It’s Getting Uglier in Spain

No government, no problem.

The last time Madrid had an elected government was 232 days ago. Even after a second round of elections in June, there is no guarantee that Spain’s two major parties, the Popular Party (PP) and the Socialist Workers’ Party (PSOE), will find enough common ground to form the so-called Grand Coalition that the country’s banks and corporations have their hearts set on. And without that, a third round of elections, in December, is almost inevitable.

The task of setting a stringent, Troika-approved budget for 2017 — by far the European Commission’s biggest priority for Spain — will have to be put on ice, just at a time when the country’s public debt remains perilously close to record highs. According to the Bank of Spain’s raw figures, i.e. before “adjustments,” Spain’s total debt surpassed €1.5 trillion euros at the end of the first quarter of 2016. That’s over 140% of GDP, more than triple what it was in 2007.

Political chaos and growing public indebtedness are not the only problems Spain faces. There is also the issue of internal strife in the country’s central bank. Over the last 15 months external investigators have probed the Bank of Spain’s role in the approval of allegedly fraudulent financial statements in the run-up to Bankia’s highly dubious IPO, in 2011, which ended up costing retail and institutional investors billions of euros. This, together with internal disagreements over how best to implement new ECB regulations, has sparked a mini mutiny among the bank’s inspectors and middle managers

Continue reading the article at WOLF STREET

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