A lesson not learned

Today Spain raises its VAT from 18 to 21 percent in an effort to increase government revenues and decrease the budget deficit. If history has taught us anything it's that all previous increases failed miserably in achieving the desired result.

Seventy-three years ago today, German troops invaded Poland and plunged the continent into the darkest five years anyone had ever experienced. In Europe alone the total number of casualties (civilian and military) was well over 15 million.

Today Spain is being plunged into darkness with the value added tax being raised from 18 to 21%, its highest level ever. The centrist Partido Popular (PP) government of Mariano Rajoy insists that extreme measures are necessary in order to reduce the budget deficit and foreign debt. While this may true, the real reason has more to do with credibility, or as I like to call it, creditability - the ability to pay back your loan commitments and thus secure further funding. At this stage of the game the blunders in fiscal mismanagement are so compounded that world financial markets have serious misgivings about Spain's ability to meet its monetary obligations. In other words, while Spain is making all the right moves in the eyes of Germany and the European Central Bank (ECB), the rest of the world believes these measures are too little, too late. The result is a risk premium hovering the 6 percent mark, extremely high for a developed country especially when you consider Germany's risk premium is zero.

So the question has to be, if Spain is complying with all the fiscal controls demanded of them, why is there such lingering doubt in financial markets?

Spain's current sitution

The graphic on the left pretty much explains it all. Currently (2012), unemploy-ment stands at 25% with over 5 million people without jobs. Of these, over 2 million have been out of a job for over two years. And there are over 1.5 million households with no income whatsoever. In a country of only 40 million people, this is tantamount to total social and economic collapse.

Furthermore, this Microsoft report from 2011 finds that 99.88% of the registered companies in Spain are SMBs, which is to say, companies with less than 250 employees and with annual revenues below 50 million euros. However, in Spain, 96% of the registered companies have annual revenues below 2 million euros; 53.9% have no registered employees. This means that the majority of companies are "mom and pop" stores: the butcher, the pharmacist, the cobbler, the auto mechanic, etc.

In other words, these companies do not have extensive financial resources and are living at the edge of their monetary capabilities because the products and services they offer are price volatile and subject to the laws of supply and demand.

Therefore, as financial analysts see it, the increase in VAT and other prime commodities will most likely decrease overall revenues. Some analysts estimate government projections will be off by 2 billion euros due to an overall decrease in consumer spending.

As if to prove the analysts right, the latest consumer reports from the National Statistics Institute (INE) state that retail sales decreased by 6.5% in July.

What's even more amazing is that this is not the first time the VAT has been increased. Two years ago, under the administration of socialist president Jose Luis Rodriguez Zapatero, the opposition Partido Popular launched a massive information campaign against Zapatero's increased VAT (from 16 to 18%) initiative. The campaign cited how previous attempts at raising the VAT ended in economic disaster for the administration of Felipe Gonzalez back in 1993 and eventually led to his defeat in the 1996 elections.

So, if the strategy of raising the VAT did not achieve the desired results in 1993 and again in 2010, why is it now deemed the correct response and being forced on the people yet again? The PP has even gone to great lengths to remove all vestiges of their previous "No más IVA" (No to higher VAT) campaign from the Internet but social networking sites have kept photographic records of the PP's top echelon working the streets to get people to sign the petition.

One possible explanation
This time around Rajoy's austerity measures will have no more of a positive effect than in previous attempts. If Rajoy has paid attention to history he can expect unemployment and business closures to rise.

However, one would think that the logic is sound: if government needs money, raise taxes; if it needs to reduce expenses, cut social programs and services. Or is it sound reasoning? Judging from Spain's track record it would seem not, and yet the same strategy is being employed over and over again. Clearly, raising taxes and cutting social programs is not the answer. It hasn't worked in the past, it won't work now. Therefore, the problem lies elsewhere. These problems are deeply rooted in a flawed state system of autonomous regions and a failed business model of an economy solely dependent on real estate speculation and development. A simplistic approach to a complex problem is, at best, a band aid solution.

I won't go into the problems here because it would take more than a blog to explain and would cover several pages of macroeconomic data, the analysis of conflicting cultural attitudes and a historical approach at attempting to explain the lack of national unity. I can however say that the negative figures presented in the graphic above will only be exacerbated.

In the end, Germany may be appeased by the measures Rajoy is implementing. Their loans will be repaid, they'll make money and will continue to be Europe's economic powerhouse. But at what cost to Germany and to Spain itself?

When the dust from this economic fallout finally settles in Spain, how much will have been destroyed in terms of production, employment and wealth? This time around, how many casualties will this European crisis claim?

Those who don't remember the past are condemned to repeat it.

Spain: land of the mediocre

Yesterday I posted an opinion on Facebook sent to me by a friend. It is a well written, auto critical piece of introspection of the current situation in Spain. I translate it here for my English speaking friends. I do not know who authored it.

Perhaps the time has come for us to finally accept that what's going on in Spain is more than just an economic crisis. It goes beyond laying blame on political parties, banking greed and financial mismanagement or the risk premium. Our problems will not end with the changing of the political guard, the imposition of financial controls or the threat of general strikes. It is time to admit that the problem in Spain is not Greece, the euro or Angela Merkel. It is time to accept that we have become a country of mediocrity.

No country attains this level of deficiency overnight or in three years. It is the result of a chain of events that starts with the educational system and extends to the ruling class. We have created a culture in which average is rewarded - in school, in the office, in the media and in politics.

We are so comfortable with mediocrity that we have accepted it as the natural state of things. The excellence we have demonstrated in sports only serves to obscure and deny the reality of the situation.

- Mediocre is a country whose people watch an average of 134 minutes of teletrash daily.

- Mediocre is a country that, in its 34 year democracy, has not produced a single president capable of speaking English or of having some semblance of knowledge of international affairs.

- Mediocre is the only country in the world that, in its desire to be sectarian, has even managed to divide associations of victims of terrorism.

- Mediocre is a country that has reformed its educational system three times in three decades to the point of having the least prepared students in the industrialized world.

- Mediocre is a country who does not have a single university in the top 150 of the world and whose best scientists must seek opportunities abroad.

- Mediocre is a country with a 25 percent unemployment rate, and yet, is able to feel disgust because its neighboring country makes fun of its sporting figures.

- Mediocre is a country where a person's ingenuity is viewed negatively, where creativity is marginalized and where independent thinking is villified.

This is a country that has converted mediocre into the great national hope and aspiration, sought after by youths whose only goal is to be selected to join the next edition of Big Brother, by politicians that insult without providing a single solution, by bosses that surround themselves with simpletons to disguise their own shortcomings and by students who ridicule those that show initiative.

Mediocre is a country that has allowed, celebrated and promoted the triumph of the average, sidelining excellence with two options: leave or assimilate yourself in that unstoppable gray tide of mediocrity.

Spain, what next?

Spain's risk premium hits an all time high while the disgruntled public takes to the streets. What are the implications and how does it affect you?

Spain is experiencing massive daily demonstrations with no let up in sight. And this is just the beginning.

I've been ranting it for the past several months - raising all kinds of taxes while making drastic public spending cuts in an effort to reduce the budget deficit will only produce more unemployment and Chapter 11s, the exact opposite of what the government wants to achieve.

Rajoy says that they had no alternative but to take these difficult steps in order to save Spain from itself. In his State of the Nation speech to Congress last week, he reiterated that the decision to raise taxes and cut spending was undertaken in consultation with the private and banking sectors and was the correct decision regardless of how difficult it might be.

See, I don't buy the part about how difficult it was to make this decision. On the contrary, they took the easy way out...the easiest way out. In a business, if you have to reduce your losses, the first thing you do is cut expenses - a dollar saved is a dollar earned. That relationship is direct: when you reduce your cost by one dollar, you increase your profit by one dollar. Secondly, if the market can bear it, you raise your prices. This is the easiest and most time-honored way to minimize losses.

Government operates the same way. If the deficit exceeds an acceptable level, reduce operating costs and increase revenue. However, unlike the private sector which raises prices ONLY IF THE MARKET CAN BEAR IT, government doesn't give a hoot whether the public can bear it until it blows up in its face. When you're faced with 25% unemployment, the last thing you do is raise taxes. The market cannot bear it.

According to NationMaster.com, as of 2010, Spain had approximately 24 million people between the ages of 20 and 65 (the workforce), while the remaining 16 million were either retired or too young. If, of that 24 million work force, 25% is out of work, then it is clear to see that one-half of the population works, not only for itself, but for the other half. Since 95% of private sector companies in Spain are SMBs, it is safe to assume that these people are not millionaires. In fact, the average yearly wage of people in the private sector is normally between 24 and 30000 euros.

