How to sink Spain for its sin

The man who understood nothing of such matters

Winston Churchill once wrote that to tax yourself into prosperity is like standing in a bucket and trying to lift yourself by pulling the handle. Ah, if only he had used the word ‘growth’ instead of ‘prosperity’, then his wise dictum might have applied to today’s situation in Spain.

Now it will be obvious to all that it doesn’t; which must be one of the reasons why the unholy coalition of the EU Commission from Brussels and the Spanish Government in Madrid have decided, in fine mutual agreement, to tax the country into growth. 

You probably expect me now to tell you of an awful tax-hike on the wealthy which the Spanish government is planning. After all it is they who are largely responsible for the Spanish housing bubble and the miserable banking practices. But no: that is not the idea. The wealthy, more particularly the tax-evading wealthy, have already received special treatment. They were slapped with a scandalous 10 % surtax over all the black money which they have kept hidden from the Treasury for the last few decades, which neat little sums thereby get whitewashed forever more. Never mind that they owed the Treasury ten times that sum. Crime pays in times of crisis.

No, the solution is to tax the poor and the average working middle classes. The Rajoy government, back against the wall, sabre point into its stomach, is going to raise the low VAT rate of 8 %, levied over essentials like food, drink, rent, heating etc., to the high rate of 18 %. Never mind that retail sales have been dropping for 23 consecutive months already. Never mind that they are dropping with some 5 % a month this spring (in comparison with the same month last year). Never mind either that this is a dagger in the back of the ONLY sector of the economy which was still performing properly over the last few years, namely tourism (the unrest in yesteryears popular holiday destinations like Greece, Egypt and Tunisia is a godsend for the sunny land).

Raise taxes, lower salaries, cut benefits without a thought for the sick, the elderly, the unemployed, the under-educated children, or the 20 % of the Spanish population which (according to the UN) live below the poverty line. Behold the recipe for struggling out of the present European crisis. And the worst of it is that it shows no signs of actually working… In fact, it must be obvious to all those willing to look at the situation with no ideological glasses on their pinched noses that it is making matters worse.

What in the world is wrong with our leaders, one wonders? Are they really so stupid? Are they really that evil? One or two may be. But it is inconceivable that all of them are. Something else must be at work. And perhaps the following quote from a biography of old Winston – to end with him as well - gives us a minor clue into the deeper nature of the trouble:

In any crisis of this nature the historian, however well equipped with information, is at a disadvantage. Any crisis generates its own momentum and its own personality. The stress of events; fragmentary information; the characters of the individual ministers; physical tiredness; sheer chance; all these play their part, and contribute to the character and development of the crisis to an extent of which even the participants are often unaware. And thus it is that follies are committed and a sense of proporti­on is lost for reasons which are impossible to specify with any exactness. Thus, however complete the documentation may be, the true causes are usually absent. [Robert Rhodes James, Churchill: a study in failure 1900-1939, Part IV.]

This weekend yet another Eurotop to stop all Eurotops, dear reader. Spain’s 10-year interest rate stands at 7 % again ten days after its magnificent banking bail out. Italy’s is getting close to 6.5 %. Cyprus has just become the 5^th country to be put into receivership. Unemployment in Germany is on the rise. The medicine is working splendidly…

The Eurotop (Rompuy and Barroso on the lower right)