Spanish footballer is right, it's not the Germans' fault
Spain's Prime Minister should take lessons from Gerard Piqué and stop finding excuses or someone else to blame for the country's banking crisis
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Sunday 28 April 2013
When Gerard Piqué was asked to explain Barcelona's humiliating defeat at the feet of Bayern Munich in last Tuesday's Champions League match, the centre back made no excuses. In keeping with the Catalan team's reputation for being the gentlemen of football, Piqué simply said the Germans had outplayed them.
He was far more gracious than his fellow Catalans, but the fans have stayed faithful and are already out in force putting up the bunting ready for this Tuesday's second leg at Camp Nou.
Yet another defeat would be catastrophic for the region which is deeply scarred by soaring unemployment – triggered by the devastated construction sector – and where anger against the austerity measures of Spain's Prime Minister, Mariano Rajoy, is reaching crisis point. If you add into this mix, the simmering disgust towards the royal family following the latest scandals, it's no surprise the Catalonian independence movement is growing by the day and being joined by those – on the left and right – who want to leave the euro.
It's not just northern Spain on the warpath. The number of jobless is even worse in the south and last week's figures show there are now 6.2 million officially unemployed people – 27 per cent of the population. Around 1.7 million jobs have gone from the construction sector alone since the financial crisis, when Spain was forced to call a halt to its madcap building. Around one million properties are now empty.
Most worrying, though, is that six out of 10 of those unemployed are under 25. Yet the real figures among the young are said to be far higher as those who can afford to are furthering their studies. English lessons are said to be booming.
The outlook is even more ghastly. On Friday, the government slashed its 2013 growth forecast from a decline of 0.5 per cent to a 1.3 per cent fall and predicted growth of just 0.5 per cent for 2014. Although depressing, this was at least far more honest than previous forecasts. Indeed, Rajoy – who was pilloried on Twitter for his absence from the press conference announcing the new numbers – has also revised down the deficit forecast for this year to 6.3 per cent of GDP and to 5.5 per cent next year; meaning its EU budget target is out by two years. While this is a real softening in the austerity drive, more tax increases are on their way which will hit consumer confidence further.
Yet the big problem – sorting out Spain's banking system – is not being tackled. Without taking on the banks, most of the economic reforms are meaningless. There's only one way to do this and that's to make them shift capital out of the unhealthy sectors – such as construction and retail banking – and into the export-led sectors and small businesses that have prospects of growth.
As Goldman Sachs's Andrew Benito points out, there's too much "evergreening" – repeatedly extending the terms or increasing the amount – of loans to inefficient sectors and too little net credit creation. Indeed, the European Central Bank's support which kept the banks afloat to avoid a disorderly deleveraging may have encouraged the evergreening while raising the cost of unsecured lending.
What's now imperative is to get credit flowing again. This can only be achieved if the more profitable banks, such as BBV and Santander, take a tougher approach to bad corporate lending. They must be encouraged to call-in existing loans to unviable businesses and extend credit elsewhere.
If they are nervous about such a strike, then Rajoy will have to bang heads. He needs to learn from Piqué that making excuses – or blaming the Germans – doesn't increase your chances of playing a better game.
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