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Stealth Austerity Coming to Spain?

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Yves here. On the Spain front, we must note that the MSM is dutifully reporting the cheery news from the IMF: that under its stressed economic scenario (4.1% fall in GDP, 20% decline in housing prices this year), Spanish banks will need only €37.1 billion in assistance.

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

So the worst kept and most predictable secret happened over the weekend with the Spanish bank bailout. I don’t think I need to go through the details. I am sure anyone who cares about it has already read at least 10 articles on the fact that Spain has secured up to a €100bn loan from Europe in order to recapitalise its ailing banking system.

Initially the deal appeared positive for Spain, but as usual the devil is in the detail. It must be noted that I don’t consider this something that, by itself, changes the medium to long term outcome of the country. This is simply a new loan that will be required to be paid back and doesn’t change the fact that the Spanish government is still attempting to deleverage while the private sector does the same in the absence of a true floating currency or an offsetting current account surplus.

Supposedly these loans will give the Spanish banks the ability to re-capitalise and begin lending again, but this seems fanciful. This is the same story we heard the ECB when the 3 year LTRO was announced and it completely ignores the fact that even if the banks were capable of lending no one wants the debt. The Spanish unemployment rate is nearly 25% and by the government’s own admission the economy is going to get worse over the next year. It defies all logic that anyone expects the private sector to have renewed vigour for credit under these circumstances even if the banks were in a state to grant it.

There are a number of outstanding questions for the bailout, the most notable being exactly where and under what terms the money will come. According to the Spanish government, this package requires no further fiscal measure to be implemented by the Spanish but this appears contrary to the framework of both the EFSF and the ESM (please see more here).

Although it is yet to be ratified by the German parliament, the ESM is supposedly the target for the bailout. However, given the mechanism isn’t in place it is possible that the funds will firstly have to come from the EFSF. If that is the case then, as with Greece, the Finnish government will demand collateral.

The Rajoy government has attempted to frame this as a non-sovereign loan to the banking system, but that doesn’t appear to be a valid description of what this actually is. The money will be paid in through the Spanish fund for orderly bank restructure, the FROB, which by its own documentation states that its issuances have:

explicit, unconditional and irrevocable guarantee of the Kingdom of Spain

So, as far as I can tell, no matter where the money actually comes from, and whatever the terms, the sovereign, not the banks, will be ultimately responsible for the new loan. In an environment where the economy continues to contract, unemployment remains staggeringly high and industrial production continues to sink, this is not at all positive for sovereign risk or the people of Spain.

As I said above, what the Spanish government has been saying appears to be contrary to the ESM and EFSF treaty documentation. If we look at the ESM documentation it very clearly states, just like the EFSF before it, that there is a memorandum of understanding that needs to be created which defines the parameters of the loan:

If a decision pursuant to paragraph 2 is adopted, the Board of Governors shall entrust the European Commission – in liaison with the ECB and, wherever possible, together with the IMF – with the task of negotiating, with the ESM Member concerned, a memorandum of understanding (an “MoU”) detailing the conditionality attached to the financial assistance facility. The content of the MoU shall reflect the severity of the weaknesses to be addressed and the financial assistance instrument chosen. In parallel, the Managing Director of the ESM shall prepare a proposal for a financial assistance facility agreement, including the financial terms and conditions and the choice of instruments, to be adopted by the Board of Governors.

We are obviously yet to see such a document, so until we do it is very difficult to analyse exactly what Spain has actually signed up for, but others appear to have a very different version to the funding utopia Mariano Rajoy has been telling his country about.

Spain faces supervision by international lenders after a bailout for its banks agreed at the weekend, EU and German officials said on Monday, contradicting Prime Minister Mariano Rajoy who had insisted the cash came without such strings.

EU Competition Commissioner Joaquin Almunia and German Finance Minister Wolfgang Schaeuble said that as in those other bailouts, a “troika” of the International Monetary Fund, the European Commission and the European Central Bank would oversee the financial assistance.

“Of course there will be conditions,” Almunia told Spain’s Cadena Ser radio. “Whoever gives money never gives it away for free.

