Mariano And The Mess (23 November)

Who on earth would want to be a Spanish prime minister? Well, Mariano Rajoy for one, though why is anyone’s guess. It says much for political ambition that you would willingly enter the lions’ den unprotected and smelling of dinner. Deficit, highest unemployment rate in Europe, virtually no growth. Presumably, in the words of the election song of a certain former prime minister, things can only get better. Actually, they can’t; they can only get worse, and they already have.

Surprise has been expressed that the markets have reacted with a massive thumbs-down. That’s not how it’s meant to work. Good, right-wing, slash-and-burn politico takes over, and the markets are supposed to cheer at the fall of the squandering, bumbling incompetents from the left. They might have done were it not for the fact that Rajoy has to wait a few weeks before getting his backside onto the prime ministerial seat. There are procedures, you know, post-electoral ones, and the markets are being blamed for not understanding that it takes weeks for the Spanish to sort these procedures out. Perhaps Spanish politicians should try understanding how markets work, though they have shown little evidence that they do.

The hiatus following the election is just one reason why the markets have reacted so negatively. Another is that they really don’t have much confidence in Rajoy and the Partido Popular as they know full well that there is precious little that Rajoy can actually do. Yep, it’s a great time to be taking over as prime minister, knowing that you are totally emasculated and are dead meat even before you start.

If he were allowed into the prime ministerial office now, he would be flashing into the night sky over the Gotham City of Spain the distress image of the Euro and getting Angela and Nicolas racing from the ECB Batcave. “There are only 24 hours to save Spain, Robin.” Which isn’t too far from the truth, as each day brings with it ever more woe. Or perhaps he would be sending out an SOS and hoping that Thunderbird 5 picks it up. “Brains, any ideas as to how we can rescue Spain?” “Er, er, well, er, Mr. Tracy, we’ll have to dig very deep. Cut very deep.” “Right, Brains. Virgil, take Thunderbird 2’s austerity mole pod.” “F.A.B., father.”

Oh that it was as simple as sending out a distress signal and International Rescue comes and makes everything all right. What am I saying? This is pretty much how it is. The IMF or the European Central Bank buying up Spanish debt as quickly as it can be issued in order to give Rajoy some breathing space to stutter his words of reforms before they cart him off to the Papandreou Home For Distressed European Leaders.

There’s the deficit and then there’s employment creation. It’s not going to happen, because JP Morgan says so. Yes you can always rely on what banks say – they got everyone into the mess and now they can gloat at everyone’s misfortune; JP Morgan reckons unemployment in Spain will rise to 27% next year. Rajoy, if and when he can get his scissors out, is going to have to cut so deep that unemployment will continue its upward march and growth its downward slump. Here comes another recession. Not that the first one ever really went away.

In an ideal world, and you may have noticed that the world currently isn’t ideal, Rajoy would set in motion much-needed plans to restructure Spain’s economy and not just its finances. Investment in new industries to break the dependence, certainly in some regions of Spain, on construction and tourism has been demanded for years. But where would the investment come from now? Even if the banks weren’t suffering liquidity problems or weren’t applying a squeeze and even if the government had spare pots of cash lying around, the results would take years to bear fruit. And Rajoy hasn’t got years. He’s barely got days.

Some proposals like tax cuts for smaller businesses could help with stimulating the economy, but what really might would be lowering the burden on social security payments. A reduction in IVA for the tourism industry, however, would be senseless. Tax receipts have gone up this year, thanks in part to the rise in IVA, and they are likely to be up again next year.

Rajoy has inherited a God awful mess. He should demand our sympathy, but then he wanted to be prime minister. So he should get on and sort it. But he can’t, not yet, because procedures don’t allow it. Incredible.

Any comments to andrew@thealcudiaguide.com please.

Going Benalup: Unemployment and easy credit (22 November)

There is a town in the province of Cádiz in Andalusia that has the worst unemployment rate in Europe. It is called Benalup (or Benalup-Casas Viejas, to give it its full name). In an article by Giles Tremlett in “The Observer” on Sunday, the collapse of what, for a brief time, had become a boom town is chronicled, and the story of Benalup tells you mostly all you need to know about why Spain is in such a mess and is going to have one hell of a struggle getting out of it.

Benalup is by no means unique, even if it can lay claim to that unwanted unemployment crown. Spain is full of Benalups, and Mallorca shares its problems. To summarise Tremlett’s main points, the Benalup belly-up effect was founded on excessive credit and on a glut of construction jobs that paid well and took teenagers out of education.

