What are your thoughts on Spain's economic crisis?

I am interested in the causes, effects and solutions to the economic crisis in Spain.

1.   It sounds a bit like an exam question, but I wonder what people's opinions are on the causes of the economic crisis in Spain.  Why is it different, for example than the crisis being experienced to lesser or greater degrees in other countries?  Maybe someone has some opinions on how Germany seems to be still doing fairly well in comparison to Spain?  What is it about Spain that has led to the crisis being so acute?  It is perhaps only by examining the mistakes that were made that positive ways forward can be suggested.

2.  We have heard quite a lot about the effects of the economic crisis, including the impact on people's lives, both Spanish and foreigner.  This has led off to a discussion of one particular aspect, focusing on the cost of living now in Spain for expats and comparing it with that in the UK and this is also being discussed on the other thread regarding why people would move back to the UK. That wasn't the only aspect I thought it was worth exploring and it is being discussed elsewhere.

3.  To my mind, the third part of what it is worth exploring more is what are the best ways out of this crisis?  People are either in favour of austerity measures or in favour of spending more - but are there any other ways of thinking about it?  For example, I mentioned earlier on about the possibility of getting back some of the wealth that has been stolen from the Spanish authorities/Spanish people, over a period of many decades.  I am aware that there are a stack of legal cases, but do not know if money and assets are being seized and put into the public coffers for the common good.   Does anyone have anything to add to this?  Either in the way of expanding on this idea or having a completely different idea for how to help to get Spain out of this mess?  I know we're not the Government, but let's imagine we were sitting in the Spanish Government and were asked to brainstorm...

Firstly, thank you, eggcup for telling part of your story re moving to Spain and returning to the UK.  We often read posts from people concerning the reasons they moved to Spain and we often read posts from those who have returned to the UK and why.  It's rare to read about the reasons for leaving the UK and then the reasons for returning.  Hopefully, we'll get to know the whole story one day. 

These are certainly difficult times we're going through in Europe and, so far, much of the media focus has been on Greece, Spain and Ireland.  However, in time, we'll all get to know just how difficult life is going to become for all of us.  Governments have decisions to make to help us get out of this mess and none of them will be popular.  And, as we all know, those in power are afraid to make unpopular decisions (however right they are) that could see them being voted out of office. We need some leaders with huevos!

Basically, we got ourselves into the mess because interest rates were kept too low for too long and borrowing was made easy for too many.  It also became the norm, a way of getting what you wanted today and paying for it at a later date.  There are few retirees today who haven't learnt how to save money rather than borrow it and the parents of retirees (folks in their 80s/90s) saved up for months to buy what they wanted!  Unfortunately, many of today's younger workers are into the quick-fix ie; if they want something...they prefer to borrow the money to buy it now.  They are used to today's technological world where everything is only the touch of a button away....and it's most annoying if the computer takes more than a minute to load.  How do you get them to accept that the way out of this mess will take YEARS?  Very few people in their 20s, 30s, 40s are free of debt...not counting their mortgages, without which a house purchase would be unattainable.  And who can blame them?  Governments failed to curb the banks and finance companies that were lending money out to anyone and everyone that would take one.....even to the extent of falsifying paperwork to get a loan through the system that could have put a stop to it.  My husband and I became heartily sick of being offered debt up until a couple of years ago when lending dried up.  We are still getting phone calls from Companies offering to 'help sort out our finances' and, when we tell them we haven't owed anyone any money for years....they think we're kidding!

As I understand it from the books I read and the programmes I watch/listen to, the reason Spain has reached such a dire state before other nations might (will?) is because of the huge amount of debt taken on to build so many properties that have been left unsold (they just couldn't stop building even when the market started to slide) and because of the many householders that DID buy their property but can no longer afford to pay for the mortgage. In such instances, debt that was once that of the house owner now becomes Government debt....how?  because the Governments have taken it upon themselves to bail out the banks' debts!  And they'll keep on bailing out the banks until we reach a critical point...ie; it can't go on.  What will happen then is anyone's guess, but it won't be good.

Of course, there's a hell of a lot more to it than that but I'll leave it to others to explain more if they want to.  I'm reading a great book at the moment that I'd recommend to anyone that's interested....'ENDGAME The end of the debt supercycle and how it changes everything' by John Mauldin and Jonathan Tepper. Fascinating and not all doom and gloom!