The IMF would be fully involved in monitoring Spain’s program even though it was not contributing funds, and banks that received aid must present a restructuring plan, he said.

Schaeuble told Deutschlandfunk radio: “The Spanish state is taking the loans, Spain will be responsible for them… There will likewise be a troika. There will of course be supervision to ensure that the program is being complied with, but this refers only to the restructuring of the banks.”

I personally struggle to see how this is workable, especially given the funding body for the banks is a sovereign entity. This sounds far more to me like “Trokia by-stealth”, but I will reserve final judgement until I see the MoU.

In the meantime there is a second problem that we know already exists. This from the ESM treaty:

Like the IMF, the ESM will provide financial assistance to an ESM Member when its regular access to market financing is impaired. Reflecting this, Heads of State or Government have stated that the ESM will enjoy preferred creditor status in a similar fashion to IMF, while accepting preferred creditor status of the IMF over the ESM. This status shall be effective as of 1 July 2013. In the unlikely event of ESM financial assistance following a European financial assistance programme existing at the time of the signature of this Treaty, ESM will enjoy the same seniority as all other loans and obligations of the beneficiary ESM Member,with the exception of the IMF loans

In other words, by accepting this loan Spain has just sub-ordinated all of its existing bond holders. Obviously, given the LTRO, many of these holders are Spanish banks but on top of the additional debt to GDP ratio this bailout pushes onto Spain (possibly up to 11% ) this again is a poor outcome for sovereign risk which is why we saw Spanish yields climb higher overnight against expectations of the opposite:

So, although, in Mariano Rajoy’s own words, there aren’t any additional requirements on the state due to this loan, the reality looks to be quite different. I hesitate to pass judgement given we haven’t yet seen any real detail of exactly what Spain is getting, but it would appear that this Spanish bank bailout has just pushed the sovereign closer to requiring full-blown assistance of its own.

They will, however, need to get in the queue:

Cyprus said Monday that it urgently needed European financial aid to boost its banks’ capital, a step that would make it the fifth euro-zone economy to seek help from the region’s bailout funds.

Cyprus Finance Minister Vassos Shiarly said the country’s need for an international bailout was “exceptionally urgent” in order for it to recapitalize its banks, and that the issue would need to be resolved by the end of the month.

According to several European officials, the size of any bailout would be unlikely to exceed €3 billion to €4 billion ($3.8 billion to $5 billion), a sum that wouldn’t strain the resources of the euro zone’s bailout funds. The economy of Cyprus—an island of 800,000 people—is one-sixtieth the size of the economy of Spain, which said over the weekend that it would seek European funds to recapitalize its own banks.

However, some European officials said the main impact of Cyprus’s request might be to send a further signal that contagion is spreading in the euro zone. Greece, Ireland and Portugal are all in bailout programs.

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28 comments

  1. psychohistorian

    The Shock Doctrine Spain event unfolds.

    Why should the people of Spain accept this added sovereign debt for what appears to be private banking excesses? Will any say NO to the private world of banking? Will the public in Spain even get to vote on this deal?

    What will be the next chapter in EU can kicking? This can stinks and you can’t see the details so only the negatives can be factored into Mr Market. Italy must be next…..Spain is soooo last week…

    I think we are seeing true chaos theory in action. Just keep stirring the pot until all the frogs boil……true austerity if you like frog soup.

    I just don’t see the 99% willingly marching themselves off to the Soylent Green facilities quite yet.

    Where the hell is all this going to end up? There sure are lots of pieces whirling around everywhere and I suspect it will get more so as the election event of who to best sell out humanity hots up.

    1. Maju

      They should not, Psychohistorian, but in the media it is almost not even debated: all they talk is about football and some odd murders, which they follow year after year for hours. Then you have cartoons, reality shows and when they have no option but to discuss the bailout, they do on their toes.

      “I just don’t see the 99% willingly marching themselves off to the Soylent Green facilities quite yet”.

      Don’t you? I’m worried they do. Anything short of a revolution is doing exactly that.

      1. Nathanael

        Spain is just this side of a revolution. If the elites dither long enough for the 25% unemployed to run out of savings, it will get one.

