EUROPE - SPAIN

"Holy Roman Euro Empire" ??

CRISIS, AN INSTRUMENT IN BUILDING THE EUROEMPIRE

Crisis: Spain’s Possibilities: 

• The Greek scenario under which Spain would trade its islands for cash as the first step and further act accordingly.

• The Argentinian scenario under which Spain would say Goodbye to the Eurozone, slip into default, and introduce a national currency.

• The Brussels scenario under which Spain’s debts would be sold to the European Central Bank.

EROSION OF THE SOVEREIGNTY OF EUROPEAN COUNTRIES

The carefully engineered and fueled debt crisis, coupled to Brussels’ regionalization policies, not only causes nation-statehoods in Europe to crumble but, from a wider perspective, undermines national sovereignty and statehood as general principles. 

Lehman Brothers – the pivotal point which marked the escalation of the world’s mounting problems into the full-blown crisis – went almost unnoticed on September 15. The outdated forecasts that used to sound grim – like the one that it would take a couple of years before the light at the end of the tunnel comes within sight – now read as outbreaks of ridiculous optimism. These days, the recovery is projected to commence at least a decade from now, while alarmists predict far greater troubles including a military conflict of global proportions.

The public opinion has learned to think of the crisis as of some sort of a natural background. Guesswork concerning the causes of the meltdown may remain unconverted, but the recipe – rounds and rounds of spending cuts – seems to be universal, with no alternatives allowed even hypothetically. Luckily, the advice offered by Prince Charles – to take shorter showers to help the environment – does not have the power of law, but the austerity programs compiled by European bureaucracy and confirmed by national legislatures are not as easy to ignore, regardless of how the populations feel. More belt-tightening was prescribed to Europe where a series of protests erupted in response. 

The rally held by the so-called May 15 protest movement around the building of the Spanish parliament was the highlight in the course of the events – the legislature was surrounded by crowds of people, all of them being unarmed and some - families with children, but Spain’s premier Mariano Rajoy still described it as an attempted coup. Actually, thus Plaza de Neptuno in Madrid saw a replay of what happened a year earlier in Athens, at Syntagma Square. The developments in Greece and Spain exemplify a wider model which implies the erosion of the sovereignty of European countries. Importantly, the top authority in the process is not meant to be taken over by the EU institutions - it is rather true that a future Euroempire will have a grip on the reshaped Europe.

SPAIN’S AUTONOMOUS REBEL

Catalan national flags were hanging down from balconies in Barcelona in numbers last spring, and by the fall the joke often heard in Spain was that, if another austerity package is adopted, the country would fall apart and downtown Madrid would be left alone to repay the sovereign debt. Since 1983, the unitary Spain comprises 17 autonomous communities and 2 autonomous cities, all of them having their own governments and parliaments. Quite a few of the communities boast glorious history and some – serious records of independent statehood. For example, two states existed on the territory of what currently counts as the autonomous community of Castilla and Leon, and both played major roles in the Reconquista at the time.

Moreover, Spain’s autonomous communities are equipped with viable self-government and have their own political parties which are fairly independent financially. The independence was threatened when Rajoy’s government slashed the provinces’ budgets, and a strong reaction surfaced immediately. The government of Catalonia presented Madrid with an ultimatum, demanding either to be allowed to pay no taxes or to be given a Euro 5b loan. Rajoy opted for the latter, but, in Catalonia, the parliament stayed discontent and government head Artur Mas scheduled snap regional elections for November 25.

The opponents of Madrid in Catalonia opened the campaign on June 30 by staging the March Towards Independence. The demonstration which convened in Barcelona with the slogan "Catalonia, new state in Europe" was particularly impressive as it attracted from 600,000 to a couple of millions of people. The former estimate was aired by Madrid, and the latter – by Barcelona, but, considering that the total population of Catalonia is 7.2 million, even the floor-level 600,000 figure looked extraordinary.

