Captain, This Ship Is Sinking!

"Lo primero, el empleo" was the Partido Popular's slogan in Spain's recent elections. There's a "des" missing somewhere from that phrase. Today's unemployment figures here are once again dramatic. 22.85% of the workforce, 5.273 million people unemployed. There is now a serious expectation of Spain hitting the figure of 6 million unemployed, and that could even happen in 2012 on current trends. How distant now seems the time when a total of 4 million unemployed was regarded as an awful, unacceptable, prospect.

Is the 6 million figure alarmist? Well, let's consider what is likely to be the result in employment terms if the IMF's recent forecast of a 1.7% decline in the Spanish economy for this year turns out to be accurate? A deliberately provoked recession which can only lead to greater destruction of employment, and today's figures demonstrate clearly that the rate of that destruction continues to be enormous. But if that sounds bad, there is a further problem to consider. The IMF's estimate, and the Spanish government's own 1.5% estimate, don't take into account the likely effects of the additional 2% deficit reduction that is being demanded following the overshoot on 2011's deficit target.

Those extra 25000 million euros of cuts which have to be made if the deficit target for this year is to be met can only accelerate the terrible downward spiral. You cut more, your tax income decreases further whilst social spending on unemployment goes up. So you need to cut even more, your national debt increases instead of decreasing, you miss your deficit targets anyway and where do you end up? In the same position as Greece, Portugal and Ireland. It's not as if the outcome of all of this is a mystery any more, this has been happening in all the countries which have been "rescued" by the EU.

The Spanish government knows this will happen, and behind the scenes is believed to be attempting to negotiate a relaxing of the relentless drive towards austerity madness. Whilst officially denying it. Even the IMF, for god's sake, has finally woken up to what is really going on and warns that no good will come of this. The Bank of England, of all institutions, releases a report on the need for a new international framework to stop one financial crisis after another from wrecking the prospects of economic recovery. It's probably at least 20 years late but hey! 

However, those who continue to sail complacently towards Fantasy Island on the always tranquil waters of the Sea of Fiscal Consolidation and Structural Reform remain oblivious to the perfect storm that is forming. Meanwhile Captain Rajoy was about to help the most disadvantaged passengers off the ship when he slipped and fortuitously fell into a passing lifeboat. Now he sits in a deckchair on the shore with his copy of Marca on his lap telling people that he will do what needs to be done. It's a terrible, man-made, shipwreck.

There Ain't No Justice Part 1

Time for a South of Watford mini-series on what is already promising to be a vintage year for the Spanish judicial system. I'm hoping that putting numbers on the instalments will give me sufficient impetus to follow up with the rest but there's no guarantee of that. It might just end up like one of those Spanish TV series that gets abruptly cancelled, or it could go on for ever. It's not like there's a shortage of material.

Let's start with the case of the man who we may yet have to refer to again as the Molt Honorable Francisco Camps. Acquitted yesterday by a Valencian jury of having accepted free gifts of clothing from the organisers of the Gürtel corruption ring, Camps has won what was an almighty gamble. Whilst two of his fellow accused previously declared themselves to be guilty as charged on the (ill judged) assumption that the Molt Unpredictable was going to do the same, Camps decided to bet on a jury trial getting him off the hook. 

His fellow defendant, Ricardo Costa, wisely didn't take Camps on his word and went to trial too with the result that he has also been acquitted. After a trial lasting several weeks, the nine member jury voted 5-4 for acquittal last night just in time to go off and watch the Barça-Madrid game. All of this in spite of extensive evidence having been presented of the relationship between Camps and the Gürtel ringleaders, and the evident attempts to manipulate crucial documentation in favour of the accused.

There are now many critical of the decision to leave the verdict in the hands of a jury, with claims that a more professional tribunal would never have acquitted the two men. I'm not convinced about this, after all I remember the example of judge De la Rua and with a post pending on the Spanish Supreme Court's continuing vendetta against Baltasar Garzón I'm not sure this is the moment for praising the detached professionalism of the judiciary. Juries can deliver seemingly perverse verdicts, but so can judges with decades of experience.

Perhaps, given the apparent willingness of voters in Valencia to vote for the corrupt, there could be a case for such trials to be held outside the area of influence of the politicians concerned. But then Spain's decentralized judicial system doesn't generally allow for that. We also have to take into account the separation of the case concerning the clothes from the much meatier part that concerns the possible illegal financing of the Partido Popular in Valencia via the Gürtel companies.

Ironically, the acquittal of Camps creates something of a headache for Mariano Rajoy. Having taken some tentative steps to begin a clean up of the festering swamp that the Valencian PP has become, he would send a terrible signal if Camps was to be restored as regional president. But the latter is still a member of the Valencian parliament. It's notable that there are no Valencian politicians in Rajoy's administration. Rajoy obviously has the power and patronage to put Camps in a cozy position where he can do little damage and that should probably be somewhere far from Valencia. Given that Esperanza Aguirre shows such little interest in being Spanish ambassador in Kazakhstan, perhaps a suitable position could yet be found for Mariano's old friend Paco Camps?

The Supreme Leader Is Dead, Long Live The Dear Leader!

Silence descended last night on the deserted streets of the Spanish capital Madrid, as inhabitants of the country tried to come to terms with the death of Kim Don Manuel, known to all as The Supreme Leader. Reliable information is hard to come by in such a secretive regime, but it is rumoured that Kim Don Manuel had been ill for some time so his death at the age of 167 came as little surprise.