Spain is the fourth largest economy in the eurozone yet its wages rank only 15th in all of Europe (see graphic upper right hand corner). Spain's has a higher internet connection cost than France, Germany and Holland. All this only goes to show that the Spanish people can ill afford any tax increases as envisioned by this administration.

I've always maintained that the difficult decision, but the right one, would have been to reduce taxes and reduce costs. Make the country attractive to foreign investment, don't kill it.

At present, Spain's risk premium is at 593 points or 5.93% for seven year government bonds, 5% for two year bonds. These are ridiculously high premiums to be paying, but it reflects the level of uncertainty that exists. It is generally accepted that the panic point is 600 points. I have no doubt we will surpass it.

Europe will have to pour more money into Spain that much is clear. Furthermore, the current situation (recession) will extend way beyond the 2014 target the government is setting for itself, which is wishful thinking.

What I can say for certain is that Spain has the potential of dragging the whole of Europe into a deep recession. And if that happens, the rest of the world will be affected because imports from developing countries (SE Asia and Africa) will be greatly affected. The bigger scenario is that the world could end up in the worst depression since 1929.

Speculative politics accentuate innate nescience

With 100Bn euros in fresh aid, Spain seeks to stabilize their over exposed banking system. The question is, is this too little, too late?

Spanish bankers must be passing around cigars, popping champagne corks and making appointments with their favorite massage therapists after receiving the news that the ECB was coming to rescue their industry.

If anyone thinks this bailout will change everything in Spain, and by extension Europe, let me be firm and unequivocal. Yes, it will change things...but not for the better. I've already mentioned in previous posts that Spain is a cancer just waiting to metastasize.

While this bailout may appear to work in the short term, true success can only be measured in the medium and long term. And that long term success is dubious at best.

Spain, like the rest of Europe, is highly socialized, which basically means that government is used to spending money it does not have. To top it off, socialism has no regard for free enterprise. Let me put it this way. If you're an entrepreneur, you want to be living under a government system that embraces free enterprise, i.e. a capitalist system. If, on the other hand, you are a worker, then you want to live in a socialist environment.

The problem with socialism, as opposed to capitalism, is that its adherents believe that the way to pull a country out of the doldrums is through increased public spending. In order to cover increased public debt, socialists simply raise taxes. The result of all this government intervention is minimal growth rates. Compare annual growth rates of socialist countries and you'll see that these are usually in the order of 1.8 to 2 percent a year on average. Socialist governments are structured for this kind of growth. And it works as long as economies are sustainable because everything is controlled, from inflation to pay raises and the cost of living or CPI (consumer price index).

However, the opposite is also true. When the economy takes a downturn, socialist systems are the least prepared to handle it precisely because of the kind of structure they have in place. I'll give you an example.

In 2008, when Spain first started to feel the effects of the recession and unemployment started to reach unprecedented levels, instead of providing incentives to increase consumer spending such as lowering taxes and implementing mechanisms to promote entrepreneurship, the government decided to hire more civil servants. In my previous post I stated how Spain had the highest number of civil servants per capita compared to other European nations. Zapatero's answer to the crisis: increase public debt; hire more civil servants to offset increasing unemployment figures. Where were the incentives to promote new businesses and new hires? Nowhere.

And that's where Spain finds itself today. The 100Bn euro bailout package is destined to recapitalize the over extended banking system. None of this money will be used to reduce unemployment which stands at over 25 percent (and increasing) or to promote new businesses. Instead, to finance interest payments and decrease the deficit, the government will now raise VAT to 21 percent from the current 18. This is the second VAT increase in three years.

It's not rocket science. If you have an unemployment rate of 25%, with mom and pop stores closing at an alarming rate (95% of all businesses in Spain are SMBs) because of reduced consumer spending, raising taxes will just kill the economy completely. And in the process, it will bring down the rest of Europe. The ten year yield on government bonds is the highest its ever been. Moody's and S&P have already downgraded Spain's credit worthiness to near junk status. All this means only one thing: there is absolutely no confidence in the current administration.

Spain is a ship of fools run by incompetents, and like the Titanic, is heading straight towards an iceberg.

I read the news today, oh boy...

Talk about having a bad day.

The confluence of the stars must have been propitious. Today was one of the worst news days in recent memory. Let me give you a sampling:

- Spain 'to request bank aid tomorrow' - The Independent
- Ruud Gullit: 'There were monkey chants at Dutch Euro 2012 training' - The Telegraph
- Mick Fleetwood: Bob Welch's Suicide Was 'Out of Character' - Rolling Stone
- What the password leaks mean to you (FAQ) - CNet
- Princes William and Harry join Euro 2012 boycott over Ukraine's treatment of jailed opposition leader Yulia Tymoshenko - Daily Mail Online
- Police investigate possible link between gay porn star 'cannibal killer' Luka Rocco Magnotta and body parts under Hollywood sign - The Independent
- Bus bombing kills at least 18 in northwestern Pakistan - Washington Post

And of course, there's Syria. The headlines coming out of Syria are just too numerous to list here but the Telegraph updates its page every couple of minutes.

It seems we have it all today, from racism and boycotts in sports to a snuff film murderer, terrorist bombings, failed economies and wholesale massacres. Someone is having a heyday out there.

And while all these headlines are serious, the Syrian conflict is limited and confined to the region...for now. The Spanish bailout, on the other hand, poses the greatest peace time threat because it is affecting millions of lives and has the potential to affect many more. It's effects will be felt world-wide and could have long lasting consequences. I previously mentioned that Europe cannot afford to stand idly by while Spain's finances vaporize into radioactive dust; the fallout would be brutal.

The question is, if you're Germany, what do you do? Do you agree to a bailout package and hope the 4th largest European economy recovers? What happens if they don't? Much of Spain's financial problems are structural. In other words, when times were good, there was very little fiscal responsibility; money flowed in and civil service employment rose to an all time high in order to sugar coat unemployment figures. The problem? Once you become a civil servant, you have a job for life. You cannot get fired under any circumstance for any reason. The result? Spain has more civil servants per capita than any other nation in Europe. So when the country faces a budget deficit and is forced to fiscalize, public spending cutbacks are hard to come by. To make matters worse, Spain has one of the most unproductive work forces in the eurozone (see my previous posts for sources).

Conversely, do you make an example of Spain, deny the additional funds, tell Rajoy they have to go it alone regardless of the consequences and hope the lesson is digested and assimilated by Italy, Greece, Portugal and Ireland?

Either way, Germany is caught between a rock and hard place.

If they do provide the 60 billion euro package Spain is requesting, it will tie up much needed funds at a time when Spain's financial rating is the lowest it's ever been. Additionally, the German people, understandably, are beginning to get fed up with having to bail out all these Mediterranean nations and that may cost Merkel at the ballots. If they don't come to the rescue, Germany loses credibility, prestige and leadership. That plus the whole euro ball of wax may just unravel and plunge financial markets back to the dark ages.

Early 20th century Europe - Part II

The reign in Spain...

As mentioned in my previous post, by the time the great war started every major country in Europe was directly involved or had a stake in its outcome. However, one country was conspicuous by its absence. Spain, licking its wounds from a century of turmoil, was politically, economically and socially spent and had remained neutral throughout the continental conflict.

The decline of the Spanish empire started back in the 18th century with the War of Succession (1701-1714) and culminated in the 19th century with the War of Independence or Peninsular War (1808-1814), the Civil War of 1820-1823, three Carlist Wars (1833-1839; 1846-1849; 1872-1876) and the Spanish American War of 1898.

The first and last of these wars were unavoidable. The Civil War of 1820 and the three succeeding Carlist Wars were the long term consequences of the War of Independence of 1808 which was sparked by Napoleon's usurpation of the crown. It was a war born out of greed and double crosses.

The War of Succession 1701-1714
When Charles II died in 1700 he had no heirs, and with his passing, the Habsburg line in Spain which had ruled for two centuries, came to an abrupt end. The War of Succession that followed was one in which Europe's ruling families, all related either by blood, marriage or both, opposed the naming of Philip, Duc d'Anjou, grandson of Louis XIV the Sun King and grand nephew of Charles II, as heir to the Spanish throne as this would have created a world super power with the consolidation of vast territories under one ruler and would have upset the balance of power in Europe. These territories included the Netherlands (through the Habsburg line), the kingdoms of Milan, Naples and Sicily as well as colonies in the Americas (Louisiana, Canada and South America) and Asia (Philippines).