SPANISH AUTONOMOUS COMMUNITIES WILL SERVE TO PLANT NEW STARS ON THE EU FLAG

Madrid holds Catalonia responsible for a debt of Euro 40b, while the community rejects the claim and is constantly mindful of the fact that it contributes 20% of the Spanish GDP and, by switching to the standalone status, can establish itself among Europe’s top regional exporters. Polls steadily give separatism a 90% support in Catalonia, the explanation being that the majority of the people suspect paying more in taxes than they get back from the central government. Independence would make it possible to stop feeding tax money to Madrid and, importantly, would shield the community from austerity plans such as the increase of the added value tax from 18% to 21% or the deep cuts of the budget dedicated to the local administration. It is clear that, if the proponents of secession win on November 25, their first step would be to set a date for the independence referendum. Catalonia and Madrid would then be drawn into tense negotiations, with Brussels arbitrating between the two.

Catalonia is the prime candidate for secession from Spain, but there are others who may pick up the lead. In the wake of last summer’s sweeping miner strikes and clashes with the police, the parliaments in Galicia and the Basque Country similarly announced snap elections coming on October 21, ahead of those in Catalonia. Madrid recognizes the Catalan nation as a separate entirety, but the historical and linguistic reasons to expect the same treatment are by all means comparable in Galicia and the Basque Country.

Some of Spain’s regions where the populations have no features of separate nations nevertheless grow disquietingly ambitious. Like Catalonia, Valencia - a region accounting for roughly the same share of the overall Spanish GDP - is squeezing the assistance in the amount of Euro 5.5b from Madrid. The same is done by Murcia and Andalucía which ask for Euro 700m and Euro 1b respectively. The government of the tiny Castilla-La Mancha which adds only 3.4% of the total to the Spanish GDP requested Euro 800m in September. The central government established a Euro 18b stabilization fund to prop up the autonomies, but the appetites of the five autonomies combined are enough to drain it to the bottom since late in September the bid staked by Andalucía jumped to Euro 5b. It must be noted that 12 other autonomies - Rajoy’s home Galicia and the chronically defiant Basque Country among them – may yet articulate their pressing needs.

NO REAL CHOICE

The government headed by Rajoy faces a dilemma of choosing between the sovereignties which will mushroom if the loan applications are turned down and the appeasement policy which can only be sustained if Madrid borrows tons of money from the European Central Bank. The EU approval will be required under the latter scenario, but at the moment the EU is drafting the procedures to which the heavily indebted nations will be subject, and the EU programs are notorious for igniting mass protests in target countries. No doubt, Brussels will agree to bail out the Spanish banking system, but after that Spain, like Greece, will have to part with some of its cherished assets such as the Canary Islands or even the Balearic Islands. Credible estimates show that the Spanish sovereign debt will reach 90% of its GDP in 2013.

Taking out loans in the EU, Rajoy’s government becomes a de facto intermediary charged with the mission of distributing the money among the autonomies. Those, however, can eventually decide that go-betweens in the business are completely unnecessary. If they do, the push for independence currently exerted by the Spanish autonomous communities will serve to plant new stars on the EU flag.

The above is the trajectory Rajoy is trying to steer the unitary Spain away from. As an option, he suggested to the EU to issue collective European bonds to be marketed globally, but Brussels seems to be unreceptive to the plan. Clearly, stabilizing nation-statehoods is not what the emerging Euroempire needs. Stonewalled, Madrid floated government bonds worth Euro 186.1b on its own in a hope to sell them for US dollars, yuans, roubles, and whatever comes along and, thus, to overcome the addiction to EU loans. More Spanish bonds worth Euro 200b for a term of 2-3 years are expected to see the light of day in 2013. The obvious truth is that, given that the world crisis shows no signs of waning, the design appears stillborn.

Consequently, the future promises to Spain one of the following possibilities.

• The Greek scenario under which Spain would trade its islands for cash as the first step and further act accordingly.

• The Argentinian scenario under which Spain would say Goodbye to the Eurozone, slip into default, and introduce a national currency.

• The Brussels scenario under which Spain’s debts would be sold to the European Central Bank.

The one empowering Brussels, as it happened in the case of Greece, is more sinister than others – should it materialize, Spain would stop being a sovereign country and submit to the remote control to be exercised by the EU supranational bodies.

by Andrei Ganzha, Serge Klimovsky