In the words of the BBC economics editor, this could make the Greek crisis look like a "picnic in the park". And it also should be noted that the Spanish crisis has got a lot WORSE since the government announced big public spending cuts....

 

 

From the Independent:

 

 

If Greece was Northern Rock, Spain is Lehman Brothers

 

Unlike the football result, Spain's financial fiasco was entirely predictable. Though her problems are not as deep-seated as those in Greece, they are more dangerous simply because the Spanish economy is so much larger than that of Greece – about five times larger, in fact. It is the sort of difference, to draw an uncomfortable analogy, between Northern Rock and Lehman Brothers.

 

 

The first was serious indeed, and a precursor of worse to come, but it did not shake the world; Lehman Brothers was globally systemic, just as Spain is. Spain's economy is five times the size of Greece's; she is too big for Germany and France to save, and threatens the euro's survival. But, to borrow a phrase, Spain is also too big to fail.

 

The short-term problem is that investors are unwilling to lend to Spain – the Spanish government, Spanish banks and Spanish companies are finding it difficult to raise funds. Without those funds, they cannot go on. It is a credit crunch, based, as in Greece before it, on a rising tide of scepticism about Spain's ability to meet her obligations as they fall due. The banks, in particular, need liquid funds to carry on their normal business of lending. If they cannot rely on those, then they will fail, with disastrous consequences for the Spanish, European and world economies.

 

Having survived the slump well – Banco Santander snapped up Alliance & Leicester and Bradford and Bingley, and now wants to buy some RBS branches – Spain's banks are now in the sort of trouble that the British banks were in in 2008-09. But this time it is the government's lack of credibility damaging the banks, rather than the other way round. So they will have to draw on foreign funding, EU or IMF.

 

But why don't the markets believe that the Spanish government will reduce its deficit and get its house in order? Again, as in the Greek case, there is political and union resistance – strikes, protests, parliament votes. Added to that are Spain's unusually powerful autonomous regions, responsible for much public spending. Madrid claims that they are signed up to prudence, but some doubt it.

 

The longer term obstacle is Spain's notoriously restrictive and inflexible labour market. It has contributed to a youth unemployment rate of 30 per cent-plus (though some of that is also down to some slipping out of the tax system and into the black economy, a traditional Spanish defence mechanism in a downturn).

 

Like Britain, Spain relied on an unsustainable property bubble to sustain growth, as the unfinished apartment blocks and idle cranes littering Madrid and the Costas testify. Spain borrowed heavily from abroad, but did not invest the money wisely. Foreign investors wonder if Spain can grow her way out of her problems under the weight of government debt, a creaking banking system, a woefully unreformed economy difficult to control from the centre, and membership of a single currency that prevents devaluation and export-led recovery (as may yet happen in the UK).

 

Spain isn't Greece; it could be worse than that.

 

On a related note, David Blanchflower (the only member of the Monetary Policy Committee to accurately predict the recession back in 2006/07), has now said he is 100% convinced the world is heading for a Depression, due to the idiotic cuts by European governments. But I guess the Coaltion isn't going to listen to reason...

Edited June 17, 201015 yr by Danny

It's not a Spanish crisis but a Euro crisis. The Euro is flawed mechanism that really should not of got off the ground but it made policital sense and politians put short term politicial gain over long term economic well being of a country. The long term reality is starting to hit home.

Spain cannot adjust there currency to sort itself out - and politians cannot save money they have already spent. One option is for Spain to leave the Euro and devalue there worth in the same way the UK has partially been able to do. As Spain is not the only country in the mess Portugal, Italy and Ireland have a similar problem. It's possible they can get together and create a Euro-minor currency, so the Euro gets split up. A minor Euro would also be attractive to many eastern European countries.

Ultimately though these countries have to stop spending what they don't have. Currency devaluation only goes so far and while a good relief it only buys more time by effectively selling a countries assets.

 

I see the Euro falling to pieces; the dollar collapsing and the long term effect of all this will be to end the imbalance between the western world and the rest of the world.

Edited June 18, 201015 yr by Ricky

Hugh Hendry on the breakup of the Eurozone (from January 2009)

First 2 minutes only. PIIGS= Portugal, Italy, Ireland, Greece and Spain.

