We must plan for the misery that is coming our way. And we must do what we can to alleviate it as early as 2021. It is unforgivable that the widespread impoverishment into which we are plunging in Southern Europe should catch us unawares, since the facts are right under our noses.
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The indebtedness of Spanish households has increased not only in 2020 but also in the first quarter of 2021, and rising. At the same time, household disposable income has fallen very significantly. And it is significant because this decline in savings is occurring in the midst of rising unemployment and with the prospect of further increases, both of which are traditional drivers of increased savings and precaution in household spending. In other words, Spanish families are going bankrupt and, with no room for manoeuvre, they are drawing on any possible savings or debt to merely survive. The profits set aside by SMEs and the savings made by wage earners over years and years of sacrifices have vanished in just 4 quarters. And not only has their emergency lifeline disappeared, but the indebtedness they have been pushed into in order to survive has forged them into concrete feet.
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Moreover, job destruction obviously goes hand in hand with the destruction of the business fabric. And therefore capital formation and business investment are neither there nor expected. The ERTEs provide a political cover-up for the employment scourge, but only temporarily, because when the dust of the demagogic measures dissipates, the harsh reality of our business fabric and labour market will slap us in the face unreservedly.
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Nor will Papa State be able to do anything but mourn its resounding defeat. Expenditure and revenue projections were unrealistic even without COVID-19, as had been warning us the EU's Euro-bureaucrats. But the pandemic has shattered even the fanciful credulity of the government's staunchest groupies. The European funds are ridiculous and destined, to the surprise of any lucid mind, to digitise and green Spanish industry and companies, not to save them. In the end, these funds will remain in the hands of the usual people, far from the agonising real economy.
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However, the game of Monopoly where the bank (ECB) continues to lend infinitely, it is unlikely to end in the default of any significant EU member. But we may well see a extraordinary fiscal adjustment imposed by the North of the EU (a few euphemisms suffice). And while this is happening, misery is permeating and spreading silently, like an oil stain, in what was once a welfare state.
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The problems of the Spanish economy have increased tremendously and will continue to do so in the coming post-pandemic years, even if mass vaccination brings us back to normality. Because the normality of Southern Europe in general and Spain in particular is economic decline and fiscal exhaustion. Our population is unemployed, unproductive and its progressive ageing makes it even more extractive of a state that is exhausted. And fiscal abuse is the bread for today for the government of the day, but the hunger for tomorrow belongs to all Spaniards.
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Paying for an international and prestigious university education for our children will be our best inheritance as it will give them wings and teeth to fly and eat the world in growing and healthy economies. If, on the other hand, we bequeath them the equivalent of the cost of these international studies in bank balances or in bricks and mortar (see details of costs of all-inclusive University in the USA), we will be condemning them to a constant struggle in Spain to live in a minimally comfortable way, in an economically hostile environment and with a permanent icy headwind. And that extra 100,000 euros in the bank or half an apartment on the beach will not last long. I don't want that for my children. I want them to fly towards prosperous economies with the best preparation I can plan for them today.