# Valencia bail-out - banks before people



## Alcalaina (Aug 6, 2010)

In case you wondered what the government was doing with all the money it's saved by cutting wages and raising taxes - helping the Valencia region pay its bank loan. 


> ... Madrid decided to step in to ensure that the Valencian government would not default on a maturing debt of 123 million euros with Deutsche Bank.
> 
> This is the first time that the state has helped out a region - which in this case, happens to be the most indebted one out of Spain's 17 semi-autonomous communities. Valencia's debt-to-GDP ratio is 19.9 percent, and last September its deficit stood at 2.3 percent, a whole percentage point above what the state had authorized for the entire year.
> 
> Last year, the Valencian government owed providers 2.4 billion euros in unpaid bills, and pharmacies across the region recently went on a two-day strike to protest the situation. In the last few months, public workers have also been at risk of not getting their checks. But until now, banks had always been paid back promptly by a government that has already been dragged through the mud by the ratings agencies. In December, Standard & Poor's placed Valencian debt one step away from junk bond status (BBB-).


Government forced to step in to stop Valencia debt default · ELPAÍS.com in English


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## Guest (Jan 5, 2012)

This is ridiculously frustrating. It's about time someone strings Camps et. al. up by their big toe.


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## Guest (Jan 5, 2012)

took them longer than the eeuu, in baling out the banks, the main reason we left the eeuu.


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## Guest (Jan 5, 2012)

This is ten times more ridiculous than what happened with the banks in the US, at least in my opinion. It seems like we can't go a day without seeing *something* about corruption in Valencia.


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## mrypg9 (Apr 26, 2008)

But what would have been the consequences of not repaying this money?
I'd like to know that before criticising the decision.
If the consequences would be non-existent or negligible then yes, the money should have been used for other purposes.
But if default would have meant that the Junta would have been unable to raise loans to enable social services etc. to function at all, then it was a necessary although unpleasant decision, no?

We do have to consider all factors, not automatically tar the banks as villains, although it may be ideologically satisfying to do so.
People whose savings are in that particular bank might not be happy about mass default.


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## ruefguet (Dec 8, 2011)

I don't think the Spanish Government is bailing out a local bank in this case. They're loaning Valencia the money to repay a loan to Deutsch Bank.


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## Alcalaina (Aug 6, 2010)

mrypg9 said:


> But what would have been the consequences of not repaying this money?
> I'd like to know that before criticising the decision.
> If the consequences would be non-existent or negligible then yes, the money should have been used for other purposes.
> But if default would have meant that the Junta would have been unable to raise loans to enable social services etc. to function at all, then it was a necessary although unpleasant decision, no?
> ...


The bail-out, according to the article, was to stop the rating agencies giving Valencia junk bond status (it is currently BBB-, just one step away). 

I know all the economic arguments inside out, but it still sickens me that in this crazy upside-down immoral economic system we are stuck with, we are continuously robbing the poor to prop up the rich.

Valencia Comunitat, as Halydia says, is one of the most corrupt authorities in Spain and their pals are now running the country. I doubt Andalucia would get a government bail-out of any kind.


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## mrypg9 (Apr 26, 2008)

Alcalaina said:


> The bail-out, according to the article, was to stop the rating agencies giving Valencia junk bond status (it is currently BBB-, just one step away).
> 
> I know all the economic arguments inside out, but it still sickens me that in this crazy upside-down immoral economic system we are stuck with, we are continuously robbing the poor to prop up the rich.
> 
> Valencia Comunitat, as Halydia says, is one of the most corrupt authorities in Spain and their pals are now running the country. I doubt Andalucia would get a government bail-out of any kind.


I hear all you say and it's true but we won't change the system by over-simplifying it.
The fact is this: liquidity in the financial system is essential if government at any level is to function. That is true of all economies, whether capitalist or socialist. In fact, it is the illiquidity of socialist economies that makes them so inefficient, apart from all the other factors.
Back in 1992, Clinton inherited the biggest deficit in US history from Reagan who preached small government but ran up deficits to give tax cuts to the rich.
Clinton rightly prioritised cutting the deficit. Once that had been achieved, he announced his priority for the surplus: social security.
What the bank bashers and soi-disant anti-capitalists don't seem to grasp is that deficits must be reduced, loans repaid and books balanced.. Period.
It's how it's done and what should be done when the books are balanced and the economy moves into surplus that is important.
I haven't noticed much pragmatic discussion about that coming from the noisy but ultimately vacuous professional protestors - a fair description of a sizeable minority of these sloganisers.


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## Alcalaina (Aug 6, 2010)

More on Valencia's mismanagement of public funds:

The Valencia inheritance: Liquidity problems of the region's government reveal a general lack of budgetary control


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## mrypg9 (Apr 26, 2008)

Alcalaina said:


> More on Valencia's mismanagement of public funds:
> 
> The Valencia inheritance: Liquidity problems of the region's government reveal a general lack of budgetary control




Now *that* is a different matter and hopefully those responsible will be punished in March.
Mismanagement if not downright fraud seems endemic all over Spain. It's difficult to admit being a PSOE supporter in my area as the previous Alcalde's mismanagement has resulted in a deficit of 400 million euros. He had a big heart but poor judgment.
It's the same in the Czech Republic, regardless of Party, as in Spain. Fraud and financial irregularities at all levels of government and business too.
As both were previously under dictatorships of right and left respectively, I wonder if it's caused by a lack of understanding of how a democratic,civil society works.
A dramatic change of the kind these and other countries have seen in the last thirty or so years can take time to filter through society.
You can see this in the police forces, certainly in the CR, which contains many officers from the socialist era who have had inadequate training in human rights or even if they have, haven't taken it fully onboard.


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## Alcalaina (Aug 6, 2010)

I think a big factor in the mismanagement of Spain's ayuntamientos is that the elected mayor has far too much power and often has no background or training in management or accountancy. This wouldn't matter so much if there were a strong, well-qualified administrative team to offer advice, checks and balances. But all too often the funcionarios have been in place for years, get little or no training and just do as the Alcalde tells them.

On the other hand, sometimes it's just down to corruption, pure and simple.


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