Stop Press – Sarkozy Says Spain is no Longer in the Front Line!


Thoughts on alternate realities…
Or was he thinking of the Maginot line? Lets hope Sarkozy’s imaginary line will hold for longer than the Maginot line that proved useless within a few days to repel a German invasion. The phrase ‘wishful thinking’ comes to mind.

If only politicians could create reality. If only.

France’s top man, praised Spain’s political leaders for their “enormous efforts” and “responsibility” in taking steps to reduce the country’s deficit and allay the fears that Spain will follow Greece into the abyss of default.

When I read this in El Pais, a leading Spanish newspaper, and having indulged in a bit of SciFi reading over the weekend, my mind drifted to ‘alternative realities’ and ‘parallel universes’. A bit of idle research on Wiki revealed that the correct quantum mechanical definition of parallel universes is “universes that are separated from each other by a single quantum event.’

Certainly, the Greek quasi default, at least in the normal universe we see around us, must be classed as a quantum event, although the spin of the politicians seems to have been successful in making the markets feel warm and cuddly as they were all up last week by big numbers. “So what”, I hear you say, “who ever said that the markets are rational?”

Reading on in the El Pais article I found that Frau Merkel was not quite as jolly about Spain. Sighhhh. Can they agree on anything?

Well, as Marbella is not on planet Zog, I have to say that I haven’t seen much in the way of cheer lately. The tourists have gone home taking with them the spending that kept Spain sunny and (a bit more) in work during the summer.

Oddly perhaps, the local shopping centre was packed as ever this weekend so there still seem to be plenty of people spending money, or were they just walking around wistfully? I have also noticed that there are quite a few property transactions about these days, certainly at the medium and top end of the market.

The Spanish banks have still not had to formally recognised the substantial losses on the properties that they now own by default. What they are doing is offering them to the public at modest discounts of 15-25% and giving buyers 100% mortgages. I really wish that they would dump their stock of properties then at least we would see movement in the mass property market and cash would start to circulate again.

Imagine the cash that would fly around if they had the sale of the century and dropped prices by 50%.

The Spanish banks must be happy. though, with all this fuss and bother over Greek debt as it has distracted everyone from their biggest problem.

Talking of cash, I am convinced that Spain does have one ace up its sleeve. It seems that it’s fabled black economy is on the rise. Now, I am no macro economist, but it must be good for Spain for a sizeable chunk of the economy to bypass the Government’s need to wet its beak. If Spain truly had 21% unemployment, with most not receiving anything in the way of benefits, I would have thought that we would have seen a lot more social unrest. The Spanish are not exactly renown for being complacent and docile, are they?

As the total tax take on minimum wage workers and low income self employed is 45%-50% in Spain, I suppose you can’t blame a plumber or gardener on the breadline not wanting to join the system. Economically speaking, I don’t think there is much argument with the thought that families spend their money more efficiently (economically speaking) if they don’t share it with the state. Arguably, the nation benefits with less civil unrest as people find ways of surviving the crisis, even if theyhave to break the rules. Pity about the civil servants having less money to waste.

Spain is, like everywhere, in a precarious situation but I have this feeling that despite its government it will muddle through and come out of it OK. It’s a pity really, because a nice big crisis might enable a new government to force through some seriously overdue reforms. They could start with the complete de-regulation of labour law, reforming the court system and slashing the fiscal pressure on the low paid.

Now that would create an alternate reality.

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