Holding out for a hero
Europe is holding out for a hero, but as Spain is finding out, the wait could be a long one -- if a hero even shows up at all
Peter Parker’s Uncle Ben told him that “with great power comes great responsibility”. But it is a message that doesn’t seem to have permeated through the eurozone as Spain becomes the latest to reach the cliff top hoping for a hero rather than a push.
Bankia has called on Spider-Man’s help in the form of bribery as it attempts to stem the capital flow out of its accounts by offering a Spidey beach towel to young investors if they put €300 in their accounts by the end of the month.
What is happening with Bankia is a microcosm of what is happening in Spain in general. Money is pouring out of the country with €66.2bn leaving in March alone, bringing the Q1 haemorrage to nearly €100bn, and that was before the events at Spain’s fourth largest lender.
Spanish banks took a punt on the property boom which subsequently crashed leaving them with billions in bad assets.
And the thing is, the Spanish government had no idea how seriously in hock the banks were. Take Bankia; the bailout figure now stands at €25bn, nearly double the original estimate.
So annoyed is the government over the true status of its banks that it has hired consultants to get to the bottom of the real state of the debt problem and toxic assets.
In a fit of pique, the governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, resigned saying that there had been a campaign against the central bank.
Now hang on senor. Why did you sign off Bankia’s proposals to meet new government guidelines just days before it was part-nationalised? Why exactly was half of its €37bn property exposure considered problematic?
Like the Bank of England over here, everything seems to be someone else’s fault; the great burden of responsibility seems to be lacking.
For Spain, the problems get worse with the regions claiming bankruptcy including the richest area, Catalonia, and funding is about to get a whole lot harder with rating agencies downgrading their credit-worthiness making it harder to borrow money. In addition, foreign investor exposure to Spain debt now stands at 30 percent and is continuing on a downward path as investors look to safe havens such as Germany.
So with banks having no money, no foreign investor buying in, and the government unable to re-capitalise the banks, because the banks have lost their appetite for sovereign debt, the vicious circle is accelerating.
And here’s another thing: what is happening in Spain is a reflection of the difficulties that Europe faces. Due to history, there is a greater independence in the Spanish regions than in other countries.
They raise local taxes, sort out local spending and have a greater scope for ignoring Madrid’s wishes. This is why it is proving difficult for the central government to rein in the regions’ spending. For Madrid, read Germany.
As, yes, Kapitän Deutschland, with its shield of prudence. So great is its power, investors are now paying the German government for the privilege of lending it money such are the low yields on its debt. However, other countries wish it would put down its shield and let the cash flow to fellow members of the League of Ridiculous Currency Ideas.
But hang on, as it stands at the moment, why should Germany open the purse strings? What is to prevent other countries from grabbing the money, flipping the bird, and us finding ourselves in exactly the same mess five years down the line? This is what the German people are thinking and so this will be the German Government’s primary responsibility.
And here is where we get to the fundamental philosophical problem of a European union – we’re not European.
Sure, the eurocrats and their fellow travellers would love us to consider ourselves European, but we are not. We live within the European continent but we are French, German, and British and so on. We torture ourselves through competition against each other and alliances are formed with other countries be it voting for your neighbour in Eurovision or cheering on another football team in the Euros when the inevitable happens and we are knocked out.
And so with the people, so with the economies. We all have distinctive characters in our economies; separate yet attached through trade and convenience.
I have banged on about this enough times over the year but it is still an essential truth: unless you are prepared to cede fully to a political and economic union, you can never correct the fundamental flaws existing in the single currency.
So here’s an idea, truly barmy I know, but how about you guys ditch the euro and thoughts of political union? We can carve back the bloated bureaucracy of the EC and, oh I don’t know, reinvigorate EFTA while, from the UK’s point of view, re-energising our links with the Commonwealth. That way we can go back to being friends and allies rather than risking the explosion that will occur if this dogmatic philosophy continues for too much longer.
The problem with Europe is that no one wants to take that great responsibility and without that responsibility the great power that is there is likely to become rotten to the core, turning what was heroic in the eyes of the eurocrats into something much more malevolent – a bizarro-euro, if you like, where everything that happens is opposite to what they dreamed off.
Spain has joined Greece on the cliff face and the question has to be asked: is there going to be a hero? Or will the question be one of whether they jumped or were pushed?
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