Wednesday, October 11, 2017

Victory Into Defeat: Economic Ingratitude

While the world, some of it, waits with trepidation to see if Mariano Rajoy pushes the Article 155 nuclear button and constitutionally annexes Catalonia, a far smaller part of the world may have been unaware of Rajoy imperialist intervention in the Balearics. This didn't cause ripples to turn into independence-affirming tidal waves washing across from Barcelona, as it was all on account of this imperialism having been confined to the singularly dull political hold exerted over the Balearic accounts. Yes, in the political world, even one as insane as Spain's, accounting is as yawn-inducing as it is in the real world.

The Balearic government had been in the process of edging towards its own Article 155 - the average number of days to pay suppliers. The halfway mark was breached in July last year: 83 days and going up. It was at this point that the Rajoy imperialist finance legion marched on the regional accounts and occupied them. Did anyone really notice? Well no, because no one was remotely bothered, with the exception of suppliers suffering serious cash flow crises thanks to the Balearic administration.

The quest for budgetary stability, an issue of mind-numbing tedium equal to anything that accounting can offer, was the reason. Stability included the hitherto alien concept of paying people with something approaching reasonable alacrity. So persuasive was the finance legion that within twelve months of its occupation, the accounts revealed that average payment time was more than a quarter of what it had been. The transformation has been such that there has to be more of an explanation than that the government's purchase ledger clerks had been roused from their comas. Might one therefore offer the prospect of a better financing deal from Madrid as the real reason? One might well do so.

Tough though it currently is to love anything Rajoyist hovering above the Balearic administration, there is the realpolitik of finally securing this damn financing deal. If it were to be obtained, we should all be extremely grateful. We wouldn't have to listen to the government going on about it on every available occasion. Or would we? Well we would, because triumphalism and an upcoming election would mean it being shouted from here until May 2019.

For those who believe that the Partido Popular will simply just have to show up at the next election and expect to be able to move into the Consolat del Mar government HQ electorally unmolested, I would advise some caution. On the principle that the voter is mainly interested in the economy alone, then quite remarkably the PSOE-led pact has achieved the seemingly impossible. It hasn't made a total pig's ear of things.

The irony is that it has little or nothing to do with the government as such. It can thank Madrid for being able to now boast that it takes three weeks to pay up when it used to take three months. A control of public finances, notwithstanding the massive debt of course, is due to exigencies from Madrid. And if Madrid goes all soft and delivers that Holy Grail of a better financing deal, then the Rajoy administration will truly have helped Armengol to a second term. Having itself done virtually nothing, the pact can claim economic responsibility and economic success.

There are other ironies, none more obvious than the fact that Balearic economic growth and improved employment stats owe virtually everything to what the government now considers a curse - a tourism boom that put the boom in the economic boom. It wasn't anything else and it wasn't anything that the government had any part in. It just happened.

Given all this, what could possibly go wrong and mean a clutching of 2019 electoral defeat from the jaws of victory? Well, there is that growth. There may just be more of a slowdown than forecasters suggest. Why? Because of government policy to attempt to turn boom into bust. Showing its total lack of gratitude for something it wasn't responsible for, by instituting certain tourism policies - and we all know which ones - the government may well just signal its own downfall.

And then there are the realities of growth and economic recovery on the streets and in the households. The latest Gadeso survey of the public's confidence in the economy reveals only marginal gains in some aspects. A mere 17% of households classify their financial status as good. Three-quarters of respondents say that salaries are not good enough. More still point to the proliferation of temporary jobs.

The government might hope that the wage deal for the hotel sector will provide a brighter outlook, but the fact is that the government in itself has had minimal impact on citizen well-being. And that wage deal may prove to be less of a winner next year than the government might wish, thanks to the only real influence it is now exerting on the economy.

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