It won’t sit well with the La Caixa bank, known also for its Obra Social good works programmes, that it gets fingered as having triggered a lending war among the banks that flooded into the town in search of mortgage customers, many of them young and having turned their backs on school in the knowledge that they could earn handsome wages in the construction industry.

Construction was the first and most obvious victim of economic crisis, and it took its labour force down with it. In Benalup, those who had left school at sixteen and who had embarked on a side career of avaricious material grab are just part of the almost 50% of Spain’s under-25s that are unemployed. This material grab has left Benalup, as Tremlett remarks, “plastered with ‘for sale’ signs”, those of La Caixa’s estate-agency arm, which has been forced to repossess.

Much of the construction was centred on the coastal area. The Benalup story, therefore, is a not unfamiliar one of the two heads of construction and tourism that is the economy of much of Spain, Mallorca included. But Benalup, some kilometres inland, doesn’t have the luxury of the fallback position of tourism. Without the construction on the coast, it doesn’t really have anything.

The dependence on construction and tourism in different parts of Spain is just one factor that has undermined Spain’s economy. Subject to the vagaries of economic cycles, both industries also contribute to a devaluing of the general skills base and of the education system. Easy money can be had, or could, and the state would provide some assistance in the winter for those less inclined to slog around a building site.

The education system is not that great anyway, and in Mallorca it is particularly poor. But through a combination of the system’s inadequacies, a lack of incentive to stay in education and the promise of riches from humping bricks about (now gone), general competitiveness is also undermined.

One solution to the unemployment in Benalup is a state­-funded training course, assuming you can get on it. Not that it necessarily opens up subsequent employment opportunities, as the course is for graphic design. In Mallorca, there are any number of young graphic designers. They are two a penny. Many are good, but where’s the work? Economies do not generate wealth or growth through graphic design. It is a pitiable non-­solution.

The Zapatero administration presided over the end-game of the great Spanish boom. It deserves to be criticised, but it is not alone. Successive governments have perpetuated an aspirational dream for a country that was in the economic dark ages only half a century ago. One mistake, aided by the banks, was to break with a traditional cash­-based society and replace it with one based on credit, and very easy and loose credit at that. The country’s richness, as evident from a lofty position in the IMF GDP league table, obscures a reality of over­dependence on certain industries and a lack of competitiveness.

There is fortunately some realism coming from the newly elected government, an acceptance that Spain isn’t that rich and that the mechanisms for granting the population the trappings of aspirational wealth were largely built on sand. Within a framework of this new realism, how, though, can Rajoy set about realising his election promises, such as that to reduce unemployment?

I’ll have a look at that in a further article. But for now, and notwithstanding the fact that the Spanish electorate does appear to “get it” where the country’s parlous position is concerned, I’ll leave you with a piece of history. In 1933, Benalup was the centre of an anarchist uprising and a police massacre. Thank God it’s not 1933.

The original “Observer” article:
http://www.guardian.co.uk/world/2011/nov/20/spain-benalup-unemployment-euro-crisis

Any comments to andrew@thealcudiaguide.com please.

The Dead Time

There can be no more appropriate fiesta than that of 1 November. The day of the dead, or one of them anyway. It’s a surprise fiesta for the unsuspecting Brit, for whom All Saints means a girl group. The Brits pour themselves another cup of black coffee, assuming they can find anywhere open to sell it, and freeze the moment. For, from 1 November, time is frozen. It is suspended. In hibernation. The dead time.

Cemetery slabs and stones are swept and cleaned in advance of the laying of flowers on All Saints. While the homes of the dead are spruced up, the resorts, overnight acquiring their winter status as their own cemeteries, suddenly become inundated with the detritus of the dead time, the entrances to the grand hotel mausolea – their windows shuttered out of respect with whitewash – swept by the fallen leaves of the now fallen season.

Each year the dead time becomes more pronounced, more inevitable and more poignant. It is the dead time of an island and its resorts growing old, its advancing years rendering it incapable of renewal, muddling and confusing it as it tries to remember how it once was before the dead time took hold. It is the infirmity of maturity, the malady of being overcome by the youth of destinations only now enjoying their days in the sun. At the rapidly emptying airport, airliners conduct a fly-past and fly-away, drooping their wings in honour of the dead time.

