SPAIN: AT BREAKING POINT? A political and economic analysis for 2013 IBERIANS OF THE YEAR: The most influential people and groups of 2012


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Tales for Tapas: Profitability and protection

Bankia puts profits first, EU politicians side-step big expectations…and the sun is due to underperform.



In for a cool summer?

Elvira Rodriguez, president of Spain’s Securities Commission, noted in a speech to company directors in Madrid on Tuesday that the economic crisis “has revealed weaknesses in the system of corporate governance.”

Possibly a candidate for understatement of the year.

Ms Rodriguez commented, among other things, on the lack of transparency which preceded the difficulties at Bankia and at Pescanova, the fishing conglomerate. She said that Pescanova was a company that had enjoyed a positive reputation and whose management were known for their wholehearted commitment, which bamboozled the supervisory authorities.

These sterling qualities also offered a somewhat distorted impression to investors (masterly understatement again.)

Bankia shareholders, including the depositors who invested in the spring of 2011 in hybrid instruments fatally linked to the bank’s market value, suffered more pain this week when a new share issue resulted in a severe sell-off.

Chairman José Ignacio Goirigolzarri, however, remains bullish, pointing out that Bankia’s return to operating profit has protected its seven and-a-half million depositors even if this has been achieved at a high cost to investors. Profitability – in the distant future – raises the prospect of shareholders seeing the value of their stake in the bank start to rise.

In an interview with El País, Mr Goirigolzarri stated without apology that despite being in the eye of the storm, Bankia won’t step up lending to small businesses on the basis of social responsibility. Instead, he said, “we should provide loans because it’s good for profits.”

This will seem ruthless to some, but from the social as well as the market perspective the chairman’s logic could be viewed as perfectly sound. Profitability will protect depositors and shareholders – and have a broader beneficial impact on the overall economy – more reliably over the long term than less tangible things, like the reputation and commitment that appears to have pulled the wool over the eyes of a rather gullible Securities Commission.

An existential challenge

The contest between hard-nosed realism and wishful thinking came to the fore as European leaders weighed in on the problem of youth unemployment this week.

At a high-profile conference in Paris on Tuesday, the French and German finance ministers, Pierre Moscovici and Wolfgang Schaeuble, cited joblessness among under-25s as an existential challenge to the European Union. The urgency of finding solutions was stressed by Spanish Prime Minister Mariano Rajoy, who delivered the meeting’s closing address.

A centrepiece of current efforts to stimulate youth employment is a scheme to channel €6 billion through the European Investment Bank (EIB) into loans to small companies that hire young people. However, EIB President Werner Hoyer, who spoke at the same conference (as did former Spanish Prime Minister Felipe González), warned politicians not to deal in “expectations completely over the horizon.”

“There’s no quick fix, there’s no grand plan,” Mr Hoyer told reporters. “The chance that the EIB can solve these problems is greatly exaggerated.”

Meanwhile, EU officials, in an unusually robust response to criticism from Mr Schaeuble over what he described as Brussels’ ponderous and ineffective response to youth unemployment, insisted that job-creation proposals put forward by the Commission have been scuppered because of opposition from some of the same governments that emerged as champions of innovative employment measures at the Paris conference.

In the tussle between practical policies and high-flown rhetoric the Goirigolzarri formula – fix the bank and you protect the depositors – may apply more broadly. A return to economic growth is likely to create jobs more efficiently and more sustainably than media friendly (and electorally advantageous) “boutique” initiatives.

A cold front

All of which is rather gloomy and more than a little dispiriting. Still, summer’s just round the corner!

Or is it?

Meteo France, the French weather service, has just forecast that the coming months will be the coldest and wettest for 200 years. It’s all to do with the sun underperforming and the advent of “cold maritime fronts” which are apparently the last thing you want if you plan to lie on a beach any time soon.

So that makes two problems Europe’s politicians have to fix: the employment figures and the weather.

To read more by Anna Maria O’Donovan visit My Spanish Interlude.



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Published: May 31 2013
Category: Iberoblog, Featured, Spain News
Republication: Creative Commons, non-commercial
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