{"id":25925,"date":"2013-02-05T18:08:24","date_gmt":"2013-02-05T17:08:24","guid":{"rendered":"http:\/\/feedproxy.google.com\/~r\/zerohedge\/feed\/~3\/w-cn11ggj3Q\/story01.htm"},"modified":"2013-02-05T18:08:24","modified_gmt":"2013-02-05T17:08:24","slug":"the-confidence-crisis-in-spain-sends-out-shock-waves","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/breaking-news\/the-confidence-crisis-in-spain-sends-out-shock-waves\/","title":{"rendered":"The Confidence Crisis In Spain Sends Out Shock Waves"},"content":{"rendered":"
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Wolf Richter\u00a0 www.testosteronepit.com<\/a>\u00a0 www.amazon.com\/author\/wolfrichter<\/a><\/p>\n

It should have been a glorious event for Spanish Prime Minister Mariano Rajoy: a t\u00c3\u00aate-\u00c3\u00a0-t\u00c3\u00aate with German Chancellor Angela Merkel. At the press conference following the 24th German-Spanish government consultation, he\u2019d stand next to her, illuminated by her glory. He\u2019d brag about implementing structural reforms, cleaning up the bailed-out banking sector, and moving Spain forward. He\u2019d point at yields on government debt trending down toward normalcy. No, Spain wouldn\u2019t need another bailout. All due to his excellent governance.<\/p>\n

Merkel would endorse him with her benevolent smile. It would cement his political position in Spain. She\u2019d rave about how the country has emerged from the debt crisis thanks to his tireless, bold, and courageous work in tightening the belts of his people.<\/p>\n

But instead, Spanish stocks took a nosedive. Yields jumped. And the press conference turned into a slugfest about the corruption scandal in Spain.<\/p>\n

The scandal burst into the open when El Pa\u00c3\u00ads<\/em> published documents, allegedly handwritten<\/a> by Luis B\u00c3\u00a1rcenas, the ex-treasurer of Rajoy\u2019s conservative People\u2019s Party (PP). According to these ledgers, leading members of the PP had been paid bribes for years, with Rajoy receiving about \u00e2\u201a\u00ac25,000 per year. B\u00c3\u00a1rcenas himself is up to his neck in hot water; it was discovered that he had \u00e2\u201a\u00ac22 million in Swiss bank accounts. The opposition has called for Rajoy\u2019s head.<\/p>\n

So Merkel and Rajoy were confronted<\/a> with questions about the scandal\u2013and Merkel with a blast from her past, a reference to the \u201cblack money affair\u201d of the 1990s when her party, the CDU, under Chancellor Helmut Kohl, used an elaborate system of Swiss bank accounts to hide illegal political contributions.<\/p>\n

The scandal broke in late 1999 with the arrest of CDU treasurer Walther Leisler Kiep for tax fraud. It ballooned relentlessly. After a few weeks, even Kohl\u2013by then no longer chancellor\u2013admitted to the \u201cblack accounts.\u201d It led to an investigation by a parliamentary committee. Turns out, Kohl had used the funds to support candidates who sided with him. Numerous corporations and politicians were tangled up in it, including current Finance Minister Wolfgang Sch\u00c3\u00a4uble.<\/p>\n

In short, it was a press conference from hell. Merkel emphasized<\/a> that the B\u00c3\u00a1rcenas scandal had not been part of their discussion. Instead, they\u2019d talked about educational and health policies and renewable energy. And Rajoy, she said, explained his successes in implementing structural reforms and fighting unemployment….<\/p>\n

Alas, Spain\u2019s unemployment rate hit 26% in December, leaving 5.97 million people unemployed, up from 5.27 million when Rajoy took office in late 2011. Youth unemployment surged to 55.1%. On Monday, more bad news: the number of people receiving unemployment compensation jumped in January to the historic high of 4.98 million\u2013up from 2 million in 2007. And the number of employed people dropped by 263,243. El Pa\u00c3\u00ads<\/em> declared morosely<\/a>, \u201cthe labor market begins the year with the destruction of 8,500 jobs per day.\u201d<\/p>\n