The frantic scramble for places on the last flights out leaves behind the refugees who shuffle in never-ending and slow-moving queues towards the dole office. Over 100,000 unemployed – before the season has finally come to an end – 18% of the Balearics working population. Higher than last year. Time was, not so long ago, when 80,000 was said to be the psychological barrier. No one seems to take much notice now. The collective psychology has been shattered, its self-esteem in tatters; there is a resignation to fate. For the 40% said to be unable to live on what wages or savings they might have, fate has dealt a heavy blow.

The dead time is not the consequence of crisis. It has crept ever closer over years. It is the consequence of lack of foresight, of a failure to appreciate the shifting sands of the island’s vital tourism market as it now gets sand in its shoes in lands far away. It is the consequence of complacency, not just that of politicians or employers but also of the employed, those who have colluded with an unbending acceptance that the dead time will come around each year. It is the consequence of the riches acquired by the owners of the grand hotel mausolea, wringing every last cent out of the summer and then escaping to foreign fields to open lavish palaces – the new Columbuses colonising the Dominican Republic all over again.

Without tourism, Mallorca is an empty shell, one all washed up and left on a beach beaten by the turbulence of autumn waves, tossed by Tramuntana winds that scoop it up with the sand and hurl it onto streets. It is neglected through the dead time by municipalities holding out their begging bowls for a handful of coins that might pay for the cleaning machines.

But the dead time arises because of the antithesis of the alive time, the dream time of summer, of tourism thronging to the beaches, beading bracelets from the shells caressed onto the shores by gently lapping and deep-blue waves. The dream time causes an unreality, it provokes the lyricism of the paradisal isle, the lulling into the illusion of ideality. As the dream time comes to its end, it emits a deceptively malevolent lullaby to send the island to sleep, to enter the dead time of what suddenly turns into a nightmare.

The day of the dead marks the end of summer. It is a fiesta of regret, of passing. And with each year the sense of bereavement, rather than diminishing, grows stronger. The mourning starts on the first of every November, a black armband wrapping itself around the island’s psyche. But on the day of the dead this year, not even the dead can be honoured as they once were. The florists expect lower sales. Rather than a wreath or a spray, one single rose and its thorns. And through an accident of the calendar and an accidental prick of the thorn, Mallorca’s nervous system in winter is consumed by tetanic spasms, throwing it into its now annual intensive care and desperate for the palliative of spring. But a palliative is not a cure, and so the cycle repeats itself. Each year.

Any comments to andrew@thealcudiaguide.com please.

You Have The Poor Always With You

What does the Spanish region of Extremadura have in common with Ethiopia? (And don’t say that both start with an “e”.)

The two share a strikingly similar percentage in terms of their respective rates of poverty. The measures are different, as greatly different factors come into play, but the percentage of the population of Extremadura currently in poverty is 38%. In 2005, according to figures released by the CIA, Ethiopia, only six notches above the poorest two countries in the world in terms of per capita income, had a poverty rate of 38.7%.

Don’t let us confuse the two figures. Local standards of living mean that the poverty rates are calculated quite differently, but even so, if African poverty is considered a bad thing, which it is, should we not be somewhat alarmed by a level of poverty in Spain that, in relative terms, is equally as bad?

Extremadura, as revealed by new figures from the INE (the Spanish national statistics office), is Spain’s poorest region. And the Spanish are getting poorer. Provisional figures for 2011 suggest that there has been an increase of just over one percentage point, to 21.9%, of people in Spain who live below the breadline, defined in terms of a two-child family with an income of less than 15,820 euros a year.

The Balearics sit in the middle of the league table of rich and poor parts of Spain;20.6% of the population in 2010 existed in poverty, almost exactly the same as the national average of 20.7% last year. Taking the CIA’s statistics, Spain, to put it bluntly, is the poorest country in western Europe. It is poorer than many countries in eastern Europe, and the Balearics are pretty much bang on the same mark.

National and regional wealth do paint a different picture. The Balearics, by GDP per head of population, is one of the wealthiest parts of Spain, and Spain is rated by the IMF as the twelfth richest nation in the world. Not that this necessarily counts for much when a country can get itself into such a crisis of debt. And there is no getting away from the fact that economic crisis has added to the level of poverty and from the fact that, regardless of GDP figures, there is real hardship in the Balearics and an increasing inequality in the distribution of wealth.

Among the various statistics that inform the INE’s report is a measure of “delays in payments related to the main dwelling” (by which is meant ability to meet mortgage or rent payments, among others). On this measure, the Balearics are by far the worst region in Spain, by almost five percentage points more than the next poorest performing region, the Canary Islands.

