Money talk - False alarm

The Spanish government effectively took an unprecedented step at the start of December by declaring the country under a state of alarm.

This was the first time such a step had been taken since the return to democracy following the death of Franco in 1975. The background to the decision was a wildcat strike by the country’s air traffic controllers which left an estimated 300,000 would-be merrymakers stranded in airports across the country. The timing of the crisis was particularly significant, since the start of December sees one of the longest, and most important, long-weekend breaks in the Spanish calendar.

But looking beyond the immediate issues, and the rights and wrongs of the various parties, what is striking to the outside observer is just how quickly everyone got so wound up over the affair. We are, at the end of the day, talking about travellers heading off on holiday, many of them leaving the country to spend what effectively is much needed foreign exchange at a time when banks and the government are having increasing difficulty finding the sort of finance needed to make this possible. These particular holidaymakers were not the first to suffer at the hands of those who control Europe’s international airspace, as anyone who has had to fly across France in recent months knows only too well.

So what explains the vigour and the vehemence of the reaction? Could it be that after over three years of trying to say to themselves “Crisis, what crisis?”, the Spanish (and their Catalan cousins) are suddenly waking up to the fact that something important is going on. In the very week that all this happened the difference between the interest paid on Spanish, 10-year government bonds and that paid on the German equivalent hit euro-era highs and as a response the Spanish Prime Minister José Luis Rodríguez Zapatero announced that he was rushing forward plans to extend working life from 65 to 67 years. The idea was to try to calm investor nervousness. This it may or may not, have done, but I am sure the announcement didn’t do much to soothe the nerves of those directly affected. For many years, Spain seems to have lived in a kind of unreal world of escapism. Property prices that would never come down, labour contracts which were effectively untouchable, and crises that never were. Maybe that’s why the events of early December were so traumatic: 300,000 people were busy trying to get away for one last escape before finally facing up to the harsh truth and a regime of severe austerity which undoubtedly awaits in 2011. Happy New Year everyone!