Hence, alliances were formed. Opposing the French-Spanish coalition were England, Portugal, the Dutch Republic, the Duchy of Savoy and the Holy Roman Empire (Germany). It was during this war that England took control of Gibraltar from Spain.

Ultimately, Philip was recognized as king in the Treaty of Utrecht but had to renounce any claim to the French throne and ceded Spain's European possessions to Austria and England. It was the start of the Spanish Bourbon line from which the current king, Juan Carlos I, is descended. The decline had begun.

The War of Independence 1808-1814
If you're familiar with Spanish painter, Goya, then you have no doubt seen his paintings, Dos de Mayo and Los Fusilamientos del Tres de Mayo which represent the Spanish uprising against Napoleonic troops and the subsequent executions of the rebels by the French.

However, this is a war that might have been avoided. Napoleon, taking advantage of the favorable allied relations that existed between France and Spain, (the queen consort of Charles IV, Maria Luisa de Parma, was the daughter of Louis XV) gained permission to transit through Spanish territory (via the Treaty of Fontainebleau 1807) on his way to invading Portugal which had defied France by aligning with the British. Napoleon had called for a continental blockade of British imports after the defeat of the combined French and Spanish naval fleets at the hands of Lord Admiral Nelson at Trafalgar in 1805 and was eager for vengeance, and thus, set out to gain control of Portuguese ports.

As fate would have it, the treaty turned out to be a double double-cross. Spanish Prime Minister, Manuel de Godoy, initially requested a Portuguese alliance against invading French troops but had secretly made a deal with the French to divvy up Portuguese territories after the latter's defeat. France, in turn, had no intention of sharing anything with Spain, usurped the Spanish crown, forced the abdication of Charles IV and installed Joseph Bonaparte as king. As a result, Spain turned against Napoleon, allied itself with the British and a protracted war ensued.

So much for alliances. Spain's greed and subterfuge was its own undoing.

The Civil War of 1820-1823
After Napoleon's defeat in 1814, Ferdinand VII, son of deposed king Charles IV, was restored to the monarchy. During that time a liberal constitution (1812) was drafted and approved by the Cadiz Cortes (National Assembly). It espoused the liberal ideals of the French Revolution of 1789 including the creation of a constitutional monarchy with limited power. In order that he might return to assume the Spanish throne, Ferdinand VII, who was exiled in France during Joseph Bonaparte's rule, agreed to the liberal provisions of the 1812 Constitution, albeit begrudgingly.

Given the years of internal conflict, mistrust, secret deals and betrayals, the liberals and conservatives were soon going at it in sporadic conflicts that only served to erode the economy. The French stepped in and restored some semblance of order with the return of absolute rule in 1823.

The Carlist Wars
After Ferdinand VII died in 1833, his wife, Maria Cristina of Bourbon-Two Sicilies, became regent for her daughter Isabel. Before his death, Ferdinand signed the Pragmatic Sanction which allowed the throne to pass onto female heirs in contravention of Salic Law. Carlos, the brother of Ferdinand, disputed the legitimacy of the Sanction and declared himself rightful heir. A half century of civil wars soon followed by forces supporting the conservative Carlos (Carlists) against the progresistas supporting Isabel.

Isabel was finally deposed, exiled to Paris in 1868 and abdicated in 1870 resulting in the short lived First Spanish Republic.

The Spanish American War
Throughout the century, while different wars were ravaging Spain and a series of ineffectual rulers came and went, the colonies in South America started declaring their independence. Hence, not only were the wars depleting Spanish coffers, Spain could no longer count on income coming from the colonies. Everything was unraveling both at home and abroad.

The culmination of Spanish decline came at the hands of the Americans when they wrested control of Cuba and the Philippines in 1898 after the sinking of the Maine. By the turn of the century, Spain was the sick man of Europe trying to recover from a century that had left it all but broken.

Young king Alfonso XIII sat on the throne and would remain sovereign until his abdication in 1931.

Epilogue
While this summary is historically correct, it is far too brief and simplistic. Suffice it to say that Spain lived through a century of conflicting governments and ideals among numerous factions - liberals, conservatives, federalists, carlists, monarchists, republicans, anarchists, secessionists - which left the country in ruins.

This was Spain at the end of the first World War, a country in social decay in search of itself at the margin of mainstream Europe.

Early 20th century Europe - Part I

Germany's rise and fall - a brief history of Germany from the end of the 19th century to the end of WWI

Editor's note: While researching the subject my laptop went kaput, and with it, all my saved links to sources and bibliography. I apologize as I intended to include a list of sources at the end of the post. Additionally, this post only serves as a prelude to a future post I plan to write about Berlin in the 1930s.

By 1930, the world had become a much smaller place. The phone, radio and wireless provided what was then instant communication. Talking movies and photography were becoming an art form onto themselves. Advancements in flight, motoring and shipping opened new and faster modes of travel. A new world order was emerging and the old continent was learning how to cope amid wars and internal conflicts.

After the first world war, the geo-political map of Europe had changed significantly as borders were redrawn with the emergence of new nations. Some of the old powers lost stature while others gained in importance and authority. Of these, the most affected was Germany.

A prelude to war
Prior to 1871 Germany did not even exist as a unified nation. It was a loosely knit federation of duchies, grand duchies, principalities and city states of germanic origin. It was Otto von Bismarck who in 1871 united all the territories and created the nation of Germany under the umbrella of Prussian authority. The new nation encompassed areas of Poland, the Baltic States and parts of Denmark. Additionally, it had wrested control of the Alsace-Lorraine region from France after the latter's defeat in the Franco-Prussian War of 1870.

At the time, Germany was the most industrialized country in Europe outproducing all other European countries in coal, iron and steel, thanks in large part to its annexation of the Alsace-Lorraine region, principal source of metal ores. They were science and technology innovators making important contributions in physics and chemistry. In the first quarter of the 20th century Germany had produced more Science Nobel laureates than any other country. The Otto engine was the blueprint for all internal combustion engines and people like Einstein, Planck, Daimler-Benz, Bosch, Wankel, Diesel, Geiger and Hertz became household names.

As part of their growing importance in Europe, Germans embarked on the task of colonization. Although latecomers to the game, they established colonial outposts in Africa and Asia. Colonization served two purposes: it reaffirmed Germany as a world power which brought with it prestige and clout, and secondly but more importantly, it meant Germany had a powerful naval armada with which to defend its colonies. Britain, seeing their naval dominance challenged, retaliated by strengthening their navy. The result was the 'Dreadnought race' between Britain and Germany towards the end of the 19th century.

Tensions rising
Serbia had rebelled against the Turkish Ottoman Empire in 1815 and declared its independence by 1835. At the time, large parts of the Balkans were under the control of the Austro-Hungarian Empire and the emperor feared that Serbian independence would create similar aspirations in Bosnia-Herzegovinia and Dalmatia. Hence, the emperor, Franz Joseph I, was more than a little wary of the Serbians.

Meanwhile, the 19th century saw shifting alliances and realignment among Europe's traditional powers. After France's botched imperialistic aspirations during the Napoleonic Wars at the start of the 19th century, the victors distributed the spoils of war among themselves in the Second Treaty of Paris. Generally speaking, when a peace treaty is signed after any conflict, it means that all parties concerned have reached a compromise that pleases no one and annoys everyone. Eventually, problems with the Ottoman Empire, the creation of Bulgaria and the independence of Serbia resulted in the Triple Alliance (1882) of Germany, Austria-Hungary and Italy. As a counter measure, Britain, France and Russia formed the Triple Entente. Basically, member states were committed to come to the defense of their partners in the event of foreign invasion.

To say that these alliances were in a state of flux is an understatement. No one trusted anybody. To make matters worse, the monarchs of Russia (Nicholas II), Germany (Wilhelm II)and England (George V) were all blood related. In fact, George V and Nicholas II were first cousins and could have passed for brothers while Wilhelm was the first cousin of George and second cousin of Nicholas. Italy, after joining the triple alliance, made a separate deal with France while present day Turkey (Ottomans) would align with Austria-Hungary.