Although official media reports talked of many people crying today on the bleak wintery streets of Madrid, correspondents from outside have pointed out that it was in fact raining steadily all day. Regime supporters went so far as to claim that even the sky was in mourning for The Supreme Leader. All state publications today carried the same glowing tribute from The Dear Leader, Kim Jong Rajoy, to the dead man, although some foreign observers couldn't help noticing that the article made no reference of any kind to the role of The Supreme Leader in the terrible years following the brutal civil war that tore the country apart in the 1930's. 

The two men were not believed to have been close. Indeed, unnamed sources close to the regime have confirmed that Kim Don Manuel disliked Kim Jong Rajoy. At one point The Supreme Leader even banished Kim Jong Rajoy from his native province of Galicia to work in a menial job registering properties in the remote, semi-desert, province of Alicante. Only after his subsequent confession of vaguely worded crimes and following the accession to power of The Greatest Leader Comrade Aznar was Kim Jong Rajoy rehabilitated and permitted to return to active political life.

Kim Don Manuel was known for his legendary achievements, including his famous espousal of regular bathing in heavily radioactive waters to show support for the country's allies and to promote the ailing tourist and nuclear industries.

The Return Of The Invisible Man

Rumours that Mariano Rajoy had been kidnapped were clearly exaggerated. The great man finally emerged from hiding this week to give his first media interview since allegedly being elected as Spanish prime minister in December. There is even the possibility that he may deliver a press conference in the not too distant future, although it's unlikely on past form that he will accept any questions. Despite this silence, Rajoy still had the nerve in his first interview to claim that he would not be hiding from the crisis.

The pre-electoral strategy has been continued, and it seems that Mariano doesn't really want anyone to notice he's there. It wasn't him who had to explain the government's first package of tax increases and spending cuts this week in parliament. That package marked quite a turnaround from the unsustainable position that Rajoy's administration had held even after the election. Who is in charge of the Spanish economy? Officially its Rajoy, that's why there is no vice premier in charge of economic affairs. But then we have ex Lehman Brothers boss Luis de Guindos as economy minister and Cristóbal Montoro as minister for taxing people. Rumours of tensions between the two ministers have already emerged, and it is said to be Montoro that claims the seat at the head of the table for meetings on the economy when Mariano is off doing whatever it is he does.

It's funny how all that convenient dogma about reducing taxes to increase overall government income goes so quickly out the window when it comes to the crunch and the government needs to raise some serious money. Likewise all the rhetoric about squeezing the middle classes, which the PP used so extensively when the PSOE administration raised taxes last year. A fine collection exists of declarations, many of them quite recent, from senior PP figures on just how wrong it is to raise taxes to deal with the consequences of the crisis.

They now try to hide the dramatic turnaround behind the argument of the "herencia recibida", that the outgoing government concealed the true nature of the budget overshoot from them. The problem is that by far the greatest part of this overshoot comes from the regional governments, and which party controls almost all of these? The Partido Popular of course. It's possible, though unlikely, that they don't talk to the people in charge of their regional governments. It's also possible that the PP regional presidents have lied to the national leadership about the state of their finances. That has a more believable ring to it.

Despite the apparently progressive nature of some of the tax increases, the overall burden of paying for the crisis still falls on wage earners and the recipients of public services that are being slashed. The seriously wealthy in Spain don't pay income tax, they have numerous ways of getting around that. The only promised tax cut that has still been maintained is the potentially damaging subsidy from those who don't have mortgages to those who do. An odd thing to do when the government is trying to force the banks to accept the overdue downward revaluation of their unwanted property assets.

Meanwhile the association of tax inspectors has calculated that all of us who do pay our taxes are paying an extra €800 a year to fill the gap left by those who don't. They also say that reducing the submerged economy by 10% of GDP (probably less than half of what it currently takes) would increase government revenues by €38500 million, a figure which very nearly matches the estimate of total cuts required for this year. Instead the government has opted for what they present as an ambitious anti-fraud programme which, er, has a target 20% below that which was achieved last year.

At the same time the spending cuts are accompanied with widespread press coverage of all that wasteful spending from the boom years. The problem is that its not the airport without planes that is closing in Castellón as a result of the cuts, it's the schools. Nor do the cuts seem to be affecting a Valencian Formula 1 contract that is almost as expensive to cancel as it is to continue. This latter region, controlled for years by the PP and systematically ransacked in the last decade, is emerging as the leading candidate for basket case status. It seems that the national government had to step in to guarantee loans there in the first week of January. 

The worst is still to come. The combination of tax increases and budget cuts so far announced only accounts for around €15000 million of the estimated €40000 million total for the year. As predicted, the main pain will be announced only once the Andalucian regional elections (to be held on March 25th) are safely out of the way. Despite the servile pro-PP press coverage about how Rajoy's actions have stabilised the situation for Spain, this in reality has far more to do with the European Central Bank throwing vast sums of cheap money at the financial system. The ratings agencies have already given signs that they intend to keep up the pressure. How long will it be before a Spanish downgrade is needed because of the poor prospects for growth that result, of course, from the very same policies that the ratings agencies themselves have advocated? The casino will be the last place to turn the lights out.