We often commented that Spain is about to get a bailout – our convictions cos of the persistent denials that Spain would need one!! What a pattern that has been repeated in different situations. Denials for weeks… then overnight a deal is made. Then the markets and its behaviour is very predictable. I find it difficult, at one level, to accept that the market will always find its level, that it self-regulates in a healthy sense, but I do accept that it has a mind of its own (and this is the concept behind the word ‘city’ in Scripture). So the market: ‘markets have reacted well to the euro discussions and have risen today’ says the commentator in response to some latest meeting. Two days later, down they come, as the confidence that the latest (of how many?) meetings has not come up with the solution to end all the problems.
I realise it is ‘confidence’ that sustains the money world. We are confident that our money is safe in the banks so leave it there. If, however, we all rush for the money (UK figures) we discover that something like 2.7% is actually there, and also discover that once we handed the money over it is no longer ours by law anyway(!!), we might soon think about where we want to really place our confidence. Confidence, though is an issue. But also greed. The markets going up is not simply about confidence, but working each window to squeeze some more ‘money’ through it.
So probably the markets in the early part of next week will have a rise, given that the leaders have reacted to the Spanish problem and by the end of the week they will lose confidence.
But to the bailout (although it is likely to be termed a ‘loan’ rather than a bailout).
The timing is a week before the Greek elections. We do pray for the eurozone leaders. They desperately need some stability / fallback resources as the outcome of that election is far from known. Athens could come closer to a eurozone exit and unleash contagion.
With the bailout it will be Spaniards who will have to pay for this, but the average Spaniard is not to blame. They largely continue to pay their mortgages, relying on family when unemployment and wage cuts make it impossible to meet their bills.
The major deficit (the Spanish government was working with a balanced budget right up to a few years ago) has been caused by, or at least fuelled by, property developers and land speculators, together with the senior bank staff who made the loans. Then over the past few years this has not been addressed so has worsened.
And at a local government level much of the money that has come in has been spent on needless prestige projects. The Valencian Art and Science city is an example, with (still) a 600m deficit. There are also two brand new unused airports (for example the one in Valencia community was completed in March last year: cost 150m, no of planes landed there: 0), as well as many empty holiday homes.
The local governments are in huge debt with (sadly) much of the debt being owed to small, local businesses, who carried out work for the local authorities and have still not been paid.
The current intensity of austerity has risen. Health and education cutbacks are now part of a relentless drive towards deficit-cutting. Labour reform, meanwhile, is helping drive down wages.
Improved productivity and the fact that, after years of importing goods and cheap loans to feed an insatiable wave of consumption, Spain will soon be exporting more than it imports are signs that the drive towards internal devaluation is, slowly, working. But this comes at the terrible price of almost 6 million people unemployed. (Source: Tremlett, The Guardian.)
So we enter now a few weeks that will prove critical. I have always maintained that change is possible, but at times of crisis the leverage for change is greater. We can have a bigger influence in the Spirit.
Finance minister Luis de Guindos has warned that, “The future of the euro is going to play out in the next few weeks in Spain and Italy.”
A bank bailout may or may not help with the eventual survival of the euro. We pray for those in authority but also by the grace of God pull for a new shape across this continent.
Corrupt politicians, greedy bankers, often criminal property developers . . . a trio frequently seen together in one way or another throughout history. The names change but not the activities. It makes me think that something is off in how we relate to land itself. The outcome of this kind of activity is not just poverty for the many, housing/real estate bubbles, a few monied interests who walk away with lots and lots, but also destruction of the environment as development pushes ever further into critical wildlife (flora and fauna) habitats, or destroys sensitive ecosystems. If we eliminated private property I bet a lot of this stuff would disappear overnight. Organized crime would have to find a new way of laundering money (they love the development business), banks would have to settle for less, and politicians might have fewer means of corruption. Private ownership of land affects everything from how we produce food to how we use water, take down forests for lumber and other products, mine for minerals, organize our cities, provide housing and on and on. Seems to me, our collective relationship to the land (and to one another) is the root issue here. c.
I’m beginning to hear the cries of the children from the land here in Latvia and I sense that it might not just be Latvia. A cry going up to heaven at the burdens being shunted onto the following generations. Just sense that something is about to break because the cries are being heard.
