EUROBLOWN: Why Spain will fall down – but stand up to the Brussels Sprouts

Luis de Quindos

Standing out like a sore thumb at Zero Hedge at the minute is Tyler Durden’s latest piece on the subject of why Spain’s main achievement in 2012 is likely to be eclipsing the Greek moon of faux rescue with a default of supernova proportions. It is an excellent analysis, in that its bullet points go straight to the brain of the EU. Quoting Carmel Asset Management, ZH concludes – quite correctly in my view – that ‘Spain’s problems are worse than the market anticipates’.

Last Friday, Spain only sold 2.6 billion euros at debt auction. That was at the bottom end of the 3.5 billion euro level many Spaniards hoped to raise from the sales of bonds that mature in 2015, 2016 and 2020.

But there are other considerations of a cultural nature that make Spain a Krakatoa blast rather than an Etna rumble. And I offer that view chiefly in the context of the EU’s mad, denialist hubris when it comes to escape from debt.

Much of my opinion relates to the country’s technocrat Finance Minister Luís de Guindos. For Luis never worked at Goldman Sachs: he may be just as right-wing, but Senor de Guindos is Spanish to the core. This bloke knows full well the profundity of excrement in which Spain finds itself, but he is wonderfully free of the arm-up-the-back Goldman-Brussels-Berlin bollocks that make Lucas Papademos look a jerk, Mario Monti a sneak, and Mario Draghi a dark star in the eurozone firmament of Black Holes.

My information is that Guindos is the steel spine behind Premier Rajoy’s opposition to Troika delusion when it comes to the art of the possible.

Thus we are presented with a situation both alarming and exhilarating at one and the same time. That is to say, Spain heading inevitably towards the need for a bailout the EU cannot afford….and at the same time, an elite in Madrid obviously unwilling to bow down to the hitherto invincible Troika.

The logical – almost inevitable – outcome of all this is a very messy (and possibly sudden) divorce. And if Mario Draghi hasn’t been able to push the printing button in time, then The Slog’s view is that Luís de Guindos will go down in history as the man who fired the final silver bullet into the brain of the euro.

 

50 thoughts on “EUROBLOWN: Why Spain will fall down – but stand up to the Brussels Sprouts

  1. The logic of your argument seems sound. I certainly don’t see the Spanish humbling themselves as the Greeks, ( politicians ), have done. Question now is timing. Is there a politically good time for a Euro-exit by Spain? Or is there some other trigger-factor?

  2. Nope, won’t happen, too much to lose, them Sprouts ain’t about to let a little guy previously unheard of, derail The Dream.
    Another false dawn.
    We have many false dawns to endure yet, before the monster crashes and dies.
    As my old Mum used to say “We live in hope, even if we die in despair” wise words….

    • I have to agree Col. Sanders. What is stopping the EU bots parachuting in GS marionette replacements for de Quindos & Rajoy? Rhetorical question!

      • What’s the betting that he’ll have a nasty ‘accident’, or decide to ‘spend more time with his family’, or be found in a hotel room in the nude, wearing a pair of black lacy tights?

  3. Very much OT – but perhaps good for a giggle:

    http://www.ebay.de/itm/280859472174

    For sale is a VW Golf, the text reads:

    “Historic vehicle, formerly owned by our Chancellor, from 1990 to 1995
    Second owner, Dr. Joachim Sauer, her husband from 1995 to 1996.
    See vehicle registration document.
    Vehicle has been restored after collision damage and newly painted.”

    Currently, 153 bidders, the latest offer stands at €126,050.00 – and there are still over 7 days to go!

  4. Hope Sr. de Guindos has got some good close quarter protection; I rather fancy he may be needing it over the coming weeks.

  5. The real money (or could that be real debt) is in Barcelona with the black glass citadel of La Caixa Bank at its centre which of late has been trumpeting its recent successes, increasing size, and stability of cash reserves. There is no love lost between Catalonia and the nation’s political centre, Madrid. And then there are the broke regional authorities with huge debt burdens, masssive unemployment and house prices falling off a cliff. If ever there was a European country capable of tearing itself apart, then Spain is a pretty solid bet.

    • Nothing exceptional will come of this decadent continent and the US. If the population is not sodden with drink and illegal drugs then they sure as hell are addicted down with antidepressants, benzos and various neuroleptics. Expect nothing of this poor lot done in by their high priests and aristos before they ever knew what hit them. Comparisons with the 30’s and 40’s overlook this dramatic mass tranquilization, as well as electronic money, internet, hfreq computer trading etc.

