When All Else Fails, There's Always Plan E

The official confirmation this week that the Spanish economy is in recession hardly attracted comment, it was something we already knew was going to come. Every week seems to bring a grimmer prediction of the economic outlook for 2009, and for 2010 too if these predictions turn out to be correct. First it was the European Union who caused genuine fright with their prediction of Spanish unemployment perhaps reaching 19% before things started to improve. This week it's the turn of the IMF, and they are no more optimistic about the timing of the recovery.

Finance minister Pedro Solbes provoked a strong reaction the other week when he suggested that the government had more or less exhausted its options for dealing with the crisis. Their best hopes for this year are more or less dependent on a scheme which has now been rebadged as Plan E. Around 8 billion euros have been assigned to government approved projects run by local authorities, essentially it is an old fashioned public works scheme. The government claims that only 5 municipalities in the whole country have not submitted any plans under the scheme. The hope is that it will create work for 200-300,000 people who might otherwise end up unemployed. On current trends this implies some impact on the rate of increase in unemployment, but not enough to stop it from rising considerably throughout 2009.

The plan isn't just intended to try and slow down the dramatic increase in Spain's unemployment rate. Throwing money the way of the ayuntamientos also helped to quell a growing rebellion of municipalities who suddenly found that their main source of funding - the construction industry - had stopped providing them with big bags of cash. The absence of any kind of reliable municipal funding mechanism was on display, but the government's plan seems to have postponed that issue at least for another 12 months. Not that the government intends to let the municipalities take the credit for the scheme, acceptance of a project includes the obligation to display a prominent sign on each site proclaiming that it forms part of Plan E, and that the money has come from the government. Blessed are the sign makers, for they shall go forth and multiply.

There's No Objection To Citizenship

In a legal decision worth applauding, the Supreme Court has decided that parents cannot exercise a right of conscientious objection to the newly introduced Citizenship module in Spanish schools. The anodyne and harmless content of this course has been treated by Catholic extremists as if it was the greatest threat ever created to Christian "civilization". How dare the state presume to teach ethics or even more dangerous concepts such as tolerance to our children! Can't you see they will force our children into compulsory gay marriage! Of course, if a priest is put in charge of the teaching then it's a different matter, the objections quickly fade away.

The Partido Popular in Madrid and Valencia rose to the challenge and did their very best to sabotage the new module. In Valencia, a ridiculous attempt to impose the teaching in English of what is probably now known in that region as "sitisenchip" finally collapsed in the face of growing opposition from teachers and parents. In Madrid the Outlaw Esperanza seized selectively on a favorable court ruling in Andalucia and promptly treated this as if it was the law, allowing parents to exempt their children from the compulsory course. Now they've lost the battle and the early signs are that they may even reluctantly recognise the defeat, although the tiny but vocal groups organised around the issue seem determined to have a few martyrs for the holy cause. The court took its time to consider the issue taking into account the speed with which they often send people to prison. You have to allow for the fact that they usually only deliberate before lunchtime.

Cloak And Dagger, Espionage In Madrid

Did you know that Esperanza Aguirre is an anagram of the words "espia", "guerra" and "Aznar"? Well not quite, I got left with "Azner", but it almost worked. Meanwhile, the espionage scandal that is now almost inevitably being referred to as "Aguirregate" continues to attract attention. This is despite the assurances from the Condesa herself that there is no spying in Madrid - it seems there are just a lot of people from the same political party who spend most of their time watching each other.

It looks more and more as if there are separate instances of spying involved, the surveillance of Manuel Cobo and Alfredo Prada dates from the tense weeks in between the general election in March and the PP conference in June where Mariano Rajoy was confirmed as PP leader. Meanwhile, the reports on Madrid vice-president Ignacio Gonzalez and his mysterious trips to Colombia and South Africa come from later last year and could potentially be from a different source. Today a judge has accepted that there might be signs of some impropriety involved in the case of Gonzalez. The documents published by El País yesterday seem to suggest that the objects of the espionage spend relatively little time at their workplaces and quite a lot of time in various Madrid hotels and restaurants. Nice work if you can get it.

The spying involving Gallardón ally Cobo and Rajoy loyalist Prada took place under a previous security boss, interestingly enough someone who owed his position directly to Aguirre herself rather than any of her multiple minions. This person was replaced earlier this year following revelations about the unauthorised removal of information and a computer from an office used by an associate of Prada - the latter was of course quickly sacked by Aguirre once he was "uncovered" as a Rajoy supporter, but the security manager was just moved sideways to another post.

The responses by representatives of the Comunidad have been notably sparse on detail. At first they attempted to dismiss the allegations by claiming that it was just El País helping the government. However, once the PP announced it's own internal investigation, and after some of those affected had spoken out, this version became more difficult to sustain. Despite repeated loud threats of legal action against El País, no case has yet been presented against the paper, nor has there been any formal denial from the Comunidad concerning the authenticity of the published documents. We don't know who passed the information to El País, but it seems highly possible that the leak came from within the PP itself. So poisonous is the atmosphere in Madrid between Aguirre and Gallardón supporters, and reportedly even between members of Aguirre's administration, that there is every chance we are witnessing an example of what is normally only used to describe those cases where foreigners kill each other on Spanish soil - the ajuste de cuentas.