The powder keg
Eventually, the inevitable happened. The assassination of Archduke Franz Ferdinand in Sarajevo by a Serbian ultra nationalist was the straw that broke the camel's back. It was the perfect excuse Austria needed to declare war on Serbia. However, because of the alliances, other countries were committed to the conflict. First to join the fray was Russia which, in addition to coming to the aid of their Serbian cousins, had its own political agenda in wanting to grab the Dardanelles from the Turks, and thus, secure a direct access to the Mediterranean from their Black Sea ports. France, having no direct interest in the Serbian conflict, did see an opportunity to engage Germany in an attempt to regain control of the Alsace-Lorraine region. Britain entered the conflict when Germany decided to invade neutral Belgium to get to France. Eventually, all of Europe got involved one way or the other. The war was largely stalemated although Germany maintained a slight advantage. However, it was evident they could not sustain a two-front war. The turning point came when the Americans joined the Allied effort and supplied troops and war materiel.

The end
The rest, as they say, is history. By the time the war ended, three empires had disappeared from the face of the earth. Austria had been reduced to a shadow of its former glory, the great Romanov dynasty which had ruled Russia for over 300 years was no more and the Ottomans vanished. The Russian debacle was particularly tragic, mainly because Nicholas insisted on going to war when his country was ill prepared for it. Nicholas had never been properly trained by his father on matters of state. On top of this, he was wholly reliant on his wife, the Tsarina Alexandra of Hesse-Darmstadt, who was German by birth. While the rest of the world was instituting political reforms brought about by the new realities of the industrial revolution, Nicholas and Alexandra remained supreme autocrats eschewing all kinds of socio-political reforms. The situation was further exacerbated by the condition of Alexei, crown prince and heir to the throne, and the influence Gregory Rasputin held over the royals, especially the Tsarina.

The end for Nicholas and Alexandra came after they were twice betrayed. First by Wilhelm II who facilitated the exiled Lenin's return to Russia hoping (rightly so) that this would stir anti-war sentiment among the disgruntled people, and secondly by George V who promised the Romanovs asylum in England which was later revoked upon the advice of his ministers.

As mentioned earlier, after the war, the geo-political map of Europe had changed. The Treaty of Versailles of 1919 imposed heavy penalties on Germany which was blamed for instigating hostilities. Besides having to retreat to its pre-1871 borders, Germany faced strict restrictions on its military build up and was bound to pay extensive war reparations which were finally paid off in 2010.

Some sources used:
- Great Events of the 20th Century - Readers Digest
- Timeline of History
- George, Nicholas and Wilhelm: Three Royal Cousins and the Road to World War I -    Miranda Carter
- Iron Kingdom: The Rise and Downfall of Prussia 1600-1947 - Christopher M. Clark
- The Complete Idiot's Guide to World History - Timothy C. Hall

Eurodebt graphic

All week I've been posting threads on the state of Spain's economy. This graphic clearly illustrates the situation of the PIIGS states.

A picture is worth a thousand words.

Eurodebt graphic

I wonder

Wondering what the future might be like if we could see civilizations on other planets.

I wonder what futuristic civilizations are like.

I wonder if there are wars and terrorist wholesale killings based on ideological differences in these civilizations. I wonder if at some point in their history they scorched their planet and decimated every other living species. I wonder if people have moved underground.

I wonder if the death penalty for violent criminals still exists or if that has been deemed uncivilized. I wonder if the abortion of innocent unborn children is also practiced. I wonder if the irony has been lost upon them.

I wonder if there are elected governments and if corruption is the order of the day. Is poverty also its by-product or is there truly justice for all? I wonder if there are politicians and election campaigns as well as protests and mass demonstrations. I wonder if, like on Earth, the most vociferous protests are also delivered by the least informed and least educated members of society. I wonder if they believe in that ages-old adage, "It is better to remain silent and be thought a fool than to speak and remove all doubt."

I wonder if societies are classless - no rich, no poor, no strong, no weak, no privileged, no disenfranchised. Are the people happy or do they long for class struggle? I wonder, are all men equal or are some more equal than others? How much does it cost to be more equal?

I wonder, do governments have a big brother unit eavesdropping on people's private conversations thus eliminating all forms of freedom of expression, personal opinion and public dissent? I wonder, does freedom exist at all or is it just an illusion? But more important, how is freedom defined? Does it mean the same as it does here on Earth or is freedom for them the absence of poverty, crime, homelessness, sickness and illiteracy?

I wonder if romance exists. I wonder if people still say "I love you" or, if like on Earth, it is considered dirty and to be avoided at all costs. No one says I love you anymore on Earth. Sex is the new romance and love a useless emotion. I wonder if people still have emotions.

I wonder if people have cosmetic enhancing surgery, pose nude for pictures and then act surprised and feign embarrassment when the images are uploaded and distributed for everyone to see. And when asked why they did it, respond with "because it empowers me". I wonder what it is that posing nude empowers them to do. Maybe careers are started this way and the more promiscuous and sluttier the person, the more he or she is to be admired.

I wonder if there are family units, if the concept of male-female relationships and traditional procreation is still recognized. Maybe because of all the sex and pornography invading their daily lives, there has been a sensory overload and sex as we know it has been abolished altogether. Maybe, because of incessant cosmetic surgeries and the confusion it was creating, advanced genetic manipulation determined it was easier to do away with genitals and sexual distinction. All STDs have finally been eradicated and sex is considered to be prehistoric and basically extinct.

I wonder, if people are sexless and they all look alike, how do they tell each other apart? Do they also tattoo and pierce themselves as a sign of protest and individualism? I do hope they realize that that butterfly tattoo on their back looks good now while they're young but will probably look like a bat when their skin gets old, saggy and wrinkly. Maybe, by that time, all they have to do is pull their hair up from the top of their head to stretch out their wrinkles. Maybe their biggest problem is figuring out how to keep their hair up.

I wonder, maybe people who want an offspring just go to an IVF (in-vitro fertilization) supermarket and choose a test tube baby the way we choose our food products, by reading the nutritional specs on the label. Baby labels probably provide not only gender and race but career path, annual income and life expectancy.

I wonder if physical activities such as sport and exercise still take place or do people just plug their brains to a computer and download the latest physical activity app? Maybe the matrix is real.

I wonder if time travel is possible on this futuristic world. I would like someone from that planet to travel back to our present time here on Earth to let us know that we are headed down the wrong path; that we will likely end up as mindless, emotionless, nondescript automatons. I hope he tells us we still have time to change.

I wonder.














and if children respect their parents, or does the state take over and indoctrinate the young to conform and adhere to the social model they've created?

I wonder if love exists. or if sex has become a clinical activity.

Spanish General Strike: only a matter of time

With the latest unemployment figures just in, Spain's economy is creating a financial black hole that threatens to vaporize the entire eurozone

Place your bets, ladies and gentlemen. How long before we see a second general strike in Spain? The first one was a month ago, just 99 days after Mariano Rajoy and his centrist Partido Popular assumed office. That strike was convened by the traditionally leftist labor unions as a result of Rajoy's austerity program which calls for the deregulation of hiring practices; a reduction of workers compensation, pensions and health care benefits; and the elimination of redundant government ministries and the practice of wasteful project spending (during Zapatero's administration there was actually a government sponsored project to outline and map the woman's clitoris and the labia minora). Additionally, the most indebted autonomous regions have to curtail their budget deficits to meet national projections.

Spain's unemployment currently stands at 25 percent, the highest in Europe. It is estimated that one in three of all unemployed people in the eurozone is Spanish. And the forecast is dim as this figure is expected to increase. The causes are many and I've previously mentioned them here (Mar 27), here (Mar 30), here (Mar 31) and here (Apr 13).

What's clear is that the crisis in Spain is not going to see a turnaround any time soon. There's one fundamental flaw in the government's program. At the same time the government is reducing expenses, they are also increasing taxes of prime commodities to increase revenues. While I understand the need to increase revenues and decrease expenses to reduce the budget deficit, increasing taxes is counter intuitive and will result in the exact opposite of the desired result.

To get the economy moving again, money has to start circulating. In other words, the administration has to restore investor confidence. Reducing workers compensation on the one hand is an incentive for employers and prospective investors, but at the same time, tax increases of prime commodities such as fuel and utilities is a turn off to employers and prospective investors. The incentive the government is offering on one side is being offset by the increased cost of doing business on the other. The net effect is zero benefit. Who, in their right mind, would want to invest under these conditions? Furthermore, the increase of prime commodity taxes creates inflationary pressures at a time when the country can ill afford it. The way I see it, increase taxes and you reduce employment. If you want to decrease unemployment and get money circulating once again, reduce taxes. Unemployment is a double edged sword: less people contributing to social security and more unemployment benefits social security has to pay out. It's not rocket science, the system will fail.