    • SITC
      If it’s a solid bet, will it be harder to tear it apart? Might one have to tear up the betting slip?
      Sorry, Bank Holiday. In silly mood.

  6. Possibly dump the €uro in favour of the Pesata but won’t / can’t leave the EU as there is a little matter of the €trillions poured into Spain to build their Motorways, Marina’s etc

  7. All makes sense and I hope your right, for Spain and all Europe’s sake. But they manoeuvred around the elected governments of Italy and Greece. If it’s not possible in Spain, then surely Draghi will just turn on the money tap. I really thought things would fall down last year but draghi as the slog has pointed out, seems to be pretty good at outmanoeuvring everyone. Surely he will find a way of filling those big holes in the Spanish budgets and banks with fresh Euro’s, even if technically they don’t exist. Lets face it, in reality it’s all just numbers on screens. Now I know full well that it can’t last forever. At some point reality will have to make an appearance and god knows what happens then, but I’m starting to wonder if the Italian running the bank may drag it out for a year or two yet.

  8. Sorry, JW, this is not going to happen. Forget the Sprouts and their cheeky Troikas, the reason is the subsidies. Spain gets enormous subsidies from the EU and has no reason to think that one day they might stop. It’s a junkie. The handouts are in effect rewards for good behaviour as the need for any reconstruction following fascism long passed, Franco died in 1975. Spain has far better infrastructure than many EU countries I know. As an exemplary communard, Spain under the PSOE was a model of how Brussels would like things to go. Socialist government, lots of dosh from the north to spread around with minimal scrutiny, heaven for all. Except for all the things that you have written about for the last [rather a long time], notably productivity, labour market rigidity and the utter stupidity of the foot-shooting real estate bubble of the century (the 21st, I mean). Spaniards know which side of their bread carries butter. They will not abandon the EU/EZ any time soon. It would just be too expensive, and worse, they would not be present at the top table.

    • For how long will the EU be able to subsidise anything? I think the EU’s problems are big enough to guarantee that there will soon enough be no EU – and no subsidies.

    • That is not true. From 2011, Spain is in the edge of not receiving subsidies anymore and instead start contributing to the UE. It is true that Spain has benefited greatly in the past (at a big price), but with the new member countries this situation has changed.

      The problem, as always, are the banks.

    • I agree with Carys assessment. When talking to some Spaniards in Barcelona the are happier being ruled by Brussels rather than Madrid.

      • PW,
        You may agree with Carys assessment through talking to people in Barcelona. But the Catalans aren’t a reflection on the viewpoint of most Spaniards. They’re like chalk and cheese to be honest.
        You may find more pro-EU Spanish in the far more prosperous north. Spain has a lot of quality industry up there.
        Also, a few years ago you may have found a great many more Spaniards keen to stay in the EU project but not any more. Spain did benefit from massive infrastructure improvements and the huge amount of liquidity sprayed around by the banks allowed many Spaniards to buy houses and nice cars. But all that they’re now left with is a shitload of debt and the banks aren’t helping them at all. In fact they’re being bastards, frankly.
        All the average ‘hombre en la calle’ sees is an almost tripling of the cost of living since the introduction of the Euro, while salaries haven’t gone up anywhere near that. There is proper poverty right now in Spain and the people are skint. There’s no work and the strength of the € has shafted the tourism industry which is so vital to the economy.
        The Spanish will show absolutely zero loyalty to the project and won’t give two hoots about being good europeans and paying back their debt. They’re in the shit big time and they know it. They will make a decision based purely on what is right for them today and bugger the past. The politicians may try and show some loyalty to their EU vested interests/gravy train, but the people won’t. Unlike the UK the Spanish have got real cojones and the will of the politicos will be totally swept away by the will of the people. Desperate people do desperate things and I posted a couple of weeks ago that things are going bad quickly and the Spanish will be the trigger that blows the whole EU over. Watch this space. I wish them all the very best.