        1. Mark P.

          It’s almost all short-term looting, with those responsible thinking ‘well, as long as it can be made to last long enough for me to get out with what I’ve grabbed.’

          And in that frame of mind they will, as that bank president said, ‘dance till the music stops.’ At that point, many will find that they are not, in fact, the ones who get out.

          There will be many rounds in this game, I suspect, proceeding on out into the 2020s even. Ah, well.

  2. Maju

    “… the sovereign, not the banks, will be ultimately responsible for the new loan”.

    That’s BAD because by “sovereign” they do not mean the King nor the Bourgeois class, which are the actual rulers, but the people who is only the formal ruler. However it is as expected.

    I demand independence NOW, before that bad deal is imposed upon us without any referendum.

    Also I would consider any major debt contracted by the state without a confirmatory referendum to be a private debt contracted by Mariano Rajoy and camarilla and only them to be held responsible for it. (But if we get independence, then problem of the Spaniards and not mine anymore).

    Anyhow, the anti-people austerity is nothing new: Rajoy was applying it already and Zapatero before him, and that rotten Aguirre who is the main culprit of the Bankia scandal is applying it with double energy in the region of Madrid. They do not need any EU directives for that, they know that they only need police (lots!), prisons (more and more!), army and a minimal bureaucracy to keep the state skeletically alive. All the rest is superfluous.

    However the legitimacy of the state comes from “all the rest”. A purely repressive state can’t have any legitimacy.

    As for Cyprus… I can only tell the Cypriot people not to fall for it: money for the rich, debt for the people: bad deal.

  3. Sleeper

    How is it that there is no discussion about bailing out the banks ?

    After all did the state of Spain make bad loans ?
    Did the Spanish people make bad loans ?
    Did bad loans just grow like weeds in a garden ?

    The banks made the loans and yet there seems to be no question that the banks are to be bailed out.

    The government’s response should be “You (the banks) made the bad loans and you are responsible for the bad loans. We will investigate and prosecute, you will write off bad loans.”

    1. Eric377

      Do an experiment where the cajas of, say, Valencia, Murcia, the Balearics, Castilla La Mancha do not get bailout funds and the rest of Spain does. I have no idea what happens, but why not run the experiment?

  4. Ruben

    Yves, Mr. Rajoy has consistently lied about mostly everything, from his campaing an on. He is kind of setting a new record in this matter. Mr. Rajoy’s feels it is his duty to spread lies full time, otherwise all hell would break loose. He understand the duty of a stateman is to lie good for reasons of State. However, by lying almost everytime he speaks he is becoming a predictbale guide to reality. The only problem is that he doesn’t speak much, he prefers to hide, he runs away from office through backdoors and in untilely hours. He is kinda funny though, intellectually very limited, but really serious, and his mouth is a very little contortion of muscles that twists evrytime he lies. Not a pretty sight, but funny nonetheless.

    1. Maju

      While I agree that Rajoy lies quite a bit and when he does not it is because he is being ambiguous beyond anything reasonable, he does not because of “statesmanship” but because of petty party and oligarchy dirty secrets. He’s protecting Rato, Aguirre and all the others. He is protecting himself and his political party and he is protecting the worst of the worst of the Spanish society, which is a corrupt, cronyist oligarchy.

      That’s not statesmanship but omertá.

      1. Ruben

        I beg to disagree my dear Basque discussant. Rajoy’s talents are too limited to be the head of a mafia. He is a lowly civil servant encumbered to power by the lucky combination of a jelous former leader of his party, an almost equally modest socialist predecessor in govt, and a magnificent economic crisis, way beyond his league. He is lying so much because he feels it is his duty. With all due respect he reminds me of Mr. Bush, who once told to the American public that he was going to lie to the American public, for their own protection. Maybe later on, when all hope is lost, Mr. Rajoy will start to lie for the protection of his ‘camarilla’ and for personal business. Me think though he wont have time, I’d bet his term will be short, quickly to be digested and excreted by the crisis.

