Nothing was learned from the last crisis. Banks are shaking and with the domino effect known from the financial crisis, this will have devastating effects
There is currently economic bad news that has never been heard before. They are led in Europe and worldwide by Spain, which is now being hit by three waves of crisis at the same time, given its legacy and poorly structured economy, which is hugely dependent on the tourism business and also heavily on the automotive industry. However, Spain can – with drawbacks – also serve as an example for other countries that are particularly dependent on tourism.
It is clear that the corona crisis has almost completely brought the tourism business to a standstill. This will remain so for a long time due to the increasing number of new infections and the increasing number of hotspots in the country.
And, as is well known, the business with combustion engines is also due to various scandals and the fact that more and more people are becoming aware that climate change is a very real and urgent problem, in a deep structural crisis. It is known that they overslept the necessary change of course and continued to oversleep in Spain. State aid is used to keep an existing branch of business artificially alive, instead of switching to renewable energies and alternative mobility models.
Billions of euros are therefore not invested in these areas, but in a dinosaur technology, are also pointless for the purchase of internal combustion engines, while only a few months earlier the big word on climate protection had been swung at the Madrid climate conference.
However, in the background of the crisis in the automotive and tourism industry there is also a major general crisis that came into focus even before the corona crisis. It has long been emerging with shrinking economic performance in various countries. Germany was practically briefly in recession last year.
Only through the expansion of the European Central Bank’s (ECB) emergency measures could the general recession in the euro area be covered again with zero interest rates, negative interest rates and floods of money. This is how the value of the euro was artificially pushed to stimulate export to other currency areas.
“On the road without a shock absorber”
As has often been criticized here, the ECB has used up almost all of its cartridges. The ECB is largely helpless before the massive crisis that is now emerging. This is exactly what leading economists like Paul Krugman had warned about. The Nobel laureate misjudged the virus and its effects, but he was completely correct in assuming that we are now “without a shock absorber”.
“Today we are worse off dealing with a crisis than in 2007,” says Krugmann, who concludes that “the lesson” from the last crisis had not been learned. “If there is a collapse tomorrow, the tools to reactivate the economy will be much weaker,” he said, and that is why we should dress warmly. Telepolis had already suspected in early February and then predicted in early March that the virus would probably be the catalyst for a crisis that was pending anyway, but would be exacerbated by the pandemic. That too is now clear.
This is the background against which the crisis in Europe has to be viewed, which will hit countries like Spain particularly hard again because the structural problems are particularly brutal here. This is very similar to 12 years ago, when the real estate bubble finally burst as expected in the financial crisis and this gave the country a very deep crisis with massive social effects, since a completely wrong fight against crises was also taken.
The failed cuts in the social sector at that time already had their deadly effects in the Corona crisis. And especially in regions where the neoliberal apologists were particularly raging, the effects were particularly fatal, as in Madrid.
However, this also had to do with an inhuman policy of a right-wing to right-wing and neoliberal regional government. Old people were simply left to die by the thousands. Anyone who had no private insurance as an old person no longer received medical care in the region. The once privatized resources were not used during the disaster, although the central government had expressly made this possible in the alarm decree.
However, an overwhelmed central government watched the deadly goings-on, which cannot be taken out of its responsibility. At this point, the author had repeatedly pointed to the fatal catastrophe in Madrid, which can now be documented. Almost 7,300 old people were denied hospitalization, which one just let it die away.
And that’s why the British Statistics Office is now realizing that Madrid was the city with the highest mortality rate. The provinces in the area are also at the top of the list, such as Segovia, Guadalajara, Albacete … Barcelona is only at the bottom of the list, where the Peak was only reached later.
But back to the fatal economic situation. The big daily newspaper El País headlined on Saturday: “The virus hits the Spanish economy an unprecedented blow with a quarterly crash of 18.5%.”