      • To Repatriated Dan
        I really want this EU federation to be demolished and go to back to the EFTA that was its beginning. It is an affront to democracy and it enslaves its citizens. With no accountability in the EU or its subordinated countries, where referendums are cast aside with impunity, or not given where promised, where the political elite have so much to lose by its failure, the people will be subject to all kinds of propaganda and there will be constant divisions instigated to keep the people divided and therefore easily subdued. These subsidies will trickle to impoverished divided nations until the German taxpayer says no more. Unfortunately the German mindset is to take orders from authority until it becomes undeniable to do so. So I do not see the end of the EU coming from the Greek or Spanish peoples, although I wish it otherwise.

    • Under the circumstances Chris, could you not organise some poteen? It might give him some dutch courage..

      (maybe too multicultural..)

    • I agree with Dan, and I hope he is right, and Spain leave the Euro zone asap, it would be best for them, but where I live in Spain the people do not seem to have the courage, or want to see what is happening. They shrug their shoulders, and say that is just the way things are and we should just be thankful for what we have !!

  9. The Bolearics log (greetings from Port de Soller): It is with no small amount of shame that I report my 10 yr old son has thrown in his lot with Snr Draghi. He insists on the existence of a (notional, I am fairly certain) debt of 7 euros, which relates to an underspend from last year, which he wishes to be monetised forthwith. A money printer in my own family, it’s not going to be easy to live with that.

    There is a monstrous new hotel here, 4 years or so in construction, which is now open. The original money was, apparently, Russian but that ran out and it was finished with funding from Dubai. It is an absolute eyesore, up high and visible from all over. My cousin, who has lived here more than 20 yrs, informs that the cheapest room is 400 euros a night, room only no food. Completely mad and, I imagine, completely empty!

    On the bright side, said son and younger sister entertained 20 – 30 Germans for nearly half an hour by pulling out enough Salema (type of sea bream) on a handline to feed 4 of us for lunch. These were quite small – 12 cm approx, but very tasty. This evening my son excelled himself, however, by taking a 1.1 kilo Dorada (Gilt head bream) on the same handline. It’s going to be tough not to print those euros…

  10. Re: “For Luis never worked at Goldman Sachs: he may be just as right-wing…”.
    Pray tell (given your usually acceptable hyperbole in abundance) what ‘right-wing’ means in this juxtaposition? Or just felt like hitting that button?

      • I thought we were talking about Luis preparing for Spain’s default?
        That is hardly doing what you suggest, quite the opposite in fact.

    • Right wing – left wing – its the same stupid bird. I´d suggest not to use the left/right paradigm anymore, its part of the deception of the people.

    • @twoplato: There does exist Right and Left ideologies in this world.

      The problem is that (certainly in my lifetime) virtually all of our political parties have shifted to the Left and smothered us in PC, ever bigger government and ever higher taxation. All that is coupled to their inability to manage economics and society. It always always end in disaster.

      It’s not surprising when one considers that every time the Left get into power, they start handing out ever greater dollops of largesse to buy votes and to increase their power over the electorate and the State. Thus today, as @Terp says there’s very little difference between the political parties. It is this blanket Left dominance that is usually referred to by MSM when anybody who dares to suggest Right solutions gets described as “from the far right” or “right-wing maverick” and other denigratory labels.

      But that should not divert us from knowing that a Right ideology does exist, even if it’s not practiced. Left political dominance is destroying democracy and bringing it to a very dangerous endgame…

  11. I’ve had a feeling for a while it will be Spain that brings down the curtain. Unlike the Irish, they won’t accept a decade of austerity so the big boys can pat them on the head and tell them how brave they are, and unlike the Greeks they have the self-belief to see a fist-world future outside the Euro. Besides which, the Spainards will have to sell their oversupplied housing units to northern Europeans, and that’s a lot easier in Pesatas.

    They’re not going commit national economic suicide just so foreign bank bondholders of Spanish banks don’t have to take a haircut. And if that means triggering CDS written by Jamie Dimon, well……
    So be it.

  12. Pingback: John Ward – Euroblown : Why Spain Will Fall Down But Stand-up To The Brussels Sprouts – 9 April 2012 | Lucas 2012 Infos

  13. Lucas Papademos a jerk ?

    Dear John don’t call him names, he is just an Efialtis , a willing slimy traitor

  14. Reblogged this on Jim´s Research Notes and commented:
    This is my view as well. My research notes used to take some 2 weeks to research and write. They now take much longer but even 2 weeks is too long for me to keep following the rapid developments in the EU power struggle over the euro.

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