        1. Maju

          The head of the mafia is Esperanza Aguirre, who is not too intelligent (in the IQ test sense) but is smart enough (in the practical intelligence sense) to have everybody dancing at her tune. She is the parsley of all sauces, as they say: she has a private secret service (was a scandal a year ago, nothing happened), she has obviously got a lot of personal favorites in Bankia sucking money and privileged information and she seems untouchable no matter what she does. Hardly a politician has ever been so continuously criticized and yet so successful.

          Rajoy is the party leader because when Aznar ruled, it was obvious that he was the only one able to keep some dignity and common sense. He and Rato maybe but Rato was called to higher dignities at the IMF and then not-so-high but very profitable ones at Bankia, where he has demonstrated twice he’s a very bad manager in spite of his image.

          But behind the scenes Aguirre and the Catholic fundamentalist cults like the Opus Dei and the Legionaries of Christ control the business for which the PP is a facade.

          Rajoy is a top manager and has some power but he’s not the real power in the PP: Bee Queen Aguirre and her Bankia clique are. This is all designed by and for them – it’s a somewhat risky affair because, in theory, they could end up in jail. But we all know that in Spain judges are not independent, nor is the state attorney, nor any institutionalist politician has ended up in jail without that being part of a wider political maneouver.

          That Aguirre ends in jail would be the equivalent to the beheading of Marie Antoniette: a whole revolution would have to happen first.

  5. Ruben

    I’ve found an apt analogyt to what’s going on with all these bailouts, by reading this

    http://www.cnbc.com/id/40271476

    and this

    http://www.washingtonsblog.com/2012/06/the-spailout-has-already-failed.html

    The analogy is bio-accumulation.

    The phenomenon described by Roubini in the first link is known in ecology as bio-accumulation: some toxic substance is released into the environment. Many small herbivores start ingesting the toxic substance, get sick, get caught. The middle-sized predators eat the small herbivores and because they eat many of the small herbivores the toxic substance concentrates on the middle-sized predator. The middle-size predators get sick, get caught, and are eaten by a larger predator. The toxic substance moves up the food chain this way every time increasing its concentration until it reaches the top predators, where the toxic substance gets hyper-concentrated, causing full-blown mortality of all top predators.

    1. proximity1

      In the same vein, which I applaud your bringing up, I’d add these :

      first, Konrad Lorenz’s 1973 book, Civilized Man’s Eight Deadly Sins

      “[The pace of human ecology] is determined by the progress of man’s technology (p35)… human ecology (economy) is governed by mechanisms of POSITIVE feedback, defined as a mechanism which tends to encourage behavior rather than to attenuate it (p43). Positive feedback always involves the danger of an ‘avalanche’ effect… One particular kind of positive feedback occurs when individuals OF THE SAME SPECIES enter into competition among themselves… For many animal species, environmental factors keep… intraspecies selection from [leading to] disaster… But there is no force which exercises this type of healthy regulatory effect on humanity’s cultural development; unfortunately for itself, humanity has learned to overcome all those environmental forces which are external to itself” (p44).

      and, then, here’s my “recommended-reading list for everyone–but especially for economists and those now studying to become economists” or intending to do so—

      Konrad Lorenz: The Waning of Humaneness (Der Abbau des Menschlichen, Piper, 1983)

      John Ralston Saul: Voltaire’s Bastards: The Dictatorship of Reason in the West (1992)

      Jacob Burckhardt : (Reflections on History/ Weltgeschichtliche Betrachtungen) published in english as Force and Freedom (translated by James Hastings Nichols), published by Meridian Books, N.Y., 1955

      Nicolas Bouleau : Mathématiques et risques financiers Odile Jacob, (2009)

      Guy Debord : The Society of the Spectacle (1967)

      Daniel Kahneman : Thinking, Fast and Slow (2012)

      Robert Trivers : The Folly of Fools: The Logic of Deceit and Self-Deception in Human Life (2010)

      Karl von Frisch : The Dance Language and Orientation of Bees (1993) (original: Aus dem Leben der Bienen, 5th revised edition, Springer Verlag)

      Helmut Rosa and William E. Scheurerman, editors : High-Speed Society: Social Acceleration, Power, and Modernity (2010)