Nevertheless, Merkel had the \u201cgreatest respect and admiration\u201d for what Rajoy has implemented in terms of structural reforms. It would take time for them to do their magic, she conceded, and youth unemployment was \u201cdepressingly\u201d high. Yet she was \u201cconvinced\u201d that the Spanish government, \u201cwith Mariano Rajoy as head,\u201d would be able to resolve the problems. \u201cGermany will support him with all its power,\u201d she said<\/a>.<\/p>\n

But wasn\u2019t she worried about Rajoy\u2019s loss of authority? Merkel dodged; she\u2019d already said everything, she said. \u201cWe will continue to work well together,\u201d she added. \u201cWe have a very trusting relationship.\u201d\u00a0<\/p>\n

Rajoy spent his time furiously defending himself. \u201cI have the same desire, the same hope, strength, and courage that I had when I arrived to overcome one of the most difficult situations of the past 30 years,\u201d he said<\/a>. His ability to lead the government has not been weakened. His party has a \u201cstable majority\u201d and \u201cclear goals\u201d and would continue the reform efforts. And no, he would not resign.<\/p>\n

But the questions kept coming. Rajoy had initially denied all B\u00c3\u00a1rcenas-related allegations in their totality. But some of the elements in those documents inconveniently turned out to match reality. So why were these<\/em> elements true but not those relating to him and other members of the party leadership? Yes, some things were true, he conceded<\/a>, but \u201cnothing that refers to me and my colleagues in the party is true.\u201d<\/p>\n

He was flailing to avoid the dire fate that befell George Papandreou, the conniving prime minister of Greece, and Silvio Berlusconi, the scandal-prone prime minister of Italy. Under pressure from Merkel\u2019s Eurozone clan, they were sacked in November 2011 and replaced by unelected technocrats.<\/p>\n

Merkel\u2019s support suggests that replacing Rajoy isn\u2019t on the table just yet, though Spain is sinking deeper into its crisis that started with a pricked real estate and credit bubble, morphed into a debt crisis, a banking crisis, an economic crisis with an unemployment fiasco, and now into a confidence crisis that is sending tremors through the most important institutions of the Spanish democracy.<\/p>\n

As Deutsche Bank co-CEO said reassuringly, \u201cIn this uncertain world, I cannot exclude anything.\u201d Read…. The Putrid Smell Suddenly Emanating From European\u00a0Banks<\/a><\/p>\n

As if the Eurozone troubles weren’t enough: on the other end of the Mediterranean is Egypt, with parliamentary elections in April, against a backdrop of violent protests, a state of emergency in three key provinces, weapons caches discovered in Cairo, and radical Salafi forces who think the Muslim Brotherhood is far too moderate. Read….\u00a0 Investors Beware: Egypt\u2019s Revolution is Not\u00a0Over<\/a>.<\/p>\n

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Wolf Richter   www.testosteronepit.com<\/a>   www.amazon.com\/author\/wolfrichter<\/a><\/p>\n

It should have been a glorious event for Spanish Prime Minister Mariano Rajoy: a tête-à-tête with German Chancellor Angela Merkel. At the press conference following the 24th German-Spanish government consultation, he’d stand next to her, illuminated by her glory. He’d brag about implementing structural reforms, cleaning up the bailed-out banking sector, and moving Spain forward. He’d point at yields on government debt trending down toward normalcy. No, Spain wouldn’t need another bailout. All due to his excellent governance.<\/p>\n

Merkel would endorse him with her benevolent smile. It would cement his political position in Spain. She’d rave about how the country has emerged from the debt crisis thanks to his tireless, bold, and courageous work in tightening the belts of his people.<\/p>\n

But instead, Spanish stocks took a nosedive. Yields jumped. And the press conference turned into a slugfest about the corruption scandal in Spain.<\/p>\n

The scandal burst into the open when El País<\/em> published documents, allegedly handwritten<\/a> by Luis Bárcenas, the ex-treasurer of Rajoy’s conservative People’s Party (PP). According to these ledgers, leading members of the PP had been paid bribes for years, with Rajoy receiving about €25,000 per year. Bárcenas himself is up to his neck in hot water; it was discovered that he had €22 million in Swiss bank accounts. The opposition has called for Rajoy’s head.<\/p>\n