Aguirre has claimed that the scandal will all end in nothing, which is clearly what she hopes for. It shouldn't, because there is enough information to justify an investigation, but even if the affair is eventually buried it will have had an effect. La Lideresa now has multiple enemies within the PP, a situation almost entirely of her own causing and which probably ensures that she has little chance of ever gaining the leadership of the party. There is renewed chatter about Rodrigo Rato being the man who could emerge to save the party from itself. It could just be the usual political speculation, but the way things are going he is one of the few people who could get widespread support both in the Madrid PP and the rest of the country. Also, with the banking business not passing through the best of moments perhaps he will find time to renew his political interests?

Is That A Standard Rating Or Just A Poor One?

Spain’s international credit rating got downgraded the other day by the Standard and Poor ratings agency. The rating has only fallen from the top level “triple A” to the still superior AA+, but it does mean that the Spanish government may have to pay a bit more to finance its debt. They are strange things, these ratings, and I’ve never paid much attention to them given that I don’t have one. Nevertheless it’s curious that a country’s ability to obtain credit can be changed overnight on the say so of one of a handful of private companies that issue these judgements. S&P seem to have based their judgement on Spain’s deficit and on some unspecified “structural” problems that presumably haven’t just appeared in the last week or two. Such statements are normally code for sacking people and given the numbers being made unemployed at the moment in Spain you would have thought the country was doing very well by such criteria. It all raises the question of who rates the raters? One person who doesn’t rate them very highly is Paul de Grauwe who has written on the issue in that well known Marxist pamphlet, the Financial Times. These are some of the choice quotes from his article:

“Is S&P still in the business of producing risk analyses? Should the rating agencies not have gone out of business after they told us for years that the risk associated with the ballooning debt of banks and large companies was nothing to worry about? How can these agencies, which were systematically wrong in the past, have any credibility in whatever risk analysis they make?”

“Government debt in the eurozone has declined steadily since 2000 (from 69 per cent of gross domestic product in 2000 to 66 per cent in 2007). The government debt of Greece, Ireland and Spain has declined even faster than in the eurozone as a whole. Two of them, Ireland and Spain, had a level of government debt that was about half the German and US levels in 2007. True, since the eruption of the crisis, government debt in these countries has been increasing fast. But US and UK government debt is rising equally fast. No warnings have been issued against the US and the UK."

"We are all subject to biased beliefs. The problem arises when such beliefs affect the analysis of rating agencies, which have considerable power in moving markets and in rewarding some and punishing others. The rewards and punishments distributed by rating agencies have huge implications. "

On the other hand, perhaps the FT has turned Marxist. In the El País economy section today they quote a "moderate" FT analyst on the UK economy who suggests that shooting the bankers and nationalising their assets may not just attract public support but it may even help to get the economy out of its current mess. I’ll have to start reading it more often.

Ecuador

Ecuador may not have great fame as a tourist destination, the Galapagos islands aside, but I would have no problem in recommending it. The cities are not unpleasant and there is plenty of scope for those who enjoy mountains, jungle and the coast. Most of our trip was concentrated in the central Andean highlands of the country, in addition we had time for a few days in the Galapagos but we left without having seen anything of the Amazonian or coastal regions. I plan to blog over the next few weeks on different parts of the holiday, highlights were the walks we did on the high volcanoes and the famous train ride to the Nariz del Diablo where passengers have to find their space on the roof of the train.

The country is largely very safe and easy to travel around as the bus services are both frequent and cheap. Overall it may be a bit more expensive than some other Latin American destinations because of the dollarization of the economy a few years ago following a period of prolonged political and economic instability. We found the locals to be both very polite and helpful; obviously knowing Spanish is a great advantage although there are parts of the country where you can just about get by with English. To do a trip like this you need to pack for all weathers, temperatures high up in the mountains can be very cold and the opposite will be the case in Galapagos or the Amazon. Protection from the rain and high factor sun cream are both essentials, the equatorial sun is amazingly strong even on the days when it hardly appears.

Ecuador has been governed disastrously in recent years, with a couple of presidents having been hounded from office. The current incumbent, Rafael Correa, is said to have an approval rating at the moment of around 70%, which is not bad going. Ecuador is in an election period and if that rating reflects reality then he is going to win very comfortably. One or two of those who do not approve of him expressed their opinions quite forcefully to us. A favourite target of his opponents seems to be the "bono solidario" which is intended to help the poor get by in a country where dollarization has meant a high cost of living not reflected in salaries. It seems almost unbelievable but we heard complaints that the bono, amounting to just $30 a month, was meaning that the poor no longer had incentives to work their way out of poverty! Some things never change, when governments give money to the wealthy this is seen as sensible policy, but giving money to the poor is always dangerous and “populist”. Despite such allegedly lavish assistance, the fields still appeared to be full of people tending their crops and livestock.

