{"id":3074,"date":"2013-05-07T19:54:59","date_gmt":"2013-05-07T17:54:59","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=3074"},"modified":"2013-05-07T19:54:59","modified_gmt":"2013-05-07T17:54:59","slug":"espana-s-a","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/espana-s-a\/","title":{"rendered":"Spain Ltd."},"content":{"rendered":"

\"\"It is curious to see how, on the European periphery, there is still a belief that our states retain their status as public entities. As sovereign countries with decision-making power over all their state affairs, just like any other nation in the world. For example, that, as the independent states we are, we continue to determine our own economic, fiscal and monetary policies, as well as our labour, social and economic policies in general. That we are and will remain sovereign countries, whatever happens to our economies. Whether poorer or richer, whether banana republics or prosperous countries aspiring to join the G20 (sic), we are always masters of our own destiny. We are mistaken.<\/p>\n

Today, peripheral states are, in essence, private entities that must be run like corporations, and as such may be viable or unviable.<\/strong> And what is the reason for this change? How did we lose our status as a sovereign public entity? Essentially, it was the moment we decided to cede our monetary sovereignty to the EU. From that point on, we relinquished our ability to issue currency, and with it our ability to set the price of money. Neither we nor the rest of Europe were able to gauge the consequences of that concession at that time of pro-European euphoria fuelled by the Kohl\u2013Mitterrand axis.<\/p>\n

As we cannot print money or set our own prices, our resources are just as finite as those of any multinational company. We depend on our balance sheet being financially viable. On whether or not international banks and investors are willing to lend us money. And if we do secure it, we will have to pay the price they demand for that funding, just like any other business without a money-printing press to bail us out. Our revenue is finite, as we can only collect what taxpayers are able to pay. And that includes the rational and sustainable exploitation of those taxpayers, just as one would manage any other agricultural, fish farming or livestock operation. As a state, governments must be able to fatten up and look after taxpayers (economic growth) so that they can continue to be milked or harvested on a permanent and ever-increasing basis. Because on the periphery of the Eurozone, it is no longer enough to cover the shortfalls in our balance sheets with freshly printed money, kicking the can down the road with inflation and the devaluation of the peseta, as was done just half a generation ago.<\/p>\n

Some people have not yet realised that we can no longer print money to balance the public budget. We must balance it using revenue, or revenue plus borrowing. Nothing else. That is why A couple of years ago, we pointed out<\/a><\/strong> that Spanish sovereign debt (and that of other peripheral countries) was more of a debt than other sovereign debts, because had turned into corporate debt overnight<\/strong>. A debt which, upon maturity, must necessarily be capable of repaying both interest and principal, or be refinanced at market rates, in order to avoid default, as is the case with any private corporate issuer.<\/p>\n

That is why Spain is no longer a state or a sovereign entity, but a corporation. Just like any multinational with feet of clay and in dire straits. It is not up to us to decide how much currency to print, nor its value. We cannot even decide, without the consent and complicity of Northern Europe and\/or the ECB, how much debt we will issue next quarter. Quite simply because if we issue debt on our own, without agreeing it with Daddy Draghi and Mummy Merkel, nobody will buy it from us. And if nobody buys it from us, we will not be able to print any more euros to avoid bankruptcy. As a corporation, we are therefore in the hands of a supranational public body (the Eurogroup\/European Commission), with a central bank (the ECB) which, in turn, is also subject to the whims of Mr Market. And within that pan-European public structure, we are nothing more than a company in dire straits, a sub-brand within a holding company that ought to be financially viable in its own right but is a long way from achieving that<\/strong>. Because of what happened in Cyprus made it very clear<\/a><\/strong> that no one is prepared to subsidise (bail out) countries without their own currency or monetary policy any longer. And that means we suddenly go from being a public state to a private corporation that must balance its books and try desperately to avoid insolvency proceedings. As we said back in 2009: \u00abIf we think of the survival of the EU as a political and economic project, i.e. if we think in terms of a sustainable and competent holding or business group, the amputation of the PIIGS brands is unavoidable.<\/em>\u00ab.<\/p>\n

To postpone the inevitable, we do, however, have the complicity of the ECB, which showers our banks \u2013 and therefore our state \u2013 with endless liquidity so that we do not have to restructure an unpayable sovereign debt, the interest payments on which weigh us down, preventing us from ever getting back on our feet. This open-ended bailout is also keeping some of our major corporations afloat; despite being insolvent, they appear to be limping along to prevent their collapse from dragging down other, less moribund firms.<\/p>\n

It\u2019s laughable, to say the least, that there are still those who insist the problem facing the banking sector, the State or certain \u2018zombie\u2019 companies is one of liquidity rather than solvency. The fact is that insolvency only leads to bankruptcy if the liquidity supplied is finite. In other words, with infinite liquidity \u2013 such as that currently being supplied by the ECB \u2013 insolvency never leads to bankruptcy. And there they remain, walking the tightrope: millions of investors who are tightrope walkers, oblivious to the fragility of the balance they are exploiting. Because within their investment funds and guaranteed products, there are millions upon millions of peripheral public debt (sic) that depends on the free-for-all continuing to infinity and beyond. Greek debt has already plummeted into the abyss, and the same may soon happen to the rest of the peripheral debt.<\/p>\n

Can we keep our state on life support for years? Perhaps for a while, but at the end of the day, the leaders of the countries that decide whether to end or continue the free-for-all will change. And others will come along who will no longer be able to pretend that the Eurozone is sustainable, at least as we know it today. The situation of Espa\u00f1a S.A., formerly the Kingdom of Spain, is and will remain one of insolvency, whichever way you look at it<\/strong>. Let\u2019s not forget that our country<\/del> The company\u2019s balance sheet is clearly insolvent, and our source of funding is no longer the old 1,000-peseta green banknote printing press. Why can\u2019t we turn our company round so that it stops making losses and starts becoming profitable and solvent? Well, because to do so we would have to put businesspeople at the helm of Espa\u00f1a S.A., rather than civil servants who are only capable of pulling the strings of the defunct Kingdom of Spain, with its well-oiled little machine for printing pesetas by hand.<\/p>\n

P.S. For the optimists, the naive and so on pro-European<\/em>, here\u2019s this article<\/a><\/strong> in which five Nobel laureates (Mirrlees, Krugman, Stiglitz, Pissarides and Sargent) argue that Spain should leave the euro.<\/p>","protected":false},"excerpt":{"rendered":"

Es curioso ver como en la periferia europea a\u00fan se tiene la convicci\u00f3n de que nuestros Estados mantienen su condici\u00f3n de ente p\u00fablico. De pa\u00edses soberanos con poder de decisi\u00f3n sobre todos sus atributos estatales, como cualquier naci\u00f3n del mundo mundial. Por ejemplo que, como Estado independiente que somos, seguimos decidiendo nuestro gobierno econ\u00f3mico, fiscal, […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45,41,37],"tags":[],"class_list":["post-3074","post","type-post","status-publish","format-standard","hentry","category-asesoramiento-deportistas-artistas","category-economia-y-finanzas","category-reflexion"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/3074","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=3074"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/3074\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=3074"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=3074"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=3074"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}