Spanish Public debt reaches its second highest historical figure

The debt of all public administrations increased by 7,027 million euros in September. It reached 1.207 billion euros and is around 98% of GDP. It is the second largest data after the historical maximum recorded last June (1.210 billion), as published by the Bank of Spain on Friday. Specific, public debt increased 0.58% in September compared to the previous month, but rebounded 2.5% compared to the same month last year, rising to 29,323 million euros in the last year.

The ratio of debt to GDP would have been around 97.94% of GDP last September. This figure exceeds the debt target for the whole of the year by two percentage points, located at 95.9% of GDP, contained in the 2020 Budget Plan that the Government sent to Brussels in October.

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Do they really need money or did they waste it? Spain has the largest train HSR in Europe and the second of the world

Spain has the largest train high-speed rail network (HSR) in Europe and the second of the world. It has a significantly high figure: 2,665 km. They are more kilometers than in France, which has 1,896, and that in Germany (1,285). In the rest of the world, only China (with 4,079 km) –and also Japan (2,534 km), according to the UIC ranking– are ahead.

The current map of Spanish high-speed draws attention, first of all, for its radiality. All the corridors have Madrid as their epicenter, although some transversal AVE services - those that link Barcelona with Seville and Malaga - border the capital without stopping there, thanks to a bypass. There are others, especially the medium-distance Avant, that nurture relationships between cities along the different axes, many of them far from Madrid. The Government's plans foresee other lines - there are 1,767 km under construction, according to the UIC - that must break, at least partially, this radiality. But most of them follow this same scheme. Another relevant aspect is that the Spanish network is isolated from that of the rest of Europe. It will reach the border in 2012m but will not be linked to the bulk of the continent until 2020, when France completes its southern corridor.

On the other hand, having more network in operation does not mean having the highest volume of travelers. High speed transported 17.1 million passengers in Spain in 2009, divided between long-distance trains (AVE), which totaled 11.5 million, and medium-distance trains (Avant), with another 5.6 million. Although it is difficult to make comparisons with other countries - due to the lack of comparable figures - some sources have quantified the distances, which are enormous. According to Germà Bel, Professor of Economics at the University of Barcelona, ​​the Spanish passage is only 7% of the Japanese, 15% of the French or 30% of the German.

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Spain recognizes that it has no money to grant the pensions and approves another loan

The Government approved last March the granting of a loan from the State to the General Treasury of the Social Security amounting to 13,830 million euros to pay the pensions. In June the loan was of 7,500 million € and in November another one of 3,600 has been approved. In 2011 Spain had a reserve of 66,815 million €. Now on it is of 1,368...

In the months of July and December, Social Security jointly pays the ordinary and extraordinary payroll of pensions, a disbursement that currently reaches 19,000 million euros and that can generate liquidity tensions to the system. In fact, the Government has already announced that, in addition to the loan, to pay the extra Christmas will get 3.5 billion of the pension piggy bank.

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Spain only executed 10,4 % of the budget in Catalonia

Disloyalty is the key of the Spanish rule in Catalonia. To break the self-government promise in many areas, to disrupt the Statute voted by a clear majority with a Madrid's court decision, to jail the government, to beat voters, to impose everything without any negotiation. Another example is the Spanish budget. It is a law to obeyed but Spain never keeps its own word. In 2018 the Spanish government only executed the 10,4 % of the budget compromised in Catalonia. It means that breached 89,6 % of the budget promised. And the answer if the Catalan population protest, peacefull, is Spanish violence and Spanish inquisition. Spain allocated € 7.2 billion to Catalonia in the 2018 budget, but it only spent 10,4 % of the amount: € 757 million.

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European Parliament demands improvements to the nomination process of Guindos and express 4 reservations

MEPs expressed reservations about:

- the selection procedure,
- ender balance within the ECB,
- procedure,
- the timing of the appointment and the political independence of the nominee

MEPs want the Council to engage with the Parliament to improve the process for future appointments. The committee decision will have to be confirmed by Parliament as a whole, in a plenary vote planned for March.

Parliament is consulted on the appointment, but cannot veto it. Mr Guindos became the only contender for the top post when  the only other candidate, Irish central banker Philip Lane, withdrew his candidature last week wit no clear reason.

