governments in Spain controlled by the conservative (PP) party have been managed as cavalierly as those of the socialists with many burdened with appallingly high levels of debt after years of over spending and poor management.  Equally, there have been a number of truly astonishing corruption scandals surrounding conservative (PP) party members.

So, the PP party is hardly coming into the General Election in Spain ‘clean’.  Indeed,  the Indignado Movement  probably has it about right when it comes to politics in Spain in declaring that neither party has shown itself fit to govern.  This is something voiced by many Spaniards who are heartily sick of the endemic corruption in Spain that seems to drive every political action, one way or another – whether local, regional or national.

However, it is fair to say that the situation politically is not disimilar to the UK with the general perception being that the conservative party in Spain are better at running the economy – whilst the socialists are more humane (the kinder face of politics) but not much good economically.

So, do the conservatives in Spain have the answers to the economic problems in Spain?  Can they really deliver a solution?

Frankly, I rather doubt it.  But then the problems that the next government in Spain inherit are probably well beyond the capabilities of all but the Archangel Gabriel himself.  I suspect that the best we can all hope for is a ‘honeymoon’ period of confidence in the new government of Spain that may just produce sufficient positive sentiment to recharge the economy a little.

Nick Snelling – Culture Spain

FURTHER RELEVANT ARTICLES ON THE SPANISH GENERAL ELECTION

Hooked – the Gateway to Hell (Spain’s battle with cocaine)

Spanish economy – meltdown

Spain, the Euro and the future of property in Spain

The Spanish economy – how bankrupt is Spain?

The cost of living in Spain the lethal difference between 1981 – 2011

The Spanish economy – Are the Autonomous Regions of Spain Bankrupt

Politics in Spain

BBC view of spanish economy

GANDIA BEACH ON THE COSTA BLANCA

Evidently, 39% of all Spanish men have used a prostitute, over 900 cases of stolen babies in Spain under Franco are being investigated and ETA have declared that they will no longer use violence to obtain the independence of the Basque country from Spain.  The PP (conservative party) are still on course to win the General Elections in Spain on the 20^th November, the King has slid into third place as the most respected Spanish state institution and there may be 160,000 repossessions of homes in Spain this year.  Meanwhile, the Indignado movement in Spain is seeing itself mirrored worldwide including in London and New York.

Prostitution in Spain

The most ‘catchy’ headline recently has been that 39% of all Spanish men have used the services of a prostitute in Spain, according to the Association for the Reintegration of Women in Prostitution (APRAMP) who have produced a new guide.

I have to say that my first question would be how on earth APRAMP came up with this quite precise figure (39%)?  However, if accurate it further illustrates the acceptance of prostitution in Spain, which is curiously neither fully legal – nor illegal.

Certainly, APRAMP’s 39% exceeds that of Spain’s Institute of National Statistics (INE) which, in 2003, estimated that just over one in four Spanish men under the age of 49 had experienced sex with a prostitute in Spain.  Either way, it is a lot with Spanish prostitution being very overt, in direct contradiction to the myth of Spain being a hard line, repressed and very conservative, Catholic nation.

A few years ago I was commissioned to write a couple of articles about prostitution in Spain ‘Clubbing Together’ and ‘Confessions of a Call Girl’, both of which show the complexities and real extent of the sex industry in Spain.

Stolen babies in Spain

I was appalled to see an article on the BBC concerning stolen babies in Spain.  This is a story that seems to have raised its ghastly head from the time of the dictatorship under General Franco (1939 – 1975).  It seems that babies were removed from politically undesirable parents and then handed to those who supported the fascist regime.  As time went on political undesirability was extended to those who were considered economically or morally poor and then, it seems this became mixed up making money from the trade of Spanish babies.

It seems that no-one is quite sure of the number of stolen babies in Spain but 900 cases are being investigated at the moment with the BBC quoting a lawyer as stating that as many as 300,000 babies in Spain may have been stolen and redistributed to other people.  Appallingly, the Catholic Church appears to have been heavily involved in the theft and trafficking, which, if true, simply beggars belief.

ETA

Politically, the big news in Spain has been that ETA has decided to end their war of violence in Spain after some 52 years.  This has been heralded as a breakthrough but only time will tell whether they will actually give up their weapons and cease their gangsterism and extortion.  Most Spaniards appear cynical about ETA and still have problems understanding why they fought a war of Basque independence in the first place.

General Election in Spain

Meanwhile, as we run down to the General Election in Spain on the 20^th November, the PP (Partido Popular) conservatives are on course for a significant (absolute majority) win with a poll predicting that they may gain 45% of the vote.  Spanish voters seem to believe that Mariano Rajoy (head of the PP) will be able to deal with the economic crisis in Spain better than the PSOE party – despite making a poor job of being an opposition leader.

