Varoufakis: How is it that Spain is going bankrupt?

Fierce criticism to the European Union

 

The well known economist John Varoufakis uses the example of Spain, unleashing fierce criticism on the European leaders. Through his article in the journal «HOT DOC» he wonders how the "ridiculous political decisions" and "markets" led a country to the brink of destruction.

Here is the full article:

"I can understand Greece being in this situation. Suppose we are tax evaders, corrupt, lazy, indebted from birth, wanting to live by the sweat of the people who produce. The Spaniards, though? Why are they to be blamed?

-          didn’t Spain have a surplus just before the crisis?

-          didn’t Spain have a debt much lower than Germany just before the crisis?

-          wasn’t Spain the country with the only profitable Olympic Games in history, leaving a beautiful Barcelona as heritage?

-          wasn’t Spain the country with the example of Zara which proved that Europe can produce its own textile products without having to transfer jobs to the Far East?

-          wasn’t Spain the country that offered Volkswagen its most profitable factories (Seat) in Europe?

And yet this country stands in the same black hole as we do. How is this even possible, if the crisis is due to misfortunes that undoubtedly characterize Greece but not Spain?

For a moment let us forget our own and let us consider the drama that takes place in Spain (not only in solidarity with the likeable people of the western Mediterranean, but because doing so will make us better understand what is happening to us now, at this moment):

Since last summer, the losses of the foolish Spanish private banks (caused by gambling in real estate) have been transported on the shoulders of the Spanish State, resulting in the actual removal the later from the "markets".

In order for EU to not admit that Spain is the fourth country that will “forfeit” they have come up with the following insane “solution”:

1.       ECB will accept whatever it will be offered by the Spanish banks as "collateral" and thus will lend over 300 billion at 1%

2.       Since this money is borrowed, and with borrowed money you cannot avoid a bankruptcy (only delay it), the Spanish State will borrow more money (from EFSF) at a rate around 4% to give to the banks (during the recapitalization) - but of course without receiving back common shares (which is a flagrant violation of the rules of capitalism…)

3.       But because of No2, the Spanish State is pushed deeper into bankruptcy. In order not to sink immediately thought they have come up with the following wise idea: while receiving the loans (non refundable) from the Spanish State, the banks will lend part of the loans at 6% rates which they receive from ECB at 1%.

Do you understand what this means?

The bankrupt banks first transferred their losses to the Spanish State, leading it to bankruptcy, then secured tones of loans from the ECB (at 1%), then lent a portion of that money to the Spanish State (at 6%), all the while borrowing from the Spanish State more money that the Spanish taxpayer borrows from EFSF.

And as if all this was not enough the inviolable condition so that Spain can use "solution" is to impose austerity that will shrink the national income even further, from which the state should raise the taxes needed to repay all these loans have been loaded to the Spanish people by the bankers.

So when European colleagues, journalists and politicians, are pointing at Greece because it dared say no to the European anti-crisis "project", I answer bluntly: I will admit what you want, but when you explain to me in simple words "what the hell are you doing to Spain?"