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Economics of a Catalan secession from Spain

It is difficult to make predictions, especially about a hypothetical future, but the impact of independence on economics –for both the newly created State and what remains of the older– is a foreseeable outcome in the light of more than 150 secessions occurred  in the last hundred years, backlashes and black swans –for better or worse– excluded.
First things first, here you have a table with some fundamentals since you are not supposed to know them at your fingertips. Be aware that when we say Spain, it means the nowadays Spain excluding Catalonia. All data, even €/$ exchange rate, are 2014’s.

The main difference between secessions has been, and always shall be, if they are a covenant’s upshot or they are won against the —often furious— will of the former State, so let's go by parts, as Jack the Ripper said:

1. Velvet divorce scenario: agreed secession.

The independent Catalonia is recognized by Spain, becomes a full EU member- state, enters the UN and all the international organizations, assumes its rights and obligations under the existing treaties, etc.
In this case few are the economic impacts on economics since almost everything goes on as usual. Catalonia would gain full control of its own taxes, hence around €16 billion ($21 billion) wouldn’t be siphoned off by Spain every year; economic policies best suited to Catalan needs may be developed if voters choose wisely; and both parts take their fair share of former Spain’s public assets and debt in application of the Vienna Convention of 1983.
Spain’s only loss should be the fore-mentioned Catalan taxes, around 2% of Spanish GDP every year: a big but not an overwhelming blow.

2. Sour divorce scenario: unilateral secession.

If Catalonia succeeds to become, against the Spanish opposition, an independent State whose central authorities exercise effective control over population and territory within defined borders, and it overcomes the difficulties involved –such as raising taxes and making public and private services work–, the effects on economics are closely related to Spain’s success or failure to expel Catalonia from the single European market and the euro.
The only way to deprive European businesses and people of the single market rights they now have in Catalonia, and strip Catalan businesses and people of their single market rights all around Europe, is an unanimous decision of the 28 member-states. Otherwise these rights cannot be forfeited.

There are two sub-scenarios:
2a. From impact to wallop: Secession inside the European single market.
If Spain fails to get Catalonia off the European single market and the euro, but blocks its membership as an EU member-state –that requires an unanimous decision–, its reprisals against the independent Catalonia would be similar to the Spanish policies on Gibraltar and China’s on Taiwan: to make Catalan life inside the European single market and the euro highly bleak and rueful, and doing its best to clog any Catalan endeavor to become international organizations' and treaties' member.
Spain wouldn’t even recognize the existence of independent Catalonia, it wouldn’t agree to negotiate any partition of public assets, and it surely wouldn’t accept the former Spanish and now foreign pensioners’ entitlement to be paid their earned pensions.
In this case Catalonia should just take the Spanish public assets that dwell in its territory, and pay its pensioners with its own raised taxes, as Spain nowadays does in a pay-as-you-go pension system.
The main impact would be on debt: Spain retains all its €1 trillion debt ($1.3 trillion) with a shrunk GDP after losing Catalonia’s GDP, that is 19% of the nowadays Spain’s GDP –therefore its debt-to-GDP ratio would soar to 114% from the currently 100%.
Catalonia’s debt is €64.5 billion ($85.8 billion), 30.9% of its GDP, and Spain owns 60% of it. This is a powerful tool in Catalan hands to retaliate against the Spanish reprisals –such as behind-the-curtains officially-sponsored commercial boycotts doomed to end quickly: not to pay the former Spanish Catalonia's debt owed to a rowdy Spain.
Whence a not-agreed independence inside the euro and the European single market should be an acrimonious but manageable scenario, with huge but limited economic damage for both Catalonia and Spain.

2b. From wallop to Armageddon: Secession outside the European single market.
A completely different outcome will arise if Spain succeeds to implement an unanimous EU decision to wipe Catalonia off the euro and the single market, hence to impose tariffs on Catalan goods and services as a third country.
A Spanish commercial war would follow to take Catalonia out of the Spanish market, where Catalan goods and services are sold up to €39 billion ($51 billion),  18.5% of Catalan GDP. Since even newly independent countries are not prone to turn the other cheek to their would-be ruffians, those Spanish moves would surely provoke akin Catalan measures to wipe  Spain off the Catalan market, where Spanish goods and services are sold up to €27 billion ($36 billion),  3,1% of Spanish GDP. Catalonia could also block or otherwise clog the main land Spanish connections with Europe, that happen to pass through Catalan territory.
Hic sunt leones, sailing uncharted waters in an Armageddon scenario for both Spain and Catalonia.
These are the likely scenarios of the economic impact of secession for both players, a high-stakes game for strong nerves’ people.
Whoever blinks first loses. A lot.

Alfons López Tena and Elisenda Paluzie
Business Insider

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