Tag Archives: Spain

Spain’s Pension System Hits Crisis Point (and Everyone Ignores it), by Don Quijones

The global pension pile-up continues. From Don Quijones at wolfstreet.com:

But how did things get this bad?

By most measures, sun-blessed Spain is an idyllic place to grow old in. Life expectancy is among the highest in the world, and the national pension fund’s payout ratio (pension as percent of final salary) is the second highest in Europe after Greece. But if current trends are any indication, that may soon be about to change.

The country’s Social Security Reserve Fund, which was meant to serve as a nationwide nest egg to guarantee future pension payouts — given Spain’s burgeoning ranks of pensioners — has been bled virtually dry by the government. This started ever so quietly in 2012 when the government began withdrawing cash from the fund. Some of it was used to fill part of the government’s own fiscal gaps while billions more were tapped to cover the Social Security system’s growing deficits. As a result the pension pot has shrunk from over €66 billion in 2011 to just €15 billion in 2016.

To avoid wiping out the fund altogether this year, the Spanish government extended a €10.1 billion interest-free loan to Spain’s social security system, which enabled it to pay out the two extra pension payments due in June and December. That way, only €7-7.5 billion will be tapped from Spain’s public pension nest egg. Emptying the pot altogether this year would have been politically unpalatable, says El País. Instead, it will be emptied next year as the social security system racks up yet another massive annual shortfall.

Last year it registered its biggest deficit in its history (€18.1 billion), which was covered by the pension pot. In 2017, the deficit is forecast to be €16.6 billion, according to the government’s own projections. That’s roughly 1.5% of Spanish GDP. Another €18-20 billion will be needed next year. Successive deficits are expected until at least 2020, when there will still be an annual deficit of around 0.5% of GDP — and that’s according to the government’s own rosy figures!

To continue reading: Spain’s Pension System Hits Crisis Point (and Everyone Ignores it)

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The Price of Chaos Rises in Spain, by Don Quijones

The economic costs are rising in Catalonia and Spain as neither side wil budge. From Don Quijones at wolfstreet.com:

The longer the toxic process between Catalonia and Spain drags on, the wider the gulf grows.

During a visit yesterday to Barcelona, the organizers of the Mobile World Congress, the world’s biggest mobile event, warned the City Council that unless the political situation stabilizes in Catalonia, they will be looking for an alternative venue after 2018. Barcelona has hosted the annual event every year since 2006 and it brings in billions of euros to the city each year, much of which ends up in the pockets of local taxi drivers, hoteliers, owners of bars, restaurants and brothels, Airbnb hosts and, last but not least, the thousands of professional pickpockets that flock to the city for the four day event.

John Hoffman, the chief executive of GSMA, the association that organizes the Mobile World Congress (MWC), could not have chosen a worst day to visit Barcelona. As part of a general strike to protest the incarceration of pro-independence ministers and leaders and the imposition of direct rule from Madrid, thousands of picketers had blocked dozens of roads across the region including the main freeway connecting Spain with France, causing massive traffic jams.

High-speed train links between Barcelona and France and Barcelona and Madrid were also put out of action after hundreds of protesters moved onto platforms and railway lines in Barcelona and Girona chanting ‘Freedom, Freedom.”

At midday thousands of protesters occupied Barcelona’s Sant Jaume square in front of the city’s town hall, a traditional assembly point for Catalonia’s separatist movement. The chant “Squatters, get out” rang out in allusion to the take-over by central government authorities of Catalonia’s regional government.

Madrid is unlikely to be budged, at least not until regional elections are held on December 21, which it hopes will deliver an anti-independence majority. It’s a tall order, especially given the lack of public support for the Rajoy government in Catalonia. In a recent poll by Pew Research, 91% of the Catalans surveyed said they do not trust the government in Madrid.

If the gamble doesn’t pay off and in December pro-independence parties are handed another majority, direct rule will be reinstated, Spanish government representatives have warned. In other words, the beatings will continue until morale improves. And if morale doesn’t improve, well, the beatings will continue.

To continue reading: The Price of Chaos Rises in Spain

Why the Catalan independence movement is failing, by GEFIRA

It’s going to take more than flag waving, demonstrations, and social media feeds for Catalonians to win their independence. From Global Analysis from the European Perspective at GEFIRA.org:

The Catalan fight for independence is not how conflicts are fought throughout history, let alone how they are won. Some movements for national independence have succeeded in history, others have not. Presently, it seems that the Catalan bid is destined to fail. Maybe in the future Catalans will change their strategy and achieve their goal, but at the moment of writing the Catalan independence movement can be described as a storm in a teacup.

We therefore looked at what worked in the past and is missing right now, or what clearly is not working.

  1. A bad plan to begin with.

    Catalan independence is about claiming sovereignty from Madrid, just to immediately relinquish it to Brussels. If this had been decades ago, before the 1992 Maastricht Treaty, maybe it wouldn’t have mattered. Now, especially after the Brexit vote, the EU leadership has decided to push forward with the European Federalist project, starting possibly with a Eurozone financial minister as proposed by French President Macron.The latter’s plan also includes a Eurozone budget and that’s where the Catalan plan makes even less sense: part of the resentment towards Madrid is because Catalans do not like regional fiscal transfers towards the rest of Spain. Would they like it if fiscal transfers were towards other European regions via Macron’s proposed Eurozone budget? Many Catalans also resent the “austerity” imposed by Madrid. Yet it’s not Madrid imposing it, it’s Brussels. Yet Catalans want to dump Madrid because of austerity and then join Brussels?

    Why leave a political system because of its unnerving centralism just to join one that is shifting towards centralization, even further from the will of the people?

    The EU also does not like referenda.Mainly because it tends to be on the losing side. It lost the ones on the “European Constitution” in 2004 in the Netherlands and France. The Constitution was then pragmatically swapped into “Lisbon’s Treaty” with a number of formal changes, but even that one was rejected in a referendum by the Irish. This time, the EU leadership forced a remake, finally succeeding.

     

To continue reading: Why the Catalan independence movement is failing

Preparing For EU Collapse, by Raúl Ilargi Meijer

The EU is once again demonstrating its incompetence, in the Catalonia-Spain stand off. From Raúl Ilargi Meijer at theautomaticearth.com:

If there is one thing the Spain vs Catalonia conflict reminds us of, it has got to be Turkey. And that is a much bigger problem for the EU than it realizes. First of all, Brussels can no longer insist that this is an internal, domestic, Spanish issue, since Catalan president Puidgemont is in…Brussels. So are 4 members of his government.

That moves decisions to be made about his situation from the Spanish legal system to its Belgian counterpart. And the two are not identical twins. Even if both countries are EU members. This may expose a very large European problem: the lack of equality among justice systems. Citizens of EU member countries are free to move and work across the Union, but they are subject to different laws and constitutions.

The way the Spanish government tries to go after Puidgemont is exactly the same as the way Turkish president Erdogan tries to get to his perceived archenemy, Fethullah Gülen, a longtime resident of Pennsylvania. But the US doesn’t want to extradite Gülen, not even now Turkey arrests US embassy personnel. The Americans have had enough of Erdogan.

Erdogan accuses Gülen of organizing a coup. Spanish PM Rajoy accuses the Catalan government of the same. But they are not the same kind of coup. The Turkish one saw violence and death. The Spanish one did not, at least not from the side of those who allegedly perpetrated the coup.

Brussels should have intervened in the Catalonia mess a long time ago, called a meeting, instead of claiming this had nothing to do with the EU, a claim as cowardly as it is cheap. You’re either a union or you’re not. And if you are, the well-being of all your citizens is your responsibility. You don’t get to cherry pick. You got to walk your talk.

Belgian news paper De Standaard today makes an interesting distinction. It says the Belgian judicial system is not asked to “extradite” Puidgemont to Spain (uitlevering), but to “surrender” him (overlevering). Legal gibberish.

To continue reading: Preparing For EU Collapse

 

Spain Just Lit a Fuse Under Catalonia — its Richest Region, by Don Quijones

The Spain-Catalonia standoff will hurt both the Spanish and Catalonian economies. From Don Quijones at wolfstreet.com:

Acute uncertainty is like sand in the gears of the local economy. 

It’s amazing how fast the wheels of the Spanish justice system go round when the establishment wants them to, and how slowly they revolve when it doesn’t, which is usually when members of the same establishment — senior politicians and civil servants, bankers, business owners, or even royalty — are in the dock, which is happening with disturbing regularity these days.

On Thursday we saw Spanish justice at its fastest. In the dock was the recently sacked vice president of Catalonia’s separatist government, Oriol Junqueras, and seven other elected representatives of the breakaway region who stand accused of a litany of charges, including rebellion, which carries a maximum sentence of 30 years’ imprisonment.

The counsel for the defence had less than 24 hours to prepare the case. After just a few hours of hearing preliminary evidence, the National Court Judge sent half of Catalonia’s suspended government to jail without bail. On Friday, the same judge issued an international arrest warrant for Carles Puigdemont, the disputed Catalan president who fled to Brussels on Monday, as well as four other former ministers who did not show up to court on Thursday.

Catalonia’s separatist politicians are paying a very high price for overplaying their hand. As we warned months ago, many in the Catalan government had hoped that threatening to declare independence unilaterally, or even following through on the threats (which it kind of did on Friday), might be enough to push the Spanish government into having to compromise. It was a massive bluff, and it’s hugely backfired.

But while jailing Catalonia’s elected government may be justifiable by Spanish law and will probably go some way to placating the more revanchist elements of the Spanish public, it will also further inflame tensions and polarize divisions within Spain’s north eastern region while doing yet more damage to the tattered image of Spanish democracy in the rest of the world. It also risks exacerbating economic uncertainty and instability in Catalonia, Spain’s richest region.

