One Image is Worth a Thousand Words (III)

Dedicated with love to Lieutenant John Pike.[1]

Photo Credit:
[1] KnowYourMeme: moshimoshi167 (You rule!)

I Told You so

Man I was so busy with other things, that I missed this:

"Get Real. Wage Growth is More of a Wage Crawl
"Wage growth has slowed to a crawl, confounding doomsayers who have warned of a wages breakout emanating from mining and giving the Reserve Bank more room to cut interest rates." (See here)

I know. I should not gloat. Gentlemen don't gloat, they are gracious.

It's not cool to gloat when you are right and about every-fucking-body else (especially pro-business "experts", bosses, journos and sundry eggheads) is wrong and obviously so.

But, dammit, I ain't no gracious gentleman. I am poor and I work for a living, so I'm rude and crude, and, quite frankly, I don't give a shit:

Toldya so. 

(See here and here and here).

Chronicle of a Death Foretold

Mariano Rajoy [1]

The Spanish general elections took place today and the results were largely expected: the "socialist" PSOE lost, the right-wing PP won. Mariano Rajoy (a former bureaucrat under the Francoist regime) will assume as PM next December.

What may have surprised is how badly the PSOE lost: its poorest result ever (29.32% of valid votes for the lower house, compared to 43.87% in 2008, for a -15.14% fall).

Participation: actual valid votes from voting age population.
Party votes: percentage of valid votes.
Source: El País.

And although the PP captured some of the former PSOE votes (44.61% now, against 39.94% in 2008), the majority of former PSOE voters voted for minor parties.

IU increased its lower house representation from 2 to 11.

How does this election leave parliament?

The PP increased its absolute majority in the upper house (Senado), and achieved absolute majority in the lower house (Congreso de Diputados): 186 out of 350. Thus, the road is open for the PP to apply its programme, according to this AFP dispatch, published in the SMH today:

"Though considered uncharismatic, Rajoy won support from voters lured by his promise to fix the economy and create jobs, even if it means more austerity.
"He vowed to make cuts 'everywhere', except for pensions, so as to meet Spain's target of cutting the public deficit to 4.4% of gross domestic product in 2012 from 9.3% last year." (See here)

Other measures:

1. tax reductions for financial investments and corporate taxes;
2. reduction of tax incentives for home buyers;
3. industrial relations reform (collective bargaining at firm level, against industry level);
4. a bankruptcy-like procedure to apply to mortgagors in arrears;
5. employers subsidy for new hires. (See here. Spanish.)

Why did the Spaniards vote for such a party?

The chart above does show that the percentage of PP votes was already increasing. Apart from its promise to "fix the economy and create jobs, even if it means more austerity", the AFP/SMH dispatch mentioned above hints to a further reason:

"Prime Minister Jose Luis Rodriguez Zapatero's government was blamed for reacting late to the 2008 property market implosion, which combined with a global financial crisis to throw millions out of work."

But the most revealing passage in that dispatch, to me, is this:

"Octavio Arginano, a retired 67-year-old factory worker, said he voted for the right for the first time in his life.
" 'My son has been unemployed for over a year, my daughter earns just 600 euros ($A810) a month looking after young children,' he said as he left a polling station in Madrid.
" 'There has to be a change, although I am not sure anyone knows what to do to get us out of this situation.' "

Lo siento Octavio, pero creo que te vas a llevar una sorpresa desagradable. No todos los cambios son para mejor. Vamos a ver qué opinas dentro de un año.

I'm sorry, Octavio, but I believe you are in for an unpleasant surprise. Not all changes are for the better. Let's see what's your opinion in a year's time.

Including Spain, so far five European governments did not survive the crisis. Would this phenomenon be over, or is this just the beginning?

I can't say for sure, but the Rajoy Government could have a very short-lived honeymoon...

Update:

23-11-2011. Just 48 hours since the PP won the Spanish general elections, and yesterday "the annualised interest rate Spain had to pay more than doubled to 5.11%, from 2.29% at the last auction in October." (See here)

Where are the confidence fairies?

Photo Credit:
[1] Mariano Rajoy. Wikipedia

Good News... Bad News...

So, is a change of Government a good or a bad thing for countries like Spain, Italy or Greece?

Let me answer as a Latin American politician once did: "Ni lo uno, ni lo otro, sino todo lo contrario" (my translation: neither the former nor the latter, just the opposite).

More precisely and cautiously, if not so colourfully: it would not improve things for the majority. Let me reason this considering Mario Monti and Italy. The cases of Spain and Greece largely follow from analogy.

Mario Monti [1]

Mario Monti, current Italian Prime Minister replacing Silvio Berlusconi, had a distinguished education and successful career, in academe, the bureaucracy and the private sector. That is undeniable.

His career in the private sector included a senior advisory role for Goldman Sachs. In this, his experience is shared by a remarkable number of prominent economists currently (or at least until quite recently) in position of authority throughout Europe:

1. Karel van Miert (Belgium): former EU Competition Commissioner and ex international advisor to Goldman Sachs.
2. Otmar Issing (Germany): former board member of the Bundesbank and ECB, advisor to Goldman Sachs.
3. Mario Draghi (Italy): ECB head, former managing director of Goldman Sachs International.
4. Peter Sutherland (Ireland): former Attorney General of Ireland, non-executive director of Goldman Sachs International.
5. Antonio Borges (Portugal): former head of European Department (IMF), former vice chairman of Goldman Sachs International.
6. Lucas Papademos (Greece): Greek current PM, former head of Greece's central bank at the time of derivative deals with Goldman Sachs, enabling Greece to "cook" its books on public debt.
7. Petros Christodoufou (Greece): head of the Greek debt management office and former Goldman Sachs. (See here)

One of Monti's positive characteristics, it has been argued, is that he is a technocrat, without links to partisan policy.

I will not argue here why this is not necessarily a good thing: it could make this post too long. Instead I will simply remark that Monti, to be appointed Prime Minister, had also to be previously appointed Senator for Life, by president Giorgio Napolitano. (See here. In Italian)

This may be a perfectly constitutional process, I will not argue otherwise. However, in my mind, to be "elected" Senator when one single vote was "cast" (Napolitano's) cannot be reconciled with the notion of democracy.

If I had to speculate, I'd say it means Monti does not owe his position to popular decision, but to whatever group supported him. And I might be unduly suspicious, but this is where Goldman Sachs comes into play.

It would also mean that Monti has little in the way of legitimacy and eventually the Italian electorate is bound to find that, particularly if the new government attempts to impose severe austerity measures.

Further, it could mean Monti has little political support from the parties, if his tenure as Prime Minister becomes too unpopular.

Is the Spanish case different? It remains to be seen.

Photo Credits:
[1] Mario Monti. Wikipedia.