Interestingly, in the same Poll some 70 percent of those polled said that when they vote they would like to select their own order of candidates.  Presently, if you vote in Spain you are provided with a list of candidates for ‘your’ party in order of priority (say 1- 10).  Your vote will go to number 1 and, if he has enough votes then to number 2 and so on.  This means that you vote for a pre-selected list of candidates rather than a specific individual.

So, if number 2 on the PP list in your constituency (for example) is someone you dislike and who is incompetent or corrupt and number 4 on the list is excellent – you have to throw your vote, effectively, into the party pool hoping that there are enough votes placed to flow downwards to number 4 to get in.  Either way, you will be voting for numbers 1-3 whether you like it or not!  One of the flaws to the Proportional Representation system.

Needless to say, the chief preoccupation of voters is unemployment in Spain and the state of the Spanish economy!  Both are of understandable concern with unemployment in Spain somewhere in the region of 20% +.

Spanish property market

The woes of the Spanish property market continue unabated.  According to the Spanish Institute of National Statistics the Spanish property market in August fell to 40% less than it had been for August 2010.  This is a massive drop, on anyone’s basis, with house sales in Spain as a whole down 55% from 2007.

Meanwhile, the economic crisis in Spain is hurting home owners badly with a projected 160,000 repossessions due this year, with some 270,000 other families in arrears on their mortgage.  This is a tragedy and, as I have commented before, you cannot just hand the keys of your house in Spain back to your lender and walk away forgetting any debt owed.  On the contrary, you will be pursued by the lender for the debt thus making life impossibly hard to get on course again.

The good news is that foreign buyers are returning to the Spanish property market and the owners of two major property portals that I know well (www.kyero.com and www.girasol.co.uk) have told me that this has been a great year for them.  Certainly, there are untold properties for sale in Spain and some terrific bargains.  Prices have dropped very significantly, although no-one seems to know exactly how much – albeit that somewhere between 35% – 50% seems a fair estimate (since the peak of the 2007 boom).

Less respect for the king of Spain

I caught a glimpse of a poll by the Center of Sociological Investigations which stated that the king of Spain (Juan Carlos) had slid down the ranks of institutional popularity and admiration in Spain – from first place to third.  He has evidently always occupied first place but has been replaced by the armed forces of Spain and (astonishingly) then the media!

I wonder whether the gross mismanagement of Spain over the past few years and the economic crisis in Spain has made him, as a symbol of authority, less respected – even though he has no executive power?

The Indignado Movement in Spain

The great export of Spain at the moment is, of course, philosophy (if that is the right word).  The outrage of the Indignado Movement at the corruption of politicians, the (in effect) two party political system and the inequitable behaviour of the banks has spread widely.  Occupy in London and Occupy Wall Street in the US have shown how quickly an idea in one part of the world (in this Spain) can be of influence elsewhere.

Certainly, in Spain, the Indignado Movement shows no sign of disappearing and it will be interesting to see how it affects the forthcoming general election in Spain – particularly as it is not a formal political party and therefore cannot receive votes.  Will the Indignado Movement merely encourage people not to vote or to vote for irrelevant parties as a form of protest – or will it in some way generate new policies?  We shall see…

Two Briton killed in flash flood

Finally, two elderly Britons were killed recently in a flash flood at Finestrat on the Costa Blanca of Spain.  Sadly, they were attending a market located in the tarmacked bed of a ‘dry’ river.  A massive storm inland meant that there was no warning as to the likelihood of flooding until the water pouring off the mountains in the interior caught everyone at the market unawares.

The odd thing about Mediterranean Spain is how ferocious the elements can be, despite the climate being incredibly benign almost throughout the year.  Radiators are generally a thing to laugh at and dry river beds and deep culverts something about which to ridicule.  But then, all of a sudden, everything can change.

Of course, in the Valencian Region the most notorious storm is called a  Gota Fria which occurs (normally) in the autumn when the sea is overly warm and is passed over by a cold front.  Astonishing rainfall then occurs, usually accompanied by huge floods as the water runs off the bone dry land.

In fact, as I write, there are reports that a Gota Fria is due in my area any time now – so I may be off the Internet for some time…

Nick Snelling - Culture Spain 

Gota Frias

Gota Frias 

The Indignado Movement

Demonstrations in Spain what the Indignados are saying

Spanish Revolution

Protests in Spain – is democracy in Spain in danger?

Politics and democracy in Spain

Prostitution in Spain

Confessions of a Call Girl’

Clubbing Together’