Such a finding can be interpreted in different ways. It could be that people have overstretched themselves where mortgage commitments are concerned – which has certainly been the case – but it might also suggest that the Balearics, and property values in particular, are too expensive, relative to general earnings capacity.

If this is so, and one is inclined to believe it to be so, then the regional government’s decision to unblock projects for more luxury property development and the fact that the luxury real-estate market is relatively buoyant at present (buoyant especially where overseas buyers are concerned) put the situation into sharper relief, and it borders on the obscene.

The national government and the regional government in the Balearics operate, by comparison with other European countries, from a low base when it comes to provisions of a welfare state. But what provisions there are, are due to fall to an even lower base. The Bauzá administration is entirely mute on the subject of welfare, save for its wishes to make cuts. And these cuts have so far been more drastic than in any other part of Spain, and we yet to have revealed the full horrors that await under a national Partido Popular government.

In a few days time, we will witness the physical manifestation of the absurdity that is the local economy. The dole queues will be snaking along streets, miles upon miles of humanity, looking for its annual handout from a government that is in no position to make it. Unemployment, greater levels of poverty, cuts to services, cuts to assistance, while all the time the government abrogates responsibility to the private sector and shows not the slightest interest in any form of welfare policy.

One in five people in the Balearics living in poverty, and rising. Two in five in Extremadura. And this is meant to be a wealthy country.

Any comments to andrew@thealcudiaguide.com please.

Blind Faith

The Germans go big on Mallorca. Watch German TV and most evenings there will be something about the island, even if it’s just the weather forecast. And most evenings there will be an announcer referring to the “paradise island”. This comes from the same lexicon of blind faith that gives us all those “beautifuls” and “lovelys” to which I referred the other day. There’s nothing wrong with blind faith, except blindness. It’s another day for you and me in paradise. Paradise lost, paradise to be regained – some time. Sir, can you help me? Or help others. Those in unparadise. 

 

The economic crisis was always likely to cause some tensions. It’s just a question of how tense. The CCOO union puts an estimate on the number of workers unlikely to qualify for benefits this winter – 80,000, more than half of them from the hotel sector. That’s getting on for ten per cent of the population of the archipelago, to which can be added a similar percentage on the dole. The union is concerned that there will be a winter of discontent, or one of social conflicts, to use its words. 

 

The crisis has also made even more apparent the deep flaw in Mallorca’s economy, that of seasonality. Generally it works, just about, but when the season is shorter and workers do not have employment long enough to qualify for winter payments, the flaw, the fault line grows ever wider. As does the gap between the haves and have-nots. The gap becomes a gorge, a vast canyon. And there is no bottom to the canyon, no cement to fill this great gap of unemployment and societal disconnection, especially as the construction industry is right down in the hole as well.  

 

One can overstate the situation, and the union might well be guilty of exaggeration, but it may well also be right. You can also take into account the fact that citizens of the Balearics have slipped from a prosperity in the ’90s to one of being poorer than the Spanish average in terms of disposable income. This may be across the board, but that board is broad. One man’s lower spending power on luxury items is another one’s breadline. 

 

The truth is that many workers receive not a great deal more than subsistence wages even during the summer. At least the paradise delusion of hot days and nights can divert attention from impoverishment. And the safety net of the state has, until now, been there for the colder days and nights of winter. It won’t be for many this winter.

 

The deep flaw in the economy is mirrored by the deep flaw in island society: the extremes in terms of wealth or not. Few societies are immune from such a gulf, but the compactness of Mallorcan geography makes it more apparent, more inescapable, unless you retain that blindness of blind faith. 

 

The lateness – the 1960s – with which an industrial revolution arrived in Mallorca, at a time of a regime only starting to come to terms with true economics, provided little or no preparation for greater diversity. And that revolution was predicated on an industry far removed from the grit of manufacturing. The Mallorcan economy is something of an unreal economy. Rightly so perhaps. Paradise is a state of unreality. Unparadise, however, is the reality confronting many. And some of the wealth that was and has been accrued has an unreality as well. It was as if it was magicked, the consequence of being there, of luck, and of the benevolence of tour operators and visitors from the first days of mass tourism. 

 

One can overstate the situation, and I hope I am, and that the union is as well. But the ingredients for discontent exist, and I keep in mind the actions of those Sardinians, around the time that the crisis broke, who bombarded luxury yachts with wet sand in disgust at displays of ostentatious wealth. There might be more than wet sand this winter in Mallorca. Paradise, anyone?