HARRY07 -

Re your mention of the possibility of taxing the perceived wealthy expats.

I am not sure what you are refering to in France and maybe you would care to expand on it. I would just say, however, that many years ago I was looking at property in Malta but was discouraged by their tax on foreigners buying on the island. The reason was different, not to necessarily raise money but rather to reduce the inflow of foreign property owners and prevent the island from becoming one huge building site. However, this tax was later repealed on Malta joining the EU, as being unlawful.

Under EU legislation, discrimination is OUT - certainly as regards citizens of member countries. Any attempt to bring in that sort of thing in Spain would quickly be annulled especially as Spain's finances are under the EU microscope.

 Spains economic crisis, Englands, Italy ,Portugal, America, Greece it is all the same.

All you had, or have to do, was, and is to provide a product that the greater majority of people will purchase on credit. For it is the credit that matters not the product. You could, and can borrow money, and while you pay it back you can live in it, drive it, sit in it, eat or drink it etc.

If you pay cash for your car, financial services do not benefit

If you pay cash for your house, the same.

For that matter if you pay cash for anything financial services do no benefit.

The economy was built on credit fueled capitalism. I do believe in capitalism but i am not a beliver in credit for this purpose. If you cannot afford it dont buy it. But then knowbody wants to wait.

Think of all the products purchased on credit what a false world we live in.

The housing market is surviving today in its stricter credit form. If it stays there great but watch what will happen.

Hyper inflated product prices give way to interest free loans. Cash back, all to keep up the price. Discount for first time buyers anything to get you on the band wagon. The younger the better. The old folk who will give them credit. Unless they have an inflated produt to sell or be leant against.

Capital gains tax on increased property prices regardless. With the usual tax breaks for proven cost expenditure and time occupation discounts.

Do companies actually loose money when a sale is on. No you pay for the discounts during the year. 

What crisis. Live within your means.

Antonp 

To my mind many of the effects and causes relating to Spain suffering to a greater degree than other countries, relates to their lack of regulatory controls on the real estate industry upon which they relied so heavily and led to unsustainable over development, swathes of poor building standards and general disregard for consumer protection. Also the Banks failure to respect existing laws and the failure of the justice system to speedily enforce these laws, the conflicts between local and regional governments that failed to take account of innocent people caught in the net of corruption and greed, all led to a spiralling effect on consumer confidence and trust. The failure of legal Bar Associations to regulate their members and establish some form of respected kite mark system that would have acted as self regulation against negligent and in some cases corrupt law firms in league with developers.

This appears to have been further exacerbated when the Spanish youth were encouraged to abandon their further education as they entered the real estate industry, which has only amplified the crippling unemployment statistics as the property sector crashed.

The Government’s failure to adequately and speedily react to these factors, to resource the overstretched courts and address the human rights issues relating to property rights and law enforcement, their failure to diversify their economy and encourage their educated youth into other areas less reliant on the real estate industry, their failure to act speedily against corruption and Banking irregularities, have all played their part.

As for a few suggested solutions to restore trust, redefine goals and cope with the ensuing crisis here’s a few ideas to debate:-

Continue the fight against corruption and malpractice, adequately resource the courts to provide an efficient and “competent” system, establish respected professional kite marks (for agents, developers, law firms), adequately monitor and enforce regulatory controls to provide greater transparency and accountability. Provide a credible and effective justice monitoring system where complaints are effectively acknowledged and responded to.

Provide a system to better regulate and monitor the Banks.

Establish an inclusive think tank taken from respected representatives of all areas of society, to diversify the economy so as not to be so reliant on the real estate industry and identify a realistic plan to educate the youth into areas that will benefit Spain in the longer term.

Try to develop a more united approach where all citizens are part of a common goal to work together to develop an economic strategy that benefits all, rather than each pulling in separate directions, each looking to their own self interests. According to the recent press, Catalonia makes up one fifth of the national economy and generates 30% of Spain’s exports. So why not look to replicate their success in other areas so as to benefit wider regions of Spain? Likewise Madrid has to incentivise those in Catalonia to relate to Spain as a whole, and only by reform and fair practice, ridding the system of self interest and corrupt practice and mismanagement, can that ever be achieved.

Investigate and resolve areas of conflict between local and regional governments and where necessary gradually and effectively eliminate duplication of effort and inefficient methods of work within the public sectors, whilst developing new skills, pride and commitment to a common goal.

