Spain has been in the news a lot the last few weeks with the embattled nation facing a dire financial situation. The country is once again in recession, its jobless levels are at record highs and the people are suffering at the hands of the government’s austerity measures. So just how has Spain got itself into this situation?
Greece is the symbol and definition of how not to run an economy. The crazy amounts of cash the Greek banks and government spent, the pandemic corruption throughout all corners of society has seen the country collapse leaving it on its knees and begging for help.
Stories of the government handing out benefits for those who don’t need it such as an island where 70% of the population were claiming disability benefits or the taxi driver getting benefits for saying he was blind. The jobs for life where people couldn’t be fired even if they didn’t turn up for work and a whole range of crazy blunders so it’s no surprise that Greece is in the state it now finds itself in.
Spain whilst not as bad as Greece is still guilty of committing what can only be called madness. The prime example is the link between the banks and the government with the national sport, football.
The president of say Barcelona can ring up one of Spain’s faltering banks and ask for a loan of a hundred million Euros to help pay some salaries. The bank replies, no problem, pay it back when you can, no rush. Once the loan arrives then the superstars such as Lionel Messi get another pay rise, and millions spent on new players. Bear in mind that the money the banks are chucking at these clubs is the banks customers’ money.
There are no banks in Spain that would dare say no to lending vast sums to the big teams and none would ever recall an outstanding loan, for fear of losing the millions of football fans as customers, after all football is like a religion in the country.
When Real Madrid bought Cristiano Ronaldo and Kaka the club took out a staggering loan of 136 million Euros to buy just two players. The banks didn’t hesitate and even gave the club a low, low rate of 1.5%, a normal business would normally have to pay double that.
At a time when unemployment is rife and small businesses are desperate for loans it is crazy that banks favour the super rich football clubs to the struggling shop owner.
In the rare situations when a bank doesn’t cough up the cash the government will, states and counties, all of them throw money into Spanish football. Real Mallorca was saved from financial ruin by the taxman; a few years ago Real Madrid sold the training ground for 500 million Euros to the city – much to the horror of the European Union.
When the financial crisis struck with its full ferocity the banks were pushed to breaking point but they refused to call in the loans from the clubs, instead they went cap in hand to the European central bank and it was then that the bank that invested so much into Real Madrid, Bankia, made the two big signings of Kaka and Ronaldo collateral so that they could get more money from the ECB.
What’s crazier is that the ECB agreed and the credit rating agency Moody’s gave the deal a AAA rating!, if the bank and football club do collapse then technically the ECB bailiffs will have to kidnap the players to get the money, Madness.
The football clubs are just a pebble in an ocean of bad decisions on behalf of all the financial players in the current crisis. If Spain doesn’t change its ways soon it is sure to go the same way as Greece… or worse.