But there's another reason why the Spanish economy will be hard to restart: culture.

Spain is the one country in Europe that has failed to adapt to the international work ethic. For example, businesses routinely take 3 to 4 hour lunch breaks and they do not open on weekends. The big chain stores only open one Sunday a month because the association of mom and pop stores complained that allowing the big stores to open on weekends would put them out of business. And yet for many, the weekends are the only free time they have. I guess no one ever told these mom and pop stores they could close on Monday and Tuesday and open weekends.

Spanish workers also take a month off with pay in July or August during which time businesses shut down except in tourist areas. That means employers are paying employees during a month in which production is zero. It wreaks havoc on cash flow and budget planning.

Still, on average, the Spanish work more hours per week than their European counterparts. The problem is they are also less productive. Spanish workers, for example, work 9 hours more per week than the Belgians but are only 50 percent as productive.

So what's the point of working more hours if nothing is getting done anyway? Might as well just shut down early and at least save on electricity and air-conditioning, right? Well, a lot of it has to do with image and justification. It's bad for their image to admit they are not hard working (they aren't) and they use the extra hours stat to justify they are not lazy (they are). In fact an often heard phrase in Spain is vivir del cuento which basically means "the gift of gab and living off it". Spain takes pride in being different; I would seriously reconsider that self assessment as it may just be their own undoing.

Unions leaders are quick to point out they fought hard to achieve the worker benefits Spain now enjoys. False. They didn't have to fight for anything, it was handed to them on a silver platter when the joined the European Union. Europe poured in the funds and as they say over here, se vivió del cuento. And so far, Spain has been an epic fail on the economic front.

The only question that remains is when is the second general strike going to take place. My guess is before the summer break. What happened in Greece, that was child's play compared to what's going to happen here.

The importance of the five day weather forecast

Most people don't realize the importance of the international 5-day weather forecast. Here's why we should be paying more attention.

During the last presidential elections between PNoy and GMA, some friends asked me whom I would support.

"Well," I said, "I'll support the candidate who can guarantee to consistently put Manila on CNN's and BBC's 5-day weather forecast. I'll even settle for a mention on the each network's daily regional weather forecast."

Needless to say the topic never even came up in any of the campaign speeches of either candidate. And my friends either ignored me as being frivolous or thought I was absolutely batty; nobody seemed to understand my oblique reasoning.

I was being deadly serious.

Think about it. Why do these channels provide weather forecasts? After all, local TV channels provide more extensive coverage. So why would you watch a BBC or CNN weather forecast? Well, you wouldn't...unless you were traveling. And who are the most frequent travelers? Businessmen. And to where do they travel? To the region's business centers. Therefore, it should come as no surprise that the same cities always seem to hog the weather forecasts: Singapore, Hong Kong, Seoul, Taipei, Kuala Lumpur.

And that speaks volumes about Manila. The Philippines, which was poised to become an emerging tiger economy in the early 90s, has fallen so far behind its neighbors that it now ranks below Vietnam as a business destination. In fact, it doesn't even appear on this Wall Street Journal (SE Asian Edition) list of Asia's most attractive cities. It gets worse. This CNBC list of the World's Ten Worst Countries for Business has the Philippines down as the fourth worst country in the world to do business. Although I suppose a lot of it has to do with the welcoming committee as well as the corruption. CNNgo.com has NAIA listed as the 5th worst airport in the world.

So next time you watch CNN or BBC, note the weather forecast. Now you know why those cities always appear and Manila only appears sporadically. It's because those cities are frequent flyer destinations, they're business centers.

On the next presidential elections, ask your candidate if he or she can guarantee putting Manila on the weather forecast map. If the candidate looks at you and laughs becuase he or she has no idea what you're talking about, don't vote for that person. If, on the other hand, the candidate says "yes", it means that person has a plan to get the economy back on its feet. It means he or she has a plan to end corruption. It means there's still hope.

I called it

So there it is, Bayern Munich vs. Chelsea FC in the finals of this year's Champions League (CL) tournament. All the sports pundits had a Madrid vs. Barcelona final on their betting line but I called this one right.

It's a funny things about sports - people tend to be swayed by their passions, never by statistical probable outcome. Even the oddsmakers, however objective they attempt to be, include intangible factors in their odds predictions. Hence, before the start of the semifinals, the bookmakers at BetFair, for example, predicted that Barcelona (1/6) would qualify for the finals over Chelsea (9/2). Similarly, Madrid (1/2) was favored to qualify over Bayern (6/4).

As far as winning the whole enchilada, Barça was odds on favorite to win at (5/6), with Madrid at (5/2), Bayern at (9/2) and Chelsea, the dark horse, at (10/1). Even after Madrid had lost the first leg 2-1, betting house Bet365 still had them on top (4/7) to win and continue to the finals.

However, after last week's first leg when Chelsea beat Barça 1-0 and Bayern beat Madrid 2-1, I predicted a Bayern-Chelsea final. This prediction had nothing to do with the home teams' respective wins, it was based entirely on the scores.

The strategy behind CL matches once teams reach the round of 16 (2 match series: away and home) is quite simple - score an away goal and don't let your opponent score on the return match. Away goals are important because they are used as tie breakers. Barcelona lost because they didn't score a goal at Stamford Bridge and allowed Chelsea to score at the Nou Camp. Madrid lost, despite having scored a goal at the Allianz Arena, because they allowed Bayern to score at the Bernabéu. Mourinho said it himself, if Bayern want go through to the final, they have to score at the Bernabéu. And that's exactly what they did. It's that simple.

Ok, maybe you're thinking that the BM-RMA series ended in a 3-3 tie with each team having scored an away goal. True and that's why the match went into overtime and then penalties. However, Madrid did not lose because they were fatigued or mentally exhausted or because they had missed 3 out of their first 4 penalties. Madrid did not lose this series at the Bernabéu; they lost it at the Allianz Arena when they allowed Bayern to score the winning goal on the last play of the match, just as Barcelona did not lose the series at the Nou Camp. That series was lost when the Catalans failed to score at Stamford Bridge.

It's not simply a question of scoring more goals than your opponent. Teams at the semifinal stage are usually very evenly matched and game scores reflecting a two or more goal advantage have only occurred in 13 of the the last 44 semifinal matches dating back to the 2000-2001 season. Furthermore, field advantage does not necessarily imply a victory for the home team.

So who's going to win this edition of the Champions League? Everyone says Bayern Munich will win. On paper, they certainly seem to be the stronger of the two teams. But then again, no one gave Chelsea a chance, and yet, here they are. I'm gonna go against the odds on this one and predict a Chelsea win.

What manner of pride becomes you?

A few posts ago I railed about Spanish pride. Maybe you thought I was being facetious. Well, here's further proof

Chelsea Football Club has made it through to the the finals of the Champions League after playing a courageous match at the Nou Camp despite being a man down. Apparently that's not the really big news in Spanish sporting dailies. The big news is the front page of today's (April 25, 2012) The Sun, that cheesy English tabloid owned by Rupert Murdoch.

The front page headline says: "Terry sent off; Messi misses pen; Chelsea reach Champions League final...but most incredible of all: TORRES SCORES!"

Well, the backlash of that headline was incredible. Marca headlined it "Intolerable: The Sun makes fun of Torres' goal."

If we were talking about any other non-Spanish footballer, The Sun's headline would not have even raised an eyebrow. But because Torres is Spanish, it is a slap in the face to all Spaniards. I mean, the nerve of these Brits! How dare they! What are they trying to imply, that Torres scored out of sheer luck...that he doesn't possess the skills to score of his own accord? How dare they insult us in this manner, harrumph, harrumph!

But wait, there's more! If you continue reading, I will also include links to the Guiñol scandal (French muppets) at no extra charge!

A few months ago, Alberto Contador, 2010 Tour de France winner, was stripped of his title after being found guilty by the CAS (Court of Arbitration for Sport) of using Clenbuterol, a performance enhancing drug. Well, needless to say, the French jumped all over that one and parodied it on their Guiñol program (Canal+).

It gets even better. The show was so successful, Canal+ decided to up the ante a bit and produced another skit based on Rafael Nadal's physical prowess, which is actually quite funny. The icing on the cake was the Guiñol that showed several Spanish professional athletes, including Iker Casillas and Pau Gasol, signing contracts with a steroid-filled syringe.