    2. proximity1

      uh, one more, which I forgot to add:

      (in English, the title would be “I Went to Business School (And I’m Sorry)”

      see the english-language link by the author, Florence Noiville:

      http://www.editions-stock.fr/livre/stock-anglais-338762-J-ai-fait-HEC-et-je-m-en-excuse-hachette.html

      and,

      http://noiville.com/index-uk.php

      Her book, J’ai fait HEC(Haute Ecole de Commerce, a top french graduate business school) et je m’en excuse recounts her journey from a bright young graduate-business school student (class of 1984) to the eventual disillusionment she experienced.

      It’s poignant and revealing. Many (most?) of these bright over-achievers are, inside, as nervous and insecure as the rest of us who never get to such prestigious training-grounds. Her book offers personal stories of her experiences and those of her fellow classmates and others at other top business schools since her graduation who reveal what they really think but, due to severe social taboos, aren’t able to admit openly to others.

      She describes how, at her first big presentation before a group of top management at her first big post (Control Data Corp., then headquartered at Minneapolis, where she’d just arrived) since MBA school, she was stopped in mid-presentation by one of the senior managers who said, “Listen, Florence, how can we make more profit? The rest we don’t care about.” –or, in her shortened form, carried ever since, “Le Modèle “MMPRDC”

      (page 50) “In the writing of this book, I wanted to know what, deep down inside, my former classmates thought.”

      1. James

        I’m only surprised it took her that long. I’m only a few years out of the MBA mind wash myself (fittingly, the summer of 2008), and can honestly say that while I was pretty damn sure at the time the entire global capitalist dream was all a load of corporatist hooey, my every experience since then has only sharpened my disillusionment with and anger toward the great American global Ponzi scheme. I’m genuinely shocked that any reasonably intelligent young person these days worth wasting the tuition money on in the first place could possibly be presented with the evidence that even the most modest MBA curriculum provides and come to any other conclusion. Never mind actual experience working among the corporate droids.

        1. proximity1

          in fact, you both show a similar “reaction-time”. Like yours, her disillusionment happened in within only a fews years of graduation. She left the corporate world for which her HEC (and, correction, that is, rather than what I wrote above, the abbreviation for “(Ecole des) Hautes Etudes Commerciales”) degree was pursued and took up work in newspaper journalism. While the book itself took much longer to make its appearance (the “shock” of the 2007 bubble-burst was a catyliser for the eventual writing and publication), the internal processes of alienation had done their “work” long before that.

    3. Mark P.

      ‘the toxic substance gets hyper-concentrated, causing full-blown mortality of all top predators.’

      It would be pretty to think so.

  6. Ignacio

    I have said this before but I will repeat it because I am increasingly convinced that Rajoy’s term will end prematurely. Rajoy’s government is doing approximately the same than the UK government: raise taxes and reduce government expenditures. This is of course a recipe for a miserable fail: Mr. Rajoy won’t accomplish any of the promises he made. Finally the troika will try to replace him with another eurocrat from the ECB or the like but this can end in a popular uprising against the eurocracy.

    For foreign analysts I would like to note that this semantic game substituting “bailing” with “assistance” that the spanish government is playing has to do with its broken promises (Rajoy dismissed 2 months ago the possibility of a rescue)and the presence of an ex-Lehmann executive (Mr. De Guindos) as head of the spanish economy ministry (indeed ministry of economy and competitivity as it has been named this term). The semantic game reminds me those infamous “high grade” and “enhanced” subprime bonds or funds issued by Bear Stearns. That is why I believe that Mr. De Guindos is the creative behind the semantic game the spanish government is playing.

    1. Maju

      Something very very big (Madrid burning for days or something like that) will have to happen for your forecast of “Rajoy’s term will end prematurely” to happen. Why? Because the PSOE already lost more than 4 million votes in the last elections and will not regain them (not with Rubalcaba certainly), what means that the ruling PP has no alternative.

      “Mr. Rajoy won’t accomplish any of the promises he made”.