And during this crisis, encourage those with adequate financial resource to assist the Spanish economy through voluntary work to pass on their skills and assist those most in need. Volunteers can inspire a nation. Such things as charity shops recycling unwanted clothing/furniture, or local fruit and vegetable allotments aimed at assisting those in great need, homewatch schemes to assist the police to curb crime, voluntary educational schemes (just as one example, language and IT skills), healthcare professionals to adjust fees for those in dire need, community gatherings of foreign nationals and nationals to lift one another's spirits, encourage integration, aspire to a common goal etc

But most importantly, believe as citizens that you have the power to influence change via responsible organised Government lobbying, campaigning, etc. Who, for example, are your responsible role models in this regard?

Just a few thoughts and ideas to debate, along with many other suggestions that have been discussed within EOS threads.

What a fantastic contribution, ads, with lots for us to think about.  Obviously, the Spanish people and Government must despair at the size of the task, but as you say, even small efforts can work towards the greater good.  I believe the British people have a lot to contribute in this regard and already do in lots of areas in Spain, with charity work in particular. 

 ads,

War & peace springs to mind. Sure is an epic missive.

The answer has to be symplistic. Knowbody in power will do the right thing because the right thing gets no votes.

Punish those you can with punitive taxes for the poor think it is right. That gets votes.

Horse, gate and bolt spring to mind.

There are those of us that would employ servants, drivers, gardeners, maids, upper house, lowerhouse and below stairs, butler etc.

It would all help the people that need it.

But who wants to pay minimum wage, accomodation etc.

All people want is more to negate the tax take and when they get it they want more still.

The majority of politicians have no real interest other than there own paycheck there expense account and benefits and if that means doing as you are told they do it. Are politics really for the benefit of the people.

Antonp

Antonp

I understand your observations but an unfolding crisis of great magnitude has the potential to allow citizens to stand outside the box, to re- prioritorise their needs and aspirations to do the right thing, to make comparisons to those who have failed and learn from their mistakes, to look to those areas of good working practice and replicate where appropriate, to throw away the blinkers that constrain reform, and finally recognise that self interest during these times of crisis ("All people want is more to negate the tax take and when they get it they want more still." ) achieves little in the longer term and sadly , as we all know to our costs, has the power to destroy nations.

Spain does need more people who are able to act for the greater good and who see politics and public service as a vocation; that is probably a rare phenomenon in any country, but I personally know one British MP who came out very favourably in the expenses scandal, because she had zero interest in claiming for every little thing and was too busy representing her constituents; there was another female MP I vaguely recall, who had some kind of disability or illness but still kept her expenses to an absolute minimum. 

I think that that scandal showed up clearly that, although there were a lot of people in politics for the wrong reasons (I think the main driving force in the UK is wanting the status and that's a very bad reason), there was a minority (so, at least some) who had the right impulses.  I wonder how many people in Spanish politics and public life fit into that category?  The judge, Baltasar Garzon, who famously issued an international warrant on Pinochet and who, more recently, was trying to bring to justice the people involved in the Guertel scandal (it is estimated that the ringleader, Correa, amassed a personal wealth of 50 million euros, which would come in very handy now) was prevented from doing this by being charged himself!  You couldn't make it up.  Spain manages to produce a remarkable citizen willing to take on the big guns and instead of receiving support, he gets shot down.

Personally, I have known quite a few Spanish councillors and Mayors and have yet to meet one who is motivated by altruism.  It's all a bit strange; call me naive, but I would think that in a country where the Catholic church is so strong, there might have been some positive effect from the teaching of morality which would lead some people along a selfless path.  The local deputy head in our children's village school, asked my husband to stand for Mayor one year, 'Please,' he said, 'we need someone British, someone who isn't corrupt.'  But somehow, I don't see the good people going into politics and that is what Spain needs.  And I'll get accused of inverse sexism here, but the single best move would be to recruit more women into politics because it is a statistical fact that women are less criminally-inclined.

If this decade (and beyond) has taught us anything hasn't it demonstrated that without fair enforceable regulatory controls in place to control excess and abuse, that chaos will rule, that power corrupts, that civilised society is placed at risk? Don't the majority crave a more balanced approach to life, an approach that encompasses progress but not at the expense of all else? . Human nature being as it is, perhaps this is the wake up call to learn that uncontrolled selfish behaviour in all forms is ultimately destructive and requires contant re-evaluation of counter measures to ensure the survival of civilised society.