Mon Dieu! Sacré bleu, quelle sacrilege!

Suffice it to say the Spanish were up in arms and made all sorts of calls to denounce and boycott the French. Sure, Spanish pride was hurt. But seriously, sue the French over some satirical review? Can you imagine if George W. Bush went about suing every late night talk show because they ridiculed and made fun of him? Jay Leno, David Letterman, Jimmy Fallon, Jimmy Kimmel, Conan O'brien would all be out of a job.

I reiterate, Spain suffers from national collective inferiority complex. And it is precisely their reaction to ridicule and satire that proves my point. Had they chosen not to react so vehemently against the French, no one would have even noticed or paid attention to the Guiñol.

Spain feels, rightly or wrongly, that they deserve to be one of the world's influencers. I can only say that if they continue with their downtrodden persecuted attitude, they'll never be considered for anything.

The old adage still rings true: if it doesn't apply, let it fly.

El Clásico: where football died (the prequel to the epilogue)

Just a quick update

I forgot to post these other videos in my previous post. A family of Real Madrid fans is accosted in the Reyno de Navarra during RMA's 5-1 drubbing of Osasuna and a Real Madrid fan is beaten up in the Nou Camp in last Saturday's El Clásico. Why do I post them? Only to show that everybody hates Madrid for the reasons I mentioned previously. However, it is a sorry sight when grown men bully a little kid and his family simply for displaying his team's colors.

Again, this behavior is symptomatic of the way the socialists, who have ruled Spain for all but 8 years since 1982, deal with the electorate. If you've read my earlier posts about Spanish pride, you'll realize there is no unity in Spain. It's "I, me, mine" first and the country second. Therefore, as a democracy, socialists believe in freedom of expression but only if your opinion jibes with theirs. Otherwise, don't even bother to express it.

Don't believe me? This is the best proof of all. A few weeks ago a local football TV program, Punto Pelota, decided to try and get some information on the renewal of Pep Guardiola as Barça's head coach. To obtain the information they recruited the help of Miguel Garcia, president of the L'Hospitalet de Llobregat football team, a second division team, at a Barcelona awards ceremony. Together with the Punto Pelota cameraman, Garcia went about asking several club directors if they knew anything about Pep's renewal. Josep Maria Bartomeu, vicepresident of the club, answered he was "fucking clueless" (ni puta idea). The full video is here.

Big deal, right? Not so Barcelona. The club swiftly rescinded Punto Pelota's press accreditation and banned the show from attending any of the club's press conferences. Why? Because it put Barça in a bad light. Can you imagine if politicians could do that to members of the press that weren't exactly sympathetic to their platforms? This is further proof of that Spanish pride and arrogance I mentioned previously. No one is exempt from making mistakes but it appears that some are more perfect than others.

El Clásico: where football died (the sequel)

The beautiful game is not so beautiful

I mentioned UEFA's hidden agenda in Part I of this post. Actually, it's not so hidden. Michel Platini, head of UEFA, has on numerous occasions stated that he is a Barça fan. Such is his power that major European football clubs are questioning the impartiality of the refs in Barça's European matches. The sheer volume of news articles, blogs and commentaries regarding the Barça bias is mind boggling.

Here are just a few of the articles I've found: Another Prick in The Wall, a name you just gotta love; a post from a Manchester United blogger on ManUtdTalk.com; Platini's dislike of Madrid on Goal.com; Platini's admiration for Barça on Goal.com; an opinion from The Army of White which looks more like a page out of the Ku Klux Klan and which is also posted on Xabi Alonso's Facebook page.

If you're thinking this type of controversy (polemic as they call it here) just started with the arrival of Jose Mourinho, I give you this link of a Barça match played back in 2008. I saw the match on TV. After being reduced to 10 men on a really dubious red card, Espanyol did well to keep Barça at bay. After the full 90 minutes, the game was tied at one goal apiece. Five minutes of injury time were added by the 4th referee. At 6:40 of added time the referee awarded Barça a late penalty on another really questionable call. After Barça made the ensuing spot kick the game was ended.

More recently, Pepe was sent off for a hard foul on Dani Alves during 2011 Champion's League (CL) first leg semifinal match at the Bernabéu. The way Alves was writhing about in pain on the pitch, it would certainly seem like a justifiable call. But was it? See for yourselves in this video. How about the 2010 CL semifinal return match against Inter Milan at the Camp Nou when Thiago Motta fouled Sergio Busquets? Was that worthy of a red card or was it a Busquets dive? See it here for yourselves. Observe how Busquets "peeps" to see if the ref carded Motta. Clearly a performance worthy of an Oscar. In fact, all you have to do is type "Busquets dive" on Google and be amazed at the number of results you get.

Perhaps the referees weren't at the correct viewing angles to see these fouls. Hence, we have to give them the benefit of the doubt. However, this type of theatrics is precisely the justification that warrants the implementation of instant replays.

But it gets worse. In the 2009 CL semifinal return match at Stamford bridge, referee Tom Henning Ovrebo officiated what can only be described as the most scandalous display of Barça favoritism to date. To this day, Ovrebo still gets the occasional death threat email for that match. Just recently, he admitted to errors which cost Chelsea the final of the Champion's League game that year.

So is Real Madrid just being sour grapes or is there really a conspiracy to favor Barcelona? I've already shown that Platini does not disguise his admiration of everything Barça and his disgust for Madrid. But here's the kicker and Mourinho, in his famous "Why?" rant against Barcelona in 2011, was not entirely wrong. The article centers around Senes Erzik, executive vicepresident of UEFA's Referee Committee and right hand man of Angel Maria Villar, president of UEFA's Referee Committee and the Royal Spanish Football Federation. The icing on this cake is that Erzik is also project director at UNICEF. Remember that Barcelona's main sponsor was UNICEF up until the current season. At the very least, there was a very strong vested interest between UEFA and UNICEF to favor Barcelona - money. A club stands to make millions from gate receipts, merchandising and TV rights for every stage they progress in the Champion's League. The eventual winner gets an additional bonus paycheck.

I started this post in Part I by saying that football is the greatest sport in the world with the dumbest rules ever conceived. In the last part, we'll review some these rules.

El Clásico: where football died (I)

Another match between two of football's greatest rivalries. If recent history has taught us anything it's that these matches are not about football at all

I've always said that football is the greatest sport in the world with the dumbest set of rules ever conceived. As a result, the referee wields the kind of power dictators envy; the kind of power that determines the outcome of matches and the fortunes of clubs and players. As Lord Acton once said, "Power corrupts and absolute power corrupts absolutely."

Tonight we will witness the nth edition of "El Clásico," a match pitting Barcelona vs. Real Madrid (or vice versa), the single biggest club level match currently played and one of the greatest rivalries of all time. Worldwide TV audience is estimated to be 500 million.

In recent times, what was supposed to be a celebration of the "beautiful game" has been anything but. Sloppy play, excessive fouling coupled with B-movie theatrics and the referee's inability to control the match have put into question the impartiality of the arbiter and the hidden agenda of UEFA officials, European football's governing body. More about that later.

If this match were purely about team work, ball control and incredible goal scoring abilities, then there would be nothing to say. However, this match is much more than football. It's politics.

Barça is the darling of Europe. They are that rogue, independence seeking, left leaning, liberal province against the centrist, conservative, controlling power of Madrid. It's David against Goliath. Everybody loves an underdog, especially one that is capable of sticking it to the man.

This resentment towards Madrid dates back to Franco and the Spanish Civil War. Catalonia was one of the most outspoken defenders of the 2nd Spanish Republic, the same republic the International Brigade volunteered to defend against the Nationalist forces of Franco and his Nazi war machine. (Although not officially war time allies, Spain and Germany have always had close ties. This relationship dates back to the reign of Charles V and the Austro-Hungarian Habsburg dynasty in the 15th century) So naturally, after the Nationalist victory, Franco shafted the Barcelona and Basque regions for their separatist desires and imposed strict controls on them for over 40 years. Barça, rightly or wrongly, have always felt suppressed by the yoke of Imperial Spain in general and by the dictatorship of Franco in particular. Franco was pro Catholic Church, the republicans wanted to annihilate it. On top of this, any FCB (Fútbol Club Barcelona) die hard will tell you that one of the greatest players of all time, Alfredo Di Stefano, was "stolen" from Barcelona and recruited to play in Madrid by Franco. You'll have to ask Don Alfredo about that one.

Therefore, even before the match starts, decades of excess mental baggage are hanging over the heads of every local aficionado, regardless of side they're supporting.