So Merkel and Rajoy were confronted<\/a> with questions about the scandal—and Merkel with a blast from her past, a reference to the “black money affair” of the 1990s when her party, the CDU, under Chancellor Helmut Kohl, used an elaborate system of Swiss bank accounts to hide illegal political contributions.<\/p>\n

The scandal broke in late 1999 with the arrest of CDU treasurer Walther Leisler Kiep for tax fraud. It ballooned relentlessly. After a few weeks, even Kohl—by then no longer chancellor—admitted to the “black accounts.” It led to an investigation by a parliamentary committee. Turns out, Kohl had used the funds to support candidates who sided with him. Numerous corporations and politicians were tangled up in it, including current Finance Minister Wolfgang Schäuble.<\/p>\n

In short, it was a press conference from hell. Merkel emphasized<\/a> that the Bárcenas scandal had not been part of their discussion. Instead, they’d talked about educational and health policies and renewable energy. And Rajoy, she said, explained his successes in implementing structural reforms and fighting unemployment….<\/p>\n

Alas, Spain’s unemployment rate hit 26% in December, leaving 5.97 million people unemployed, up from 5.27 million when Rajoy took office in late 2011. Youth unemployment surged to 55.1%. On Monday, more bad news: the number of people receiving unemployment compensation jumped in January to the historic high of 4.98 million—up from 2 million in 2007. And the number of employed people dropped by 263,243. El País<\/em> declared morosely<\/a>, “the labor market begins the year with the destruction of 8,500 jobs per day.”<\/p>\n

Nevertheless, Merkel had the “greatest respect and admiration” for what Rajoy has implemented in terms of structural reforms. It would take time for them to do their magic, she conceded, and youth unemployment was “depressingly” high. Yet she was “convinced” that the Spanish government, “with Mariano Rajoy as head,” would be able to resolve the problems. “Germany will support him with all its power,” she said<\/a>.<\/p>\n

But wasn’t she worried about Rajoy’s loss of authority? Merkel dodged; she’d already said everything, she said. “We will continue to work well together,” she added. “We have a very trusting relationship.” <\/p>\n

Rajoy spent his time furiously defending himself. “I have the same desire, the same hope, strength, and courage that I had when I arrived to overcome one of the most difficult situations of the past 30 years,” he said<\/a>. His ability to lead the government has not been weakened. His party has a “stable majority” and “clear goals” and would continue the reform efforts. And no, he would not resign.<\/p>\n

But the questions kept coming. Rajoy had initially denied all Bárcenas-related allegations in their totality. But some of the elements in those documents inconveniently turned out to match reality. So why were these<\/em> elements true but not those relating to him and other members of the party leadership? Yes, some things were true, he conceded<\/a>, but “nothing that refers to me and my colleagues in the party is true.”<\/p>\n

He was flailing to avoid the dire fate that befell George Papandreou, the conniving prime minister of Greece, and Silvio Berlusconi, the scandal-prone prime minister of Italy. Under pressure from Merkel’s Eurozone clan, they were sacked in November 2011 and replaced by unelected technocrats.<\/p>\n

Merkel’s support suggests that replacing Rajoy isn’t on the table just yet, though Spain is sinking deeper into its crisis that started with a pricked real estate and credit bubble, morphed into a debt crisis, a banking crisis, an economic crisis with an unemployment fiasco, and now into a confidence crisis that is sending tremors through the most important institutions of the Spanish democracy.<\/p>\n

As Deutsche Bank co-CEO said reassuringly, “In this uncertain world, I cannot exclude anything.” Read…. The Putrid Smell Suddenly Emanating From European Banks<\/a><\/p>\n

As if the Eurozone troubles weren’t enough: on the other end of the Mediterranean is Egypt, with parliamentary elections in April, against a backdrop of violent protests, a state of emergency in three key provinces, weapons caches discovered in Cairo, and radical Salafi forces who think the Muslim Brotherhood is far too moderate. Read….   Investors Beware: Egypt’s Revolution is Not Over<\/a>.<\/p>\n

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