On a related note, David Blanchflower (the only member of the Monetary Policy Committee to accurately predict the recession back in 2006/07), has now said he is 100% convinced the world is heading for a Depression, due to the idiotic cuts by European governments. But I guess the Coaltion isn't going to listen to reason...

 

Blanchflower and Mervyn King were about the only ones to emerge from the crisis with any kind of credibility tbh, and if Blanchflower reckon cuts are gonna lead to a "Double Dip" recession, then maybe George Osbourne should be listening to that.... But the wont, cos he's an idiot.... :rolleyes:

On a related note, David Blanchflower (the only member of the Monetary Policy Committee to accurately predict the recession back in 2006/07), has now said he is 100% convinced the world is heading for a Depression, due to the idiotic cuts by European governments. But I guess the Coaltion isn't going to listen to reason...

 

:o He's usually really reliable and accurate, the coalition won't listen obviously, they're just more interested in making sure the middle/upper classes are fine ^_^.

 

I definitely wouldn't rule a double-dip recession out, but here's hoping it's not the case.

:o He's usually really reliable and accurate, the coalition won't listen obviously, they're just more interested in making sure the middle/upper classes are fine ^_^.

 

I definitely wouldn't rule a double-dip recession out, but here's hoping it's not the case.

 

The Lib Dems are just total sell-outs... Pre-Election you had them saying that they wouldn't do early cuts, now all of a sudden, they're all for early cuts.... A Double Dip recession would almost be worth it just to say "ha, told you so" and watch the "coalition" eat itself..... -_-

 

The Lib Dems are just total sell-outs... Pre-Election you had them saying that they wouldn't do early cuts, now all of a sudden, they're all for early cuts.... A Double Dip recession would almost be worth it just to say "ha, told you so" and watch the "coalition" eat itself..... -_-

Hardly. Lib Dems are a minor part of the coalition not the policy makers. The majority of the country voted Conservative so conservative policy is what you get tinted with a dash of Liberalism.

The majority of the country did not vote for the conservatives...

Hardly. Lib Dems are a minor part of the coalition not the policy makers. The majority of the country voted Conservative so conservative policy is what you get tinted with a dash of Liberalism.

 

Actually, the majority of people voted for there to be no public spending cuts in 2010.

The majority of the country did not vote for the conservatives...

 

Actually, the majority of people voted for there to be no public spending cuts in 2010.

 

Yeah, your technically correct.

What I'm getting at is that the Lib Dems where not voted for, they actually lost 5 seats so implementing Lib Dem policy is not possible.

They are less then 19% of the coalition so while they have some influence it's not that much.

 

Yeah, your technically correct.

What I'm getting at is that the Lib Dems where not voted for, they actually lost 5 seats so implementing Lib Dem policy is not possible.

They are less then 19% of the coalition so while they have some influence it's not that much.

Yet they actually got a lot MORE votes than last time.

 

Labour + Lib Dem > Conservative

 

Is what they're getting at, the majority of people voted for those two and by doing so voted against these cuts.

They are less then 19% of the coalition so while they have some influence it's not that much.

 

While I kind of see your point here, I think the point Grimly was getting at is, how can the Lib Dems SUPPORT these measures? Even if it's wishful thinking for the Lib Dems to actually force the Tories to change their key policies, most Lib Dem voters / former Lib Dem sympathisers like myself would've expected them to withdraw from the Coalition as soon as the scale of the Tories' planned cuts became clear.

 

Although then again, maybe not... it's become very clear over the last few weeks that the only reason Nick Clegg, Danny Alexander and David Laws joined the Lib Dems was because they were pro-Europe and socially liberal. Economically, they're Tory to the core.

Edited June 24, 201015 yr by Danny

While I kind of see your point here, I think the point Grimly was getting at is, how can the Lib Dems SUPPORT these measures? Even if it's wishful thinking for the Lib Dems to actually force the Tories to change their key policies, most Lib Dem voters / former Lib Dem sympathisers like myself would've expected them to withdraw from the Coalition as soon as the scale of the Tories' planned cuts became clear.

 

Although then again, maybe not... it's become very clear over the last few weeks that the only reason Nick Clegg, Danny Alexander and David Laws joined the Lib Dems was because they were pro-Europe and socially liberal. Economically, they're Tory to the core.

