There’s something reassuring about the honesty of capital.
When a country loses all respect for that system, bad things are bound to happen. Take Spain, for example. It’s nothing but bad news there. As if 26% unemployment wasn’t enough, it’s expected to increase this year. Youth unemployment is also on the rise and sits at a staggering 55%. All told, Spain has more people unemployed than two dozen European countries have people.
Any attempts at austerity measures in the country aren’t working as evidenced by rising deficit-to-GDP levels. As just another example of why to never trust desperate governments, the Spanish government projected deficit levels 50% lower than what they actually are. The international community doesn’t seem to have much faith that they’ll tackle their austerity issues to keep deficits from ballooning even more.
And here’s why: in Spain these days, capital is the tool of the evil rich to be dismissed and tossed aside. As proof, look at the rising firestorm there over evictions. It’s gotten so bad that firefighters and locksmiths are outright refusing to help banks, the government, or anyone kick people out of their homes.
As property values have crated 31% since 2007, the second worst in western Europe, the president of the local locksmiths union told the press, “Families’ lives were being ruined and we were acting as executioners. It was causing us tension and unease.” Well, we certainly wouldn’t want to cause anyone unease.
It’s not that I’m cruel and heartless and want to make families homeless. But Spain’s problems have been brewing for quite some time. The underlying sentiments of social justice didn’t just crop up yesterday. By one survey, 87% of people there want to pass a bill forbidding any foreclosures AT ALL. Sure, let’s trash individual investors, trash the already fragile banks, and trash the economy by nobody paying any living expenses. Can you say moral hazard?
It’s clear the people of Spain are dealing with some horrific economic circumstances now. But you and I saw the writing on the wall. Nobody there ever wanted the party to stop, and the mindset that now prevails, where nobody should be accountable for their actions, dug the hole even deeper.
This is why it’s so important to really understand not only the fundamentals of a new market, but the culture behind it. It’s not like Spain was ever a welcoming mecca for entrepreneurs and foreign investment.
I’ve written before about their offering of residence to anyone who buys one of the estimated 700,000 homes just sitting on the market, and while that may appeal to you bought a second residence there and avoided becoming tax resident, I don’t think it’s wise to trust the government on anything right now. Especially when there are better opportunities throughout Europe in countries that actually value your capital, and offer greater property rights and protections whether you live there or rent your property out.