Just when things appeared to be returning to some semblance of normality as local people and the region’s political parties turned their attention to the regional elections scheduled for December 21, Rajoy, his government, and the judges they help appoint just lit a fuse under the region.

To continue reading: Spain Just Lit a Fuse Under Catalonia — its Richest Region

Catalonia and Spain Enter Dangerous Uncharted Territory, by Don Quijones

Catalonia declared its independence; Spain invoked the “nuclear” option: Article 155 of the Spanish Constitution. What happens next? Stay tuned. From Don Quijones at wolfstreet.com:

Today was one of the strangest days of my life. I woke up in a constitutional monarchy called Spain and will go to bed, the same bed, in a newly proclaimed republic. Catalonia’s impossible dream has finally come true, but it could be extremely short lived, and it could have very damaging long lasting consequences.

Spain’s Senate responded to the Catalan parliament’s declaration of independence this afternoon by ratifying the activation of Article 155 of Spain’s Constitution, the nuclear button everyone has been waiting for. This will allow the central government to take full rein of the region’s institutions and levers of power, including parliament, the police force, the exchequer (already done), public media, the Internet, the education system, and telecommunications — at least in theory.

There is no telling just yet how Mariano Rajoy’s government intends to stamp its authority on 2.5 million of the Catalans now in open rebellion, or for how long. Given the law’s ambiguity, there are few constraints on its application, but trying to subdue a region where most of the 7.5 million-strong population are hostile to the basic notion of direct rule from Madrid is going to be a tall order, especially if the EU, which refuses to recognize Catalonia, expects Rajoy’s government to bring Catalonia back into line through “the force of argument rather than the argument of force.”

The force of argument is not exactly Rajoy’s forte. In all likelihood, his government’s first act will be to try to arrest the Catalan president, Carles Puigdemont, suspend his ministers, and assume direct authority over the regional government. To do that, it will probably have to take full control of Catalonia’s regional police force, the Mossos d’Esquadra. But what if some officers resist? What if there are clashes between Mossos and members of Spain’s National Police Force or Civil Guard?

Right now, Catalonia and Spain are in very dangerous uncharted territory. Emotions are running high on both sides of the divide. There have already been calls for a general strike on Monday that could last for over a week. The goal is clear: to inflict as much harm as possible on the Spanish economy so that investors begin to question the wisdom of being exposed to Spanish assets. It’s a tactic Catalonia’s Vice President Oriol Junqueras warned of using during a speech in Brussels way back in 2013:

Given that Catalonia represents a quarter of all Spain’s fiscal revenues and that we have the means to mobilize two million people onto the streets of Catalonia, does anyone seriously believe that we are not capable of halting the Catalan economy for one week? If we did this, can you imagine what kind of impact it would have on Spanish GDP? Or what foreign creditors would suddenly think of Spanish debt and what that would mean for the risk premium of Spanish bonds?

Four years on, and this doomsday scenario has become a very real possibility. But how will today’s markets react?

To continue reading: Catalonia and Spain Enter Dangerous Uncharted Territory

If You Want to Understand the Next 10 Years, Study Spain, by Michael Krieger

Michael Krieger “gets” it: Catalonia is the shape of things to come. From Krieger at libertyblitzkrieg.com:

Some of you may be confused as to why a U.S. citizen living in Colorado has become so completely obsessed with what’s going on in Spain. Bear with me, there’s a method to my madness.

I believe what’s currently happening in Spain represents a crucial microcosm for what we’ll see sweep across the entire planet over the next ten years. Some of you will want to have a discussion about who’s right and who’s wrong in this particular affair, but that’s besides the point. It doesn’t matter which side you favor, what matters is that Madrid/Catalonia is an example of the forces of centralization duking it out with forces of decentralization.

Madrid represents the nation-state as we know it, with its leaders claiming Spain is forever indivisible according to the constitution. Madrid has essentially proclaimed there’s no possible avenue to independence from a centralized Spain even if various regions decide in large number they wish to be independent. This sort of attitude will be seen as unacceptable and primitive by increasingly large numbers of humans in the years ahead. Catalonia should be seen as a canary in the coal mine. The forces of decentralization are rising, but entrenched centralized institutions and the bureaucrats running them will become increasingly terrified, panicked and oppressive.

As I’ve discussed, this isn’t coming out of nowhere. Humanity’s current established centralized institutions and nation-states have become clownishly corrupt, merely existing to protect and enrich the powerful/connected as opposed to benefiting the population at large. As such, legitimacy has been shattered and people have begun to demand a new way. Whether we see this with the rising popularity of Bitcoin, or the UK decision to leave the EU, evidence is everywhere and we’ve already passed the point of no return. This is precisely why EU leaders are rallying around Madrid. They’re scared to death and fear they might be next. They’re probably right.

To continue reading: If You Want to Understand the Next 10 Years, Study Spain