All very deep, but pretty basic when you think about it!

Is this where Spain has struggled more than most? Does this imply then that the Spanish people are more selfish (I very much doubt it) or is it that they have rebelled against the controls of the Franco era? (far more likely). In which case, we are back to trying to gain a more balanced approach to life...... the political extremes from both of these scenarios have inflicted equal harm to the Spanish people.

What do you think?

'I would think that in a country where the Catholic church is so strong, there might have been some positive effect from the teaching of morality which would lead some people along a selfless path.' 

As one of the most corrupt and hypocritical organizations on this earth I really don't think anyone can look to the Catholic church for any sort of guidance !

Ads is right  that human nature being what it is enforced regulatory controls are needed, unfortunately power corrupts and not just politicians and bankers either, even those who are meant to be the regulators and enforcers often fall by the wayside.. The system is corrupt through and through (not only in Spain)  from the top down and fixing it will require huge efforts on everybody's part and not left to just a few. Unfortunately the majority will sit back and moan and not be proactive in any meaningful way.

I wish I knew how to solve this economic crisis caused by totally incompetent and greedy people but sadly those incompetent and greedy people are still pulling the strings, the names may have changed but it's still the same old same old and they don't know how either as it is big business who really run the show.

You're quite right Poppyseed, about the Catholic Church; it's not my favourite organisation either - I've seen grown women crying when they recall their school years being taught by nuns and I've known someone who was repeatedly raped by his priest in Ireland as a 13-year old and ended up on drugs in his early 20s because of it.  Many of these victims later committed suicide.  There are countless examples of the crimes of the Catholic church.  I saw on Spanish TV a case where the Church was left a lot of money by a woman who stipulated that it should be used for the benefit of her local community when it was in need and she just wanted the Church to administer it.  The locals were then struggling trying to get the Church to say where the money was; saying if this isn't a rainy day, when is, having set up soup kitchens?  The Church kept stonewalling them. 

But I suppose what I meant is that all religions as far as I know aim to imbue their followers with some sort of moral code, to help others for example, so shouldn't this lead to some kind of altruistic efforts?   I'm going to put my head above the parapet here and suggest that Spaniards are less philanthropic than British people, according to my observations and I expect I could find some statistics if necessary to back this up.  One often hears about the Spanish extended family and it seems to be coming into its own now, with the elderly helping support their children and grandchildren through the crisis for example.   But maybe for this reason, there is not the same tradition of helping others outside the family; whereas people from other countries like Britain may neglect the extended family to a greater extent, but be more community-spirited or charitably-inclined.  I say, maybe, because I'm speculating, based on what I've observed.

In terms of regulation, I agree there should be a big effort at enforcement, especially in the short and medium-term but in the long-term, social change is more successful if it comes from 'within;' if people want to do the right thing.  I also keep going on about it, I know, but I also believe that there is a lot of money in the wrong hands that needs to be clawed back.  It's not enough to prevent corruption in the future - there's going to be a lot less money around in the future for these criminals to get their hands on - why should people get away with stealing millions from the public purse, especially in such a time of dire need?  I don't know what the law is on Spain regarding benefiting from the proceeds of crime (white collar or otherwise) and the seizure of assets, but I'd be implementing retrospective legislation if that is at all possible (probably against European law).

"I wish I knew how to solve this economic crisis caused by totally incompetent and greedy people but sadly those incompetent and greedy people are still pulling the strings"

Name and shame Poppyseed/Eggcup!! And use responsible campaign organisations like AVAAZ as a means to expose, educate, pressure and hopefully motivate the masses. It's simple to support worthwhile campaigns via this organisation..... and if belief grew in people's ability to effect change in this way, the potential support could finally make businesses/banks/leaders whoever, far more accountable. A classic case in point is the following http://www.avaaz.org/en/stop_the_corporate_death_star/ where a global petition has now reached over 700,000 (aiming for a million).