      He made no promises: his campaign lacked any sort of program, he just criticized the previous government and was elected by inertia. They barely got a few more votes than when they were elected as opposition, it’s just that the PSOE collapsed (and won’t recover because they are neither socialist nor worker, just a generic flavorless institutional management party) and, if the PP collapses now, the whole political system will.

      Such a collapse can easily degenerate in war, considering the multiethnic nature of the Spanish state, too similar to that of Yugoslavia.

      “I believe that Mr. De Guindos is the creative”…

      Every time I look at him, all I see is a troglodyte. Maybe he has an image problem (like most of his party colleagues who are generally very ugly, at least the men) but I do not think De Guindos is brighter than Rajoy. Rajoy is not as dumb as you think: he was no doubt the bright guy (or the less dumb one) of the Aznar government, the only one who was able to keep some dignity and not say idiocies every other day… and that’s why he is now the boss.

      1. Ruben

        PSOE it´s not the alternative, of course not. As Ignacio said, it´s a “eurocrat”. They did it in Greece with Mr. Papandreu and in Italy with Mr. Berlusconi. If Mr. Rajoy continues along this path, irritating European elites by delaying decisions for electoral gain (Andalucia) or bragging about he putting pressure on the Euro masters instead of the other way around, he gonna be kicked out while the Spanish populace observes. Fancy, Mr. Berlusconi was shown the door just after he made some rude comments about Ms. Merkel buttocks :-D

        1. Maju

          The Berlusconi debacle was coming from long before: bunga-bunga parties, media monopoly, mafia links and what not… there was even a civic movement demonstrating in the streets every other day dressed in purple just demanding Berlusconi to resign and he was even losing the support of his allies of the Lega Nord and the “ex-fascists” of Fini. On top of all that was the huge Italian public debt which is like a Greece to the Nth power awaiting its turn. The only thing that protects Italy is its size but Berlusconi had become just a national shame and had to be removed.

          Anyhow no comparison between Berlusconi and Rajoy, one is overflow of excess the other containment of lack.

      2. Ignacio

        I don’t think you are taking seriously enough the political and economical situation in Spain. It is not Madrid what is burning but the heart of millions of households. Bear in mind that PSOE loss the election in the midst of the worst recession in democracy and many changed to PP just because they wanted to believe that if one party was wrong, the other party would be rigth and would easily fix the economy. That was basically what Rajoy and the PP promised: they present themselves as the guys that know how to handle the economy. (Yes, they made promises, for instance he said that would improve retirement benefits)

        I am quite sure that Rajoy himself is surprised about how bad things are going. He really thougth that when beign elected, confidence would return because conservatives bring confidence by themselves. So he thougth that the economy would magically recover just because he, and not a dumb socialist, is in charge.

        The “genius” from Lehmann Bros finds a secret key to convert what everibody deemed a rescue into a “very favourable credit assistance”. Voilá, the magic of Lehmann back in action. The hapiness has not lasted even 48hours and the yields of government bonds resumed their way back.

        Nothing is working and we will soon see in the form of quarterly data releases how bad is the economy running. Also it will be interesting to see that there is still a big deficit, after slashing spending and increasing taxes just because government income is going down with the economy.

        Another broken promise: the deficit will not be reduced as much as it was supposed. Rajoy may resign by himself, by indication of it’s own party, the troika or the rest of Spain once Madrid, Barcelona or Bilbao start burning.

        1. Ruben

          It looks to me like you object me saying that the Spanish populace will sit and observe as Mr. Rajoy is replaced by a “technocrat” named by the troika, that I’m not taking seriously the suffering in Spain and the potential for internal unrest. This is because I do not underestimate the capacity of the peoples to suffer quietly, and the capacity of the leaders to repress and contain the pockets or resistance. Witness Greece, with so much suffering, but just the same the system keeps ticking at the normal pace.

          Your image of cities burning is just fantasy. London places burnt for a few nights in an outburst but then business resumed as usual. Madrid indignados will camp for a few nights becoming a curiosity but then walk back to their parents home and their bleak future. Occupy campers in NY, Vancouver, etc, will recite a few poems for a few nights until the major will see it fit to send the storm troopers. Nothing really changes. If anything will happen, will be a top down process.