Figures comparable to those from the Spanish Civil War
In the subtitle, the government-friendly newspaper points out that the economy has shrunk by 22.1% year-on-year and that such figures can only be compared with those from the so-called civil war.
Economic output fell even more sharply after the generals’ coup against the chosen republic, but firstly it coincided with the effects of the great depression in the 1930s. Secondly, the unbelievably high sums with which the economy in Spain is now being supported were also lacking. Because without the many billions that are being pumped into the economy here, the crash would probably be even more extreme than it was then.
All in all, one can only agree with the title of the article, because the effects of this crisis are truly fatal, like Telepolis had already shown on Friday in the labor market figures. The article has already stated that in no developed country is the slump as pronounced as in Spain.
German media for the USA are sometimes sensationally titled by an “economic downturn” of even “32.9%”, as in the time or other self-proclaimed quality media, but here apples and elephants are compared.
Relativization of media sensations
It is only in the text that you finally learn that the US number is extrapolated to the year: “According to the quarterly comparison of reports used in Europe, this would correspond to a minus of almost 10 percent”, is then put into perspective.
But even that is still wrong, because in real terms it is only 9.5%. This makes the “economic downturn” even comparatively mild when compared to the figures from Spain, Portugal (14.1%), France (13.8%) and Italy (12.4). Indeed, the crash in the USA was even lower compared to Germany (10.1%).
The picture becomes even clearer if you add the figures from the 1st quarter. The US economy shrank by only 1.2% compared to the previous quarter. In Spain, however, the minus was even 5.2%. Overall, it is clear that both countries are playing in different leagues when their economies crash.
If one were to extrapolate the year for Spain based on the existing figures, one would even have to speak of an economic downturn of over 50%. But no one opens this calculation in the quality media and prefers to refer to the distance with alleged horror numbers.
The situation in European countries is darker than in the USA
In real terms, the situation is actually much darker in many European countries than in the United States. A drop of 3.8% was also estimated in Portugal in the first quarter. France and Italy were even worse than Spain at -5.3%. Germany also showed a significantly poorer economic performance than the USA with -2.2% in the 1st quarter and -10.1% in the 2nd quarter.
However, it should be noted here that trillions of dollars are now being pumped into the economy in the USA in order to dampen the crash. And when it comes to financial injections for the economy, Germany is in the same league as the USA in cushioning the crisis. Portugal, Spain, Italy or other countries that are already heavily indebted cannot play in the league. A total of 48% of the gross domestic product of a year is said to have been decided as aid measures in the first five months alone, so that would be almost 2 trillion euros.
All of this should only be mentioned here for the classification of data that should only be touched with pointed fingers.
However, some insights can already be drawn from what has been said so far: The author’s assessment of June 15 that “trillions will not prevent the worst crisis of the century” was confirmed six weeks later. It is also confirmed how ridiculously small the sum of the so-called “reconstruction fund” of 750 billion euros is in view of the sums with which Germany or the United States support their economy.
Since the economic downturn is also great there, it should also be clear to the last that the 750 billion is at best a drop in the ocean for the entire EU.
This also confirms the assessment of the head of the Portuguese left-wing bloc (BE). In the Telepolis interview, Catarina Martins called the fund a “joke”. And that almost half of the sum, thanks to the so-called “frugal four”, is now also being given as loans to force the countries even more under the debt bondage of the financial market is simply dramatic. A historic opportunity was missed.
The inequalities are now not only cemented, but fatally widened. Countries like Portugal cannot even support their own economy like Germany or the USA and are falling behind. Now the necessary substance is allowed to be destroyed there.
European solidarity would certainly look different, especially after the long absence of austerity requirements, the consequences of which countries like Portugal, Spain or Greece are still suffering from.
In order to be able to assess the drama of the country’s fourth largest euro zone with Spain and thus ultimately the entire eurozone, a sector that was addressed on Friday must be examined more closely: Spain’s economy in free fall – namely the labor market.