It does not surprise me to hear the cries as you say Martin the average person is not to blame for the problems but it is they who suffer from the consequences. I really feel that countries need to start saying “that is an unfair charge and we are not paying.”
Joanna – I thought of you guys yesterday when I met a Latvian called Yuri in Romford while prayerwalking. Hung over, abandoned, homeless, confused, sad, tired, lost – what can I say? He let us help him to the Salvation Army who could put him in touch with the shelter & documentation people…he was so pathetically grateful, I felt like a missionary in a negative way. We tried to honour him and give him hope but I was so touched by his sad words – “I used to own a nice car” and “I used to be a carpenter”. Made me cry.
His presence was European, his journey was through Europe but he’s found it no better wherever he travelled. The poor (disenfranchised, marginalised) are always with us…
I’m glad you bothered to help him Jane and thanks for thinking of us.
Amen. Lord have mercy.
on a lighter note, perhaps spain could send one of her spare airports to london who needs one.
Another comment. I’ve heard a lot about the bailout on the radio. It makes me cross. What if they’d used the money to give to each of the bank’s home owners to pay back their loan ? The bank would still get it’s money but not by reinforcing the creaky system.
Now there’s an idea Liz
Ideas like that have been floated in the USA situation too. That it would be much more effective to have taken the bank bailout and simply handed the money out to people. A 7 billion handout to a total population of 350 million would have been a good amount to one and all. Home mortgages could have been paid off eliminating the home foreclosure crisis, school debts could have been paid off, medical bills (60% of all bankruptcies – no I can’t spell it and I’m too tired to look it up – in the US are a result of medical bills). So much good could have been had and the economy would have been very stimulated as a result as folks spent the bucks. But no, it went to the banks, parts of it into bonuses for the very folks who had created the crisis. Analysis shows that unemployment support is one of the most stimulative measures possible in an economy. People who are unemployed spend the unemployment insurance checks on rent and food and needs that keep businesses going. Money given to the wealthy in tax cuts is useless as it does not stimulate the economy. Wealthy people simply bank it or invest it. So it appears, from the research, that helping, supporting and caring for the poor creates the most stimulation in a moribund economy. I guess Jubilee is the answer! c.
I have been trying to analyse why some farmers in the area I live in have prospered to some extent, whilst others have struggled and one of the reasons is the distribution of equipment after the collapse of the Soviet system. Those farmers that managed to get equipment did relatively well and the equipment is still working over 20 years later. Makes me wonder if it would be better to donate equipment to local farmers – and it doesn’t have to be new equipment either – to stimulate the rural economies thus ensuring some food security in the process. That would also have been a better use of the bailout money than giving it to the banks.
“like”
I so agree with this comment Cheryl (and with Liz’s comment too). I put a comment about seeking Jubilee on Martin’s other blog about Spain and Uganda but yours is more thought through – as usual.
I’m sure there are those who can see this but it has to be fought for. It is perceptions that must change. If unemployment support (which is rubbished by most people and by the media) is so effective in an economy, why is this not noised abroad? I didn’t know this and it makes me really cross how it is represented as “wasted on people who don’t deserve it”! Who deserves it more?
“So probably the markets in the early part of next week will have a rise, given that the leaders have reacted to the Spanish problem and by the end of the week they will lose confidence.”
And that is exactly what has happened, except it didn’t take until the end of the week, it took until the end of the morning.
Where I live in Spain the local school has told us that the classroom assistants haven’t been paid since last year, because the regional government haven’t made the funds available. The local council have complained that the regional government haven’t paid for the buoys that mark the safe swimming area for a few years.
All this leads to the thought that the crisis in Spain is much worse than the government is claiming, but the markets aren’t fooled….
A couple of days ago I came across a new version of that aphorism much loved by development agencies, you know the one: “Give a man a fish and he will eat for a day…”
How about: “Give a man a gun and he can rob a bank. Give him a bank and he can rob the world!”
That one brought a lot of merriment to one and all…I think that will be re-quoted by a few.
Chris. Just gotta put this one on FB!
If it wasn’t so funnybone true, one would laugh!
J x
That’s where I found it, but going back a couple of links does not reveal its source so I don’t know who came up with it.