Spain just had some very interesting local and regional elections which seem to be a harbinger for what will come in the parliamentary elections due some time between now and March. The Socialist Party, PSOE, of the hapless Rodriguez Zapatero got clobbered by the conservative Popular Party, PP. As I write this, I have not seen the final results, but it appears that the Socialists will lose nearly if not all 13 regional governments. It seems the PSOE will lose even in traditional strongholds, and that nationwide the PP is outpolling them by over 10%. In some of the Basque country, however, some of the nutty separatist, pro-ETA types seem to be making major gains.
If the predictions are correct, it seems the PP is in line to take the parliamentary elections; it also seems the Socialist government is not in a rush to call the elections before they must legally take place.
The lessons? Mixed. Voter participation was low for Spain, just about 50%, and, I suspect there was an effort by the left to keep that low so as to minimize the impact of the loss. Notice the weird demonstrations that took place just before and during the balloting, illegal in Spain when voting is on. I know some European commentators have praised the demonstrators, "Los Indignados," but I just could not make sense of what they wanted except maybe to express general unhappiness with the 21st century. What was their proposal? I don't know, but let me give them one: Kill the Euro.
Spain has a "horrendous" unemployment rate, over 21% in the general population and perhaps double that among the under 25 set. That is to be expected: unemployment benefits and other doles in Spain are among the most generous in the world. It quite simply does not pay to work, or if you're an employer it does not pay to take anybody on--at least not officially on the books. Spain is overrun with immigrants from Latin America and North Africa, some of whom go there to work, but many of whom go for the benefits which seem to be handed out willy-nilly. It is a classic example of those who get the benefits not having to pay for them, a path we seem to be on in the USA. The politicians use other people's money to buy votes--gee, where else have we see that?
As long as the Euro and the current EU structure are around, it seems almost politically and socially impossible to undo this web of subsidies and doles. Way too many rice bowls would need to be broken, and I don't see the conservatives being able to do it. The whole system in Spain, and much of the EU, is heading for a crash, much of it the fault of the Euro. That currency is a one-size fits all obsession that is unsuited for countries such as Spain, Portugal, Greece, Ireland, and Italy, and is proving an increasingly ominous burden for the Germans, who increasingly have to maintain this whole house of cads, er, I mean, cards.
The Euro initially produced a false prosperity in countries such as Spain. With the Euro, which is really nothing more than the old Deutsche Mark, suddenly Spanish consumers could buy almost anything, including real estate in Miami, and travel all over the world with a strong currency. You could see the Spanish tourists in New York and Miami buying bags and bags of expensive clothing and electronic items. The Spanish government went on a spending binge, including huge investments in dead-end "green technologies." You went to Spain and, quite frankly, it was a wonderful place: whole city centers reformed, fabulous pedestrian walk-ways built, airports modernized, etc. But, who was paying for it? What exactly did Spain produce that could pay for all this? The answer is becoming clear. They produced cooked books that hid the massive borrowing and dependence on the EU/Germans.
As the PP comes into power, I suspect we are going to see a slide in the Euro as the full-extent of the "book cooking" by the Socialists becomes apparent. If there is any hope to be had, that just might be the best thing for Spain, Greece, et al. If Spain could have its own currency, and let the market determine its real value, then Spain could figure a path out of the swamp. As long, however, as the Euro makes unproductive Spain as expensive as productive Germany, there is no solution. Not even getting DSK to put his pants on and rejoin the IMF . . .
You just know the major reason for Germany and others fixating on propping up the Euro is envy of the status of the US - not that our $ is doing so well, either.
ReplyDeleteThe secret isn't the strength or weakness of our economy, it's our national character - current administration being the exception that proves the rule. We can thank Bibi for reminding us.