(to be continued...)

Spain's legacy to the world

Spain has bequeathed the world with its art, culture and religion. But there is another gift "Made in Spain" that history books never talk about - corruption

Ok, I'll be the first one to admit: Spain did not invent corruption. Corruption, at least its essence, has been around since the beginning of time. The actual term originates in the middle ages and is defined by Merriam Webster as "the impairment of integrity, virtue or moral principle; inducement to wrong by improper or unlawful means (as bribery)."

Let's face it, as Lord Acton once wrote to Bishop Mandell Creighton in 1887: "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men." This quote primarily stemmed from the fact that monarchs and emperors were all absolute rulers. Thus, Caligula Caesar, Pope Alexander VI, Henry VIII and Napoleon to name a few were all corrupt.

But whereas these people were morally vacuous individuals, Spain embraced corruption, developed it into a cottage industry, expanded it on an industrial scale and then exported it.

Need proof? Just take a look at the world around you. Every country Spain has ever colonized, with the exception of Costa Rica and Puerto Rico, is underdeveloped and due primarily to corruption. Mexico, El Salvador, Nicaragua, Panama, Colombia, Venezuela, Peru, Chile, Paraguay, Argentina, the Philippines are all corrupt countries. Anything, including murder and justice, can be had for a price.

And then there's Cuba. Cuba was the jewel in the Spanish crown that India was to the British crown. And we all know how that ended up.

On the outside looking in

The following is a personal account of an outsider's view of the European experience in general and the Spanish experience in particular. This post was originally drafted on October 3, 2009 although never published. It has been edited and revised since that time.

I've always wanted to do a critique on Spain as much as I've always detested the thought of writing one. Anyone who knows me, knows I don't put any stock into opinions because I firmly believe that opinions are like nose hairs - everybody has them but no one wants to see them displayed in public. Here in Spain, opinions are a fundamental part of the social fabric; you not only have the right to an opinion, you are encouraged to express it and take part in coffee shop debates. In Spain everyone is an expert on everything. However, these debates are usually one sided in that everybody expresses a position but no one cares what you think. The unwritten maxim is: When I want your opinion, I'll give it to you.

Why Spain? Because Spain offers a perspective of itself unlike that of any other country in Europe. It is a microcosm of the eurozone itself. Spain is composed of 17 autonomous provinces each with its own dialect, customs, traditions and culinary tastes. The eurozone is made up of 17 sovereign states each with its own language, customs, traditions and culinary tastes. See what I'm getting at?

You've seen the tourist promotional ads, "Spain is different!" Well, it is. What happens in the rest of Europe, also happens in Spain except over here, everything is exaggerated by a factor of ten. I'm reminded of TV star and comedian Bill Cosby. In one of his routines he would go around asking college kids why they did cocaine. "Because it intensifies the personality, man," they would respond and Cosby would counter, "OK, but what happens if the person's an a-hole?" This analogy is the best way to describe Spain - very intense but, more often than not, obnoxious and irritating. To understand what makes Spain tick you have to go back and understand its history.

Spain in the context of Europe
What makes Europe such an attractive travel destination is its history, culture, traditions and diversity. Europe has it all: power, intrigue, scandal, sex, wars, religion, science and arts.

At the same time, it is these very attributes that are the downfall of Europe. Thousands of years of traditions, customs, war and distrust are hardwired into every European. So, while on the exterior the economic powers are genuinely trying to unite the continent through the European Union, the underlying sentiment among members is one of animosity and apathy.

Why the animosity? Because of pride. Pride is at the root of everything that is wrong with Europe. Individual member states take pride in their rich history and their contributions to the arts and sciences. So they are not about to readily accept the dictates of a pan European institution that compromises their sovereign will. No place is this more evident than in Spain.

There's a little known book that was published back in 1969 by Fernando Díaz-Plaja. The book, "The Spanish and the 7 Deadly Sins," is a narrative explaining the attitudes of the Spanish. In the foreword the author states that he had not realized the character of the Spanish until he traveled abroad and observed different cultures. In so doing, he found new insight into his native land. It's a short book just 200 odd pages long but two-thirds of it are dedicated to two sins in particular: pride and envy, one being a corollary of the other.

Pride
Perhaps the strongest emotion of the Spanish, however displaced it might be, is pride. The term 'humble spaniard' is a complete oxymoron; the species doesn't exist. Miguel de Unamuno (1864-1936), Spanish philosopher and essayist, expressed it this way in his book, Obras Selectas (Selected Essays): True humility, in those who feel superior to others, is to admit they are superior. And that, in a nutshell, is the definition of Spanish humility.

I remember that as a boy in the 60s traveling to Spain to visit my aunts and uncles, I would ask my uncle why he never bothered to learn English. "What???!!! Me, learn English? Why should I learn English when half the world speaks Spanish? Maybe it is the English who should learn Spanish!" That was the conventional wisdom back then because in its golden age, the sun never set on the Spanish Empire. The Spanish were the conquerors, never the conquered. And a lot of that sentiment has carried on into the present day.

A few years ago I asked several colleagues who where in their 30s why English in Spain was not as widespread as in other European countries. The answer this time was because Franco, through censorship, discouraged the use of foreign languages in the arts. This is not entirely true. There was censorship but it was aimed at political and moral issues. In fact, there were movie houses in Madrid dedicated to showing foreign films in original version. In these cinemas I got to see the original undubbed versions of Night of the Living Dead, Alfred the Great and the Beatles' Yellow Submarine. I found it amusing that a group of people who had not even been born during the Franco dictatorship were so certain of their answer. I suspect that my young colleagues found it more convenient to blame Franco for Spain's inability to embrace the English language because it acquits them of any responsibility, even though they had every opportunity to change that course of action after Franco passed in 1975. But that never happened because films continued to be dubbed. So my colleagues' argument falls flat on its face. I can only conclude that the Spanish still held on to my uncle's way of thinking.

Shortly after Franco's demise, a new constitution was drafted and all the political parties that heretofore had been banned were allowed parliamentary representation. Keep in mind that the representatives of these parties were Franco's sworn enemies (the socialist left and the communists) and now they were in power. So I imagine that shortly thereafter they decided to rewrite the history books, this time with Franco as the evil stepmother and the socialists as the heroic Prince Charming who saves the innocent and abused Spainderella by recovering her fragile glass dignity at the palatial steps of history and restoring her to her rightful place at the throne of the world. The free thinking liberal socialists would be the saviors of Spain.

Credit where credit is due
Spain experienced its greatest prosperity at the hands of the socialists, largely due to the country's entry into the EU and its access to low interest development funds. But by the same token, the country also experienced its two worst economic downturns in history during socialist administrations.

I wasn't around for the first one in 1993-94 but I was present for the second one in 2008. On this point everyone is in agreement: Spain didn't start the crisis but it should have managed it better. So what happened? Simply put, pride.

Rodriguez-Zapatero(ZP), the socialist candidate, assumed power after the electoral defeat of the centrists in 2004. He had inherited a stable growing economy with a budget surplus. During the 2008 elections, when financial markets started going topsy-turvy, ZP denied Spain was being affected. He constantly stated that Spain was in the Champion's League of world economies and that unemployment, while growing, was under control. Now I'm not an economist nor do I claim to know the ups and downs of financial markets but I'm guessing ZP figured he had enough of the budget surplus he inherited to ride out any economic storm. He dismissed the severity of the problem. He figured that if he reiterated that there was nothing to worry about, the people would have to believe him. After all, finance is a question of confidence. It all came to a head when Paul Krugman, 2008 Nobel Prize in Economics, had a tête-à-tête with Zapatero and warned the president of the impending implosion Spain was about to experience. Zapatero's response: "Krugman doesn't know what he's talking about. We are fine." This response was coming from someone who had never worked a day in his life in any sort of business or economic capacity.

This was the height of arrogance and ignorance. Zapatero could not fathom being a failure or going down in history as the president that caused the worst financial crisis of all time. His pride would not allow it, never mind its effect on millions of people. We all know how that ended: Zapatero finally resigned in disgrace and called for anticipated elections in 2011 which his party lost.

As soon as the centrists took over, they initiated economic reforms, the kind of reforms the socialists should have undertaken but decided to defer due to their unpopularity. So what do the leftists do, they convene a general strike and accuse the administration of taking the road to ruin. The culmination of all this is that Javier Lopez, secretary general of the second largest labor union, CCOO, affirms on national TV that the right to strike supersedes the right to work.

