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It’s time for Michael Lewis to visit Madrid

Thursday, 7 June, 2012

What’s happening in Spain? Depending on who and what and where one reads, Spanish banks have lost between €300 billion and €1 trillion and the situation is so frightening and overwhelming that no one believes a single word that the government in Madrid is saying anymore. Time to send in Michael Lewis, we say. Perhaps because he’s an “outsider”, the Vanity Fair writer has the courage to see through the numbers and the lies in a way that European journalists cannot or will not. The result is remarkable clarity. Two examples:

“The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true.” Beware of Greeks Bearing Bonds

“Since 2000, lending to construction and real estate had risen from 8 percent of Irish bank lending (the European norm) to 28 percent. One hundred billion euros — or basically the sum total of all Irish public bank deposits — had been handed over to Irish property developers and speculators. By 2007, Irish banks were lending 40 percent more to property developers than they had to the entire Irish population seven years earlier.” When Irish Eyes Are Crying

The agonizing decision facing German Chancellor Angela Merkel now is whether to support Spain, and thus risk German stability and integrity, or let it pay the price for handing over its economy to property speculators. Merkel would be on solid ground at home if she supported deposit guarantees that would protect Spanish savers, but that’s as far as it goes. The Spanish banking system is broken and cannot be shored up. The greed, corruption and incompetence that led to this sad state of affairs is perfect material for a Michael Lewis masterpiece. Bring it on.


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