I don't think there is any bases to that other then political comment. All the lib dems including Vince Cable find themselves in a situation of having to comprise to make some of there ideas implemented in government, none of them wanted VAT rises as they spelled out in the election. It's a choice, you can be in opposition and have no effect or be a 1/5 part of a coalition and make some effect.

Yet they actually got a lot MORE votes than last time.

 

Labour + Lib Dem > Conservative

 

Is what they're getting at, the majority of people voted for those two and by doing so voted against these cuts.

It doesn't matter if they get more votes, they got less seats. Like it or not this is the numbers of the political system.

It doesn't matter if they get more votes, they got less seats. Like it or not this is the numbers of the political system.

Labour seats plus Lib Dem seats > Conservative seats. Damascene conversion or not, the Lib Dems led an election campaign AGAINST these cuts, and the majority of Lib Dem MPs who don't follow Orange Book principles are probably very uneasy with the fact that these cuts are going ahead in their name.

Labour seats plus Lib Dem seats > Conservative seats. Damascene conversion or not, the Lib Dems led an election campaign AGAINST these cuts, and the majority of Lib Dem MPs who don't follow Orange Book principles are probably very uneasy with the fact that these cuts are going ahead in their name.

 

Plus the SNP, Plaid Cymru, Green, Alliance and even DUP MPs all also ran on an anti-immediate cuts platform. Whichever way you slice it, anti-cuts make up the majorty of both raw voting figures AND seats in the Commons (if we go on what was actually said and promised during the campaign). I really do believe there should be immediate by-elections in all Lib Dem constituencies, as those people's representatives are simply doing the exact opposite of what they were charged to do - is there any other example in recent history where a party has promised one thing on a major issue during an election campaign, and then literally done the EXACT opposite in office?

 

Also, while I do think you're probably right that this Tory Budget is against most Lib Dem MPs' principles, they will still be complicit in it if they vote it through Parliament as far as I'm concerned. The Lib Dem MPs really do have the power to stop these cuts happening if they're brave enough, but it's pretty clear the vast majority of them won't be brave enough.

Edited June 25, 201015 yr by Danny

Plus the SNP, Plaid Cymru, Green, Alliance and even DUP MPs all also ran on an anti-immediate cuts platform. Whichever way you slice it, anti-cuts make up the majorty of both raw voting figures AND seats in the Commons (if we go on what was actually said and promised during the campaign). I really do believe there should be immediate by-elections in all Lib Dem constituencies, as those people's representatives are simply doing the exact opposite of what they were charged to do - is there any other example in recent history where a party has promised one thing on a major issue during an election campaign, and then literally done the EXACT opposite in office?

 

Also, while I do think you're probably right that this Tory Budget is against most Lib Dem MPs' principles, they will still be complicit in it if they vote it through Parliament as far as I'm concerned. The Lib Dem MPs really do have the power to stop these cuts happening if they're brave enough, but it's pretty clear the vast majority of them won't be brave enough.

Well, quite a few. Labour on top-up fees, increase in income tax top rate (although on the latter I don't think that one was really held against them all that much - particularly as the promise on that was made in 1997). The Tories in 1979 on interest rates or something like that as well?

Plus the SNP, Plaid Cymru, Green, Alliance and even DUP MPs all also ran on an anti-immediate cuts platform. Whichever way you slice it, anti-cuts make up the majorty of both raw voting figures AND seats in the Commons (if we go on what was actually said and promised during the campaign) Whichever way you slice it, anti-cuts make up the majorty of both raw voting figures AND seats in the Commons (if we go on what was actually said and promised during the campaign). I really do believe there should be immediate by-elections in all Lib Dem constituencies, as those people's representatives are simply doing the exact opposite of what they were charged to do

When you are playing football it's not the most shots that count, it's the most goals. You can't claim most shots are most goals and when the game is finished call for a rematch because you lost, to do so is both folly and bad gamesmanship. You might not of got the result you wanted but that is the rules of game whether it's politics or football.

 

About re-elections this seems bad loser syndrome. Why do you not ask for an immediate by-elections on all Labour seats? After all the majority of voters there didn't get what they voted for. Those who voted in Lib Dem MP's will at least see some of there policies implemented if they don't see the policy desired on VAT.

 

 

is there any other example in recent history where a party has promised one thing on a major issue during an election campaign, and then literally done the EXACT opposite in office?

Labour promised and put in there manifesto three times in a row to have a vote/reform of voting/proportional representation. It never happened.