In other words, the socialists are liberals and open minded. They believe in the freedom of expression but only if your views coincide with theirs, otherwise they will insult and intimidate you. If you don't believe me, go ask Lourdes Hernandez, lead singer of the rock group Russian Red when she admitted being a centrist and the subsequent backlash she suffered at the hands of the socialists. They basically labeled her a traitor and a disgrace as an artist. You see, the socialists believe they have a monopoly on intelligence and the arts and, as such, all artists by nature are anti-establishment. It is inconceivable that an artist be anything but left leaning.

We see a lot of pride and arrogance coming from all sides in Spain. It doesn't matter who you are or what your background is. If you are Spanish, you are proud and arrogant. It's in the DNA.

When so much pride and arrogance is coming out at you from one place, it should raise red flags. In my case, my flags are telling me that Spain suffers from a case of national collective inferiority complex. It's not rocket science. People who display airs of superiority do so to disguise their deep rooted inferiority. It's that simple and that complicated.

Just an update to yesterday's post

For the last two days I've been commenting on the state of the Spanish economy. And then out of the blue, as if to confirm what I had been saying all along, I found this article on the BBC website which explains in greater depth the Spanish financial crisis. However, the conclusion is the same: Right now, the Spanish are Europe's spain in the ass.

Spain's General Strike: gearing up for round two

Labor unions stage massive protests across Spain leaving the government groggy but not out. Unfortunately, this is only round one.

It was like watching a game score instant replay only five months later. Yesterday's general strike was highly reminiscent of Athens last October and the unions are promising more of the same unless the government of Mariano Rajoy backs down on its labor reforms.

Facing massive debt, unprecedented levels of unemployment and a stagnant economy, Rajoy's measures include the reduction of worker compensation, company incentives for new hires, higher taxes and lower government spending, all in an attempt to reverse the country's economic fortunes of late.

Sounds like a solid plan, right? So how come my gut tells me it's all marron glacé? You know, as in sugar coated pellets of doo-doo? I understand the reduction in worker comp. I understand the company incentives for new hires. And I understand lower government spending. But higher taxes???

The administration needs to increase revenue to cover pensions, health care and unemployment benefits, I get that. But raising taxes is a double edged sword, one that will have serious consequences. It is not feasibly possible or proper to raise taxes on a populace that is already reeling from the devastating effects of the unconscionable decisions taken by the previous administration.

I don't have the exact figures but there's approximately one million households that have zero income; every eligible member is unemployed and their benefits have run out. That's translates to about 4 million people with no means of livelihood. Other families are surviving under heavy strain because only one member has a job. So, if we now increase basic staples such as food, shelter and energy, where does that leave these people?

I'm not an economist nor do I claim to understand all the nuances of fiscal policy. But through sheer common sense, I can tell you this: you raise taxes and you are not going to induce increased private spending and investment which is what leads to higher productivity and employment. On the contrary, it has the opposite effect. It's time tested and proven. If you want to increase investment, employment, production and turnover, reduce taxes and reduce public spending.

The only thing this government has achieved thus far is to provide cannon fodder for the leftist unions. And more rhetorical bombs are going to fly before the situation gets better. Get ready for round two.

Europe’s Spain in the ass

Europe’s brightest financial planners are at loggerheads with the Greeks over their bailout package but Spain is the tumor in Europe’s behind waiting to metastasize.

We all know the situation; we’ve read the stories. France and Germany, designers of a unified monetary system in Europe are seeing their plans begin to unravel thanks to the economic conditions of the PIIGS (Portugal, Ireland, Italy, Greece and Spain).

Spain is a microcosm of Europe. It is divided and socially fractured. Unlike the former republic of Yugoslavia, which was a coalition of independent states created after World War I, Spain has been Spain since Ferdinand and Isabella married in 1469 with its heyday occurring during the reigns of Charles V and Philip II. Spain’s decline began with Napoleon’s conquest of Europe and reached its nadir with Franco’s dictatorship. Since then, the Spanish have been trying to find themselves.

Spain is one of the old continent's original colonizers, the others being Britain, Portugal, France, the Low Countries and, to some extent, Italy. However, with the exception of Portugal, Spain has never achieved the prosperity of the other members of this illustrious club. The Spanish will tell you this is due to the 40 years of Franco dictatorship. While true to a certain extent, the answer is oversimplified.

A large part of Spain’s problem, as mentioned earlier, is its lack of unity. There is a general mistrust among the different autonomous regions of Spain. Unlike other nationalities that put country above personal interests, Spain has no such sense of patriotism. In fact, Spain is the only country I’m aware of where people are accused of being fascists for displaying the flag. This means that there is little or no consensus among political parties when it comes to implementing sound fiscal policy because individual interests outweigh collective ones.

The current economic climate is the perfect example. Spain got caught up in the subprime debacle because its economy had evolved from an agro-industrial base to an economy based on real estate speculation. There was land to develop, money to be made and everybody could get in on the act.

The socialists took over from the centrist right government in 2004 inheriting a healthy economy. By 2008, the chinks in the armor started to show. Throughout his second administration, president Zapatero refused to carry out any substantial financial reforms which led to a loss of confidence and an early call to elections in 2011.

Now the centrist right party is back in power and the hard decisions have to be made. Their first call to order was to comply with EU directives to keep the budget deficit in check and to reform the financial system to reduce unemployment rates. The measures include reducing workers severance packages, modifying the universal health care system, a reduction in civil servants’ compensation, eliminating redundant or inoperative ministries, greater freedom for small business owners to negotiate labor contracts and a slew of other initiatives - basically, everything the socialists should have done but never did.

So now the socialists are screaming “Foul!” and promising a whole series of actions including a general strike and civil disobedience. Sounds like Greece, right? Yes, except for one major difference. Spain’s GDP for 2011 is approximately four times that of Greece, five times that of Portugal and six times that of Ireland. It is twice the combined GDP of Greece, Potugal and Ireland. And unlike Italy which has a large industrial base and is therefore able to manufacture goods and recover its economy, Spain’s economy is based on services.

Hence, while a Grecian debt default may be bad for France and Germany’s image, Europe has the capacity to survive it. The same cannot be said for a Spanish default which could cause the Euro to fail entirely.

What it boils down to is that expenses are going up and wages are going down. Whether this will spur employment remains to be seen. So far, unemployment rates remain the same but are forecast to rise and that means spending will continue to decline. It’s going to get worse before it gets better. How much worse is anybody’s guess. But if it does get worse, the Athens riots will only be a prelude to what’s coming.

Why La Liga will always be second best

Much is said about Spain's first division La Liga football. If you live in Spain you'll hear phrases like "The best league in the world!" or "The best players in the world." True, Spain are the current World and European champions and ranked number one by FIFA.

But having the best players in the world and being the number one ranked national team does not necessarily mean having the best league in the world. When local TV commentators, journalists and sports pundits all say La Liga is the best league in the world, you have to wonder by what parameters "best" is measured.

I can only conclude that "best" is in reference to having Lionel Messi (Barcelona) and Cristiano Ronaldo (Real Madrid) playing in two of Europe's most successful clubs. In fact, the last time a club other than these two won a league championship was back in 2004.

La Liga has become so predictable; there's no parity. If Barcelona doesn't win it, Madrid will or vice versa depending on your inclinations. Two clubs do not a league make but in this case, they do. The combined annual budgets of these two clubs is more than the rest of the eighteen first division teams put together.

Moreover, the rest of the teams never play at 100 percent unless they're playing Madrid or Barça because that's the only bragging right they have left; it's their only prize because they are not going to win anything else. So the only matches worth watching are those involving Madrid or Barça, and then, only to see if they lose.

The second half of the season starts next weekend. Already we know that it's going to be either Madrid (1st) or Barça (2nd) at the top by season's end. There's no other possible outcome.

That's why the English Premier League is, in my opinion, the best in the world. On any given year, any one of five or six teams can take top honors. Aside from Manchester United and Chelsea, you also have Manchester City, Arsenal, Tottenham and Liverpool.

Secondly, and most importantly, the EPL knows how to market its league. They've adjusted their playing times to capture both the North and South American and Asian markets. La Liga has so far discarded favoring the huge Asian market.

Third, the EPL has made inroads in the US. The US is the last major market open to all leagues and it is huge in terms of sponsorships and TV rights. La Liga has only recently tapped into this market but is not as nearly well know as the EPL.

So, is La Liga the best league in the world? Definitely. The second best.