          On the other hand it is not that Spanish voters moved to the PP in search for an alternative to the failure of the PSOE. It’s just that potential PSOE voters did not turn up demoralized by PSOE{s poor performance. These days elections are decided on how able are the more left-leaning leaders or the circumstances to mobilize left-leaning voters while conservatives voters move as a tight pack in a constant fashion.

          Liberal democracy and its companion economic apparatus form a very resilient utopia in the populace’s collective mind.

          1. Ignacio

            I was answering Maju’s message written at 1:25 pm, not yours Ruben. Sorry if I don’t reply yours. It would make the discussion even more confusing.

          2. Maju

            I don’t know in Spain but in Greece, cities have been burning, governorates have been occupied, the parliament has been besieged by huge amounts of people which deemed it illegitimate and traitorous… nothing sort of what we saw in Egypt, just that the government of Greece was formally elected (on a social program, not an austerity one).

            The end result we’ll see this next weekend but it is very likely that Greece will become a Euro-Venezuela of sorts, what in turn may get Turkey intervening and what not… but we’ll see.

            All that may happen in Spain. It is true that it has not happened yet… but only because the Spanish citizenry is much less class-conscious than the Greek one (or even the French one) traditionally – but that may change in a matter of years if things keep going this way. It is already changing and the indignados’ movement was (is) a very clear symptom.

            The 1905 Russian Revolution also began with a peaceful march that was quelled in blood. 12 years later Lenin took power at the cry of “peace now” and “all the power to the soviets”.

            Things change… sometimes very fast.

        2. Maju

          Not “many change to PP”. You really have no clear idea of how people voted in Spain in the latest elections. The maths are roughly as follows (all figures are million voters):

          PSOE -4.3
          PP +0.5
          United Left +0.8 (incl. Compromis)
          UPyD (maverick quasi-fascist party) +0.8
          Equo (maverick ecologist left party) +0.2
          White seats list +0.1
          Anti-bullfight list +0.1

          So there are still 2.1 million PSOE voters missing. They either went to abstention (+2%), to null votes (doubled) or to any of the parties not accounted for like nationalist ones or too small to be counted. The voters of PSOE did not sweep to the right: they went home, they went to small parties (not one but several), etc.

          Essentially the twin party system lost 4 million voters to more or less marginal options, not to any one specifically but scattered.

          “Yes, they made promises, for instance he said that would improve retirement benefits”.

          I did not follow it closely but I remember well that they had no program at all. That all their campaign was based on a mere the PSOE is exhausted and is our turn.

          “I am quite sure that Rajoy himself is surprised about how bad things are going”…

          Probably. He should at least prefer to be ruling in a better situation. But on the other hand, who did not know, when pondering seriously and honestly, back in the year 2002 or so that there was a huge brick bubble and that it could not continue that way forever? Prices were multiplied by maybe as much as 100 in some cases, in just one or two decades! If that’s not a bubble…

          I know that the pain in the daily lives of so many Spaniards is brutal but I also know that, besides the anger, there is no organization (actually there are organizations like the major unions dedicated to damp that anger, not to channel it into a revolutionary process).

          Unless Spaniards begin to organize themselves in true class organizations, they won’t go far. Toxo y Moxo are there to contain the anger, not to organize the militias that should overthrow the system, they are like the fascist union.

          “Another broken promise: the deficit will not be reduced as much as it was supposed. Rajoy may resign by himself”…

          Nah. Rajoy will resign when the indignados take Moncloa, not a minute earlier. The deficit does not matter. In fact Spain’s deficit is relatively good in comparison with that of Germany or almost any other European state, what matters is “austerity”: squeezing the blood of the working class to the last drop. One state at a time, let not be that the experiment goes awry and has to be contained.

          “… once Madrid, Barcelona or Bilbao start burning”.

          Bilbao and the rest of the Basque Country have their own dynamics. There was almost no indignados over here and a main reason is that people here is so pissed off at Spain in general that whatever that is Spanish is despised, even if it is a revolutionary movement.

          We have our own distinct processes.

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