Thursday, October 11, 2012

If You Dig Long Enough, You'll Reach New Zealand

Christine Lagarde, the head of the IMF, is arguing that Spain and several other insolvent EU countries be given more time to get their acts together.
TOKYO—International Monetary Fund Managing Director Christine Lagarde said Greece should be given an extra two years to meet its budget targets, publicly wading into euro-zone officials' politically sensitive bailout discussions...

Instead of front-loading the Greek bailout with budget cuts and structural changes, she said "it is sometimes better, given the have a bit more time."

"This is what we advocated for Portugal, it's what we advocated for Spain, and it's what we're advocating for Greece, where I have said repeatedly that an additional two years was necessary for the country to actually face the fiscal consolidation program that is considered," Ms. Lagarde said.
You see, Spain and the other countries have aging populations, crippling regulatory burdens on business and a population addicted to unsustainable social spending. The best thing to do in cases like this is give them more time to ... to ... to keep digging?

Meanwhile, Standard and Poor's has downgraded Spanish debt to near junk status.
Standard & Poor's Ratings Services cut its rating on Spain and maintained a negative outlook, citing the mounting pressures from the country's economic recession.

The ratings company warned Wednesday that Spain's credit-worthiness might continue to deteriorate as Madrid struggles to close a yawning budget gap...

S&P's downgrade to triple-B-minus from triple-B-plus puts its rating on an equal footing with where Moody's Investors Service rates Spain, just one notch above speculative-grade, or "junk," status.
More time will allow Spain to reach triple-Z status, the Zombie Economy level. Of course, the folks in Catalonia aren't too hip to this whole bankruptcy tune.
Three out of every four Catalans are in favor of holding a poll to decide on independence for Spain’s richest region, according to a survey published Wednesday by the Catalan government’s Center for Opinion Studies...

Pro-independence sentiment has risen in Catalonia in recent months on the back of the economic crisis. According to the survey, 74.1 percent of Catalans want a referendum on independence. Nearly all voters for the region’s main pro-independence parties are in favor — including 83.4 percent of supporters of regional premier Artur Mas’s CiU nationalist bloc, 92 percent of ERC Catalan Republican Left voters and 96.1 percent of leftist-green ICV voters — the survey revealed.
So to review, Spain has an aging population, near-junk bonds, huge unemployment, massive social spending obligations and its wealthiest region wants to secede. The best option here is to give them more time to see what they can do.

I think they can reach Wellington if they really try.
We can do it if we all pull together!


drozz said...

seems to me catalonia decided the cart was too heavy

tim eisele said...

The interesting bit is which parties are supporting Catalonian independence:

83.4 percent of supporters of regional premier Artur Mas’s CiU nationalist bloc,
92 percent of ERC Catalan Republican Left voters
96.1 percent of leftist-green ICV voters
60 percent of Catalan Socialist Party supporters

What do all these have in common? They are all leftist/socialist parties (at least, Wikipedia says they are). It looks like people who hold the very ideology that is responsible for Spain's current predicament are also the ones who are most ready to cut off the rest of the country and throw them to the wolves.

K T Cat said...

I would bet that support for the thing cuts across ideological lines. Catalonia has the cash and they feel Spain is both a thief and a cultural imperialist.

tim eisele said...

Maybe it is starting to cut a bit more across ideological lines than it used to, but the push for Catalan independence has been going on since the 1920s, and is primarily being pushed by leftist parties

K T Cat said...

Good find!