It appears that Spain’s politics is determined by vested interests of the 1%, and in a moment of crisis, unfortunately once again led by the Social Democrats.
Juan Laborda teaches Financial Economics at the University of Carlos III and Money and Banking, Syracuse University (Madrid)
Originally published in Spanish at vozpopuli
Translated and edited by BRAVE NEW EUROPE
They’ve done it still again. They have distorted the election result of 28 April. These are the same people who have no qualms about endangering the very survival of the State – see the case of the BBVA bank, recently put under investigation for corruption, blackmail, and illegally spying on competitors and politicians – or the very life of their fellow citizens: the Great Recession which in our beloved Spain became a settling of scores against the weakest. In the meantime, they distract us with patriotic games, flag wars, the end of which always takes us into the darkest stages of our history. As a reader once wrote me, “Juan desist, our country has no remedy”. But let me be naive. Our fellow citizens at key moments always respond. They try to find a dignified life for themselves. Another thing is the abrupt way our elites end those dreams. Our history is plagued with conspiracies against the majority sentiment of our fellow citizens, where the perfidious ones, disguised as false patriots, usually getting their way in the end.
Let’s put it bluntly. They have succeeded. They have torpedoed a possible coalition government between Spain’s social democrats, PSOE, and the leftist Podemos. With treachery, under a impenetrable darkness, dimly illuminated by the light of the candles where they hide, the elites, still again, have negotiated behind our backs fundamental issues for the future of our society. In order to do so, they counted on the indispensable collaboration of Pedro Sánchez, portrayed as embodying a new vision within a European social democracy, which has become increasingly irrelevant, eaten away by its unabashed concessions to neoliberalism. However, the ideas he communicates so far are empty of content. An example, its Green New Deal, in his mouth a vacuous phrase. I believe that he has not yet understood the historical significance of the terms New Deal in economic policy.
In this environment, the superclass has not hesitated to introduce a Trojan horse into the Moncloa Palace (the official residence and workplace of the Prime Minister of Spain . We are talking about a new technocracy, a demoscopic one, where political decisions are made by following the opinion polls. These new-type sorcerers, installed in the Moncloa, have clouded the sight of the acting President, endangering the hope of millions of voters. It would simply remind Sanchez of the “Cameron effect”. After winning the Scottish referendum, guided by his resistance manual, British Prime Minister David Cameron risked everything with the Brexit referendum. However, the inexplicable happened, he lost.
A conjecture: banking problems
Who could be more interested in the failure of a possible PSOE-Podemos coalition government? Since it is impossible to detect “the smoking gun”, let me make a guess. I propose something very simple. Go to your computers or mobile phones and look at the share price of the main banking entities in our country. Some are at historic lows, others are about to or already breaking the lows of the Great Recession. How is it possible, after all the money the nation has provided them with? Very simply, the rescue of our banking system during the Great Recession was a disaster, a textbook example of how elites enrich themselves in these parts and what they understand under public money. That which would have been economically efficient was not done.
The insolvent bank was rescued late and cack-handedly, and for the most part at the expense of taxpayers and their clients – companies to which they extended no new credits-, in order to give them away later to the competition. The regulator who did not do what he should have done, nationalise these insolvent bank, is very much to blame for this. But there is also a very subtle and dangerous additional aspect, which is hardly commented on, and where the regulator has been part of the problem, of course spurred on by the banking bosses themselves: the search for “National Champions”, with the consequent subsidy to systemic banking. The expectation that they will obtain state support reduces the incentives for creditors to control the behaviour of large banks, thus encouraging excessive leverage and risk taking. Look at Anat Admatti’s latest work and data on global banking, and you’ll understand how tricky the current situation is.
Therefore, we must ask ourselves, in the coming crisis, when certain banks have problems, how will they be recapitalized? Let’s look at this step for step. If we take the calculations made and updated continuously by the international Centre for Risk Management HEC, located in Lausanne, although in terms of capital deficit Spanish banking is not the most affected in magnitude should a financial crisis materialise in the near future, the truth is that the Spanish banks analysed would suffer a deficit as great as in the Great Recession, about 80 billion euros. How do you think they’ll want to recapitalise? At the expense of their creditors? Alternatively, at the expense of taxpayers? Although Community legislation on bank restructuring and resolution calls for a bail-out at the expense of the bank’s shareholders and creditors (bail-in or internal recapitalisation), pressure from certain nations, including ours, left the door open to finance them externally with a restructuring fund, thus at the expense of taxpayers. Faced with this dilemma, they undoubtedly prefer docile governments, what they euphemistically call a sensible state, obviously of their own selection. Besides we have not spoken of Bankia as a possible embryo of a powerful public bank with two axes of action! We will, don’t worry. In the meantime, this is my bet: in the near future these elites may decide to merge Bankia with BBVA, a bank which, after what has become known in recent months, has moved beyond the pale of integrity and trustworthiness, and will somehow have be saved by Spain’s financial elite with the aid of their social democratic vassals and its leader Pedro Sánchez.
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