Ecuador is going to be hard hit by the current economic crisis. A significant percentage of the population works overseas, many of course are based in Spain, and the money the emigrants send home is important. At the same time the country depends for much of its revenue on oil prices, and these have slumped - making for a double whammy of emigrants affected by the crisis in Europe combined with a big fall in petrol revenues. Those emigrants who lose their jobs in Europe face a bleak outlook if they return home, something which probably indicates that many will take their chances on the economic storm passing in Spain and other countries.

I Spy Someone Beginning With E

It would have been inexcusably lax of me to let the whole of January pass without writing something about the activities of the Esperanza Aguirre Gang, formerly known as the government of the Comunidad de Madrid. Even by their own low standards, things are really taking quite an exceptional turn at the moment. El País has reported extensively this week on the use by one of Espe's main sidekicks, Francisco Granados, of a group of former police officers to compile intelligence reports on political rivals both inside and outside of his own political party, the Partido Popular. Those spied upon included Manuel Cobo, number two to Madrid's mayor Alberto Ruiz Gallardón and Alfredo Prada who was the predecessor of Granados in charge of Madrid's "Interior" department. The latter lost his job when he committed the "sin" of supporting Mariano Rajoy as PP leader. It was also reported that Espe's vice president Ignacio Gonzalez was placed under surveillance during a trip he made to the Colombian city of Cartagena. He made the trip in his capacity as political boss of Madrid's water company, Cartagena is a very pleasant city to visit and is surrounded on three sides by the wet stuff; apart from that it's hard to see its relationship to how Madrileños get their drinking water.

The intial reaction of Granados was to dismiss the accusations using the current PP standard excuse that everything that happens is an attempt by the government to distract attention from the economic crisis. However, the Madrid prosecution service is now getting involved and there have been angry exchanges between Gallardon's ayuntamiento and the Aguirre Gang. Madrid is not amongst those regions that possess their own police force, so the creation of any kind of intelligence service seems to be well outside the range of the Comunidad's powers. Perhaps the fact that Granados is also secretary general of the regional PP helps to explain why he would (ab)use public money to dig up dirt on his poitical enemies. He is now playing the martyr in an attempt to create the idea of a witch hunt against himself and Aguirre, but there is some significant explaining to be done. Gonzalez may also have some explaining to do, having denied that he had done any favours for a businessman who accompanied him on another jaunt to South Africa, it now turns out that the same businessman has received a very lucrative contract from....Madrid's water company, the Canal Isabel II.

As if all of this wasn't enough the bizarre battle led by Aguirre to gain political control of the Caja Madrid savings bank has intensified. I thought she had won her battle when I wrote about this before Christmas, but recently the Aguirre supporter presiding the Caja's control commission was deposed by an alliance of Gallardonistas and a couple of PSOE nominees who rebelled against their party's strange decision to accept Aguirre's manoeuvres. The fallout from this has included threats of legal action by the Comunidad, so famous for their respect for the law, as well as text messages offering jobs with Madrid's government to try and change the way votes will be cast. Mariano Rajoy has appealed for a change to the law controlling the savings banks to prevent this kind of political squabbling. Of course, if he really was the leader of his party he would have already been able to put an end to the spectacle long ago, his inability to do this spells out his own lack of authority in the party. The overall impression is of a group of people engaged in almost any activity except that for which they were elected. Meanwhile Madrid seems to be getting along quite nicely in the absence of any kind of government.

El Mundo De Soraya

The newspaper El Mundo lured Soraya Sáenz de Santamaria, leader of the Partido Popular's parliamentary group, into something of a trap last week. The paper, hostile to PP leader Mariano Rajoy and his team, persuaded Soraya to pose for their relaunched magazine in what has been described as a suggestive or even provocative photo. El Mundo then acted as if they had nothing to do with what had happened and director Pedro J Ramirez even questioned whether this was appropriate behaviour for someone in her position.

Down in true cro-magnon territory at the Cope radio station, everyone got very excited over the issue. Those of a sensitive disposition may prefer not to read any further, but the combined efforts of the commentators on the program run by Federico Jimenez Losantos decided that the best male equivalent to Soraya's image would be Mariano Rajoy dressed only in a leopard skin tanga. Apologies if I've spoilt anyone's lunch by conjuring up that image; it wasn't my idea.

Vacas

Returning from an enjoyable break in Ecuador I find that I've missed out yet again on seeing Madrid under a layer of snow, it's just cold and windy. It's not all fun in the snow either, last week a walker was killed by an avalanche close to Peñalara; the first time I've heard of such a thing happening in Madrid's mountains.

I'll leave details of my holiday for further posts - there is plenty to write about. Despite having to get up at 3:30 a.m. in Quito to catch a flight to Bogotá, and despite having a 10 hour stopover in the Colombian capital, the journey home wasn't too bad. We took advantage of the time there to have a look at the old city centre. Bogotá looks nicer, and seems to be a bit safer, than it was on my only other visit to that city about 20 years ago.

Meanwhile Madrid is full of cows! When I saw a similar display in Mexico City about 3 years ago I didn't realise that the Cow Parade moves from city to city. Now it's Madrid's turn and several areas of the centre have their mini herds of fibre glass cows. Some are original and inventive, others are unfortunately just advertising for the company that has sponsored them. Here is a selection that I photographed yesterday.