As for hypocrisy, it can be found in all organisations, let alone religions, but just because it exists, doesn't mean that it's an impossible task to gain reform. We should never be overwhlemed by the task in hand due to the scope of what is required, it's one step at a time (as Keith Rule has ably demonstrated with his endeavours relating to Bank Guarantees. How many times was he told that he would be wasting his time? And the hypocrisy and irony is that those who were undermining his efforts are now proactively following suit to make the Banks accountable!! )

As for enforcement of regulation, this is the most crucial point of all. There is little point in advocating regulation if it is not properly monitored and enforced. Do not be fooled by those who suggest regulatory reform (rhetoric) unless it is accompanied by the means to enforce it in a timely manner. (Look to the recent fiasco with Barclays and you will see how compliance was compromised by ineffective monitoring). We are becoming all too wise to the failure of enforcement and need to bring this to the attention of all those keen for effective reform. It has become the hidden obstacle to obtaining justice and accountability so surely this needs to be highlighted and prioritorised?.

One step at a time however. Education to the realities is only the first step on the ladder. Motivating and initiating self belief in people's abiity to effect change in a responsible manner is much harder, especially when there are those with hidden agendas who undermine at every oppportunity.

Eggcup, clawing back of monies "stolen", or seizure of assets etc can only be done via the Justice system (in any civilised society), and once again rulings have to be enforced for them to be effective..... so timely enforcement is the key to gaining justice and accountability.
 

Have I understood you correctly, ads?  Are you having a go at me and Poppyseed?  If you're not, I apologise for misunderstanding you, but I'm not sure what you mean about naming and shaming.

I don't think Ads is having a go at us eggcup, I think she is trying to encourage us to be proactive!

Ads, I am a member of Avaaz and support many of their campaigns and I have been known to march in the streets on national and local issues!

An interesting aspect of the wide-scale corruption that was one of the main contributory causes of the economic crisis is that when politicians were involved they came from all different parts of the political spectrum.  The same was true with the British expenses scandal (although a lot of what happened there wasn't necessarily illegal as I recall, but believed by many to be morally wrong).  It seems that the right-wing/richer parts of the political establishment know the tricks of old and the left-wing/poorer parts of the political establishment are betwitched by the prospect of getting their hands on some of the lolly as well. 

I come back to my conclusion that it would be good for society if more women became involved, but you can count me out in terms of political activism as such; I spent many years burning myself out with that and would now rather my contribution be in a different form - not all of us are comfortable standing up on a podium and neither would there be room enough for us all.  There are all kinds of ways in which individuals can contribute towards a better society, including charity work, making personal donations to good causes, investing in people, for example by employing them for a fair wage and so on.  And these are all worthwhile things to be involved in during this economic crisis.

Sorry to confuse, eggcup! 

I rushed the last posting and meant to say that naming and shaming (when evidence is indisputable) is one way of bringing attention to those who wield power and continue to act in a corrupt or compromising self interested fashion.

AVAAZ is an organisation that has the potential to educate and allow citizens concerns to be effectively communicated to those in power, the means through which people can influence reform via the simple gesture of adding their name in support. It has the potential to provide citizens a means of regaining control relating to aspects that now affect all of our lives. The control that all too many feel is denied them at this time of economic crisis, when they perceive so much abuse of power, so little accountability and enforcement of law or regulation.

As for political activism, that isn't what I am suggesting to be honest, it's more the need for well defined regulatory controls, closely monitored and enforced, to protect citizens from abuse and corruption, no matter from which political spectrum they originate.

Eggcup,

I've been thinking about your observations between the Brits and Spanish in terms of the differences of approach to family assistance/community spirit/charitable giving etc. Perhaps the only way forward now that the economic crisis has hit, is to embrace and encourage all of those aspects, where applicable, to look to every avenue relating to ways that each and every one of us can help, rather than to live in hope that others will take up the mantle on our behalf, or that it won't make a difference.

You are right Poppyseed when you say I'm trying to encourage pro-activity, but at the end of the day, much depends on our consciences, our belief that no matter how small, we can do something to help, and perhaps where I'm not being clear enough in my message, is that there are some powerful tools at our disposal through campaign organisations, that only require a simple gesture of signing in support, or in some cases providing funding to assist those respected campaign organisations, to continie their endeavours on our behalf.

At some point you have to ask yourself, do you believe that such pro-activity can help, is it worthy of the small effort, but equally I hope people appreciate that doing nothing is far more harmful and plays into the hands of those who are content with the status quo, where lack of fair regulation, lack of effective monitoring and enforceable controls over their activities, appear to be harming so many innocent citizens.