Abstract
Most of the analyses on the economic crisis in Spain have concerned themselves with phenomena like mismanaged banks, excessive debts, the bubble in the real estate sector, or the loss of competitiveness. Others have sought to explain the crisis as a by-product of European Monetary Union (EMU) integration. This chapter moves beyond those explanations and argues that a fundamental reason for the economic and financial crises is rooted in the process of institutional degeneration that preceded the crisis. It analyzes the deteriorating performance of Spanish institutions to explain that reversal.
From: Royo, Sebastián. “Institutional Degeneration and the Economic Crisis in Spain.” Special issue of American Behavioral Scientist. The Economic Crisis from Within: Evidence from Southern Europe. Anna Zamora-Kapoor, and Xavier Coller (eds.) 58, no. 12 (2014): 1568–91.
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Notes
- 1.
This part of the chapter borrows from Royo (2013).
- 2.
See “In Euro Crisis, Fingers Point in All Directions,” New York Times, August 25, 2012.
- 3.
See Interview with Soraya Rodríguez, Socialist speaker “Quien da motivos para que salgamos a la calle es el PP,” El País, March 1, 2012. After almost eight years in power, Ms. Rodríguez in a response to the question “many say that the PSOE demonstrates against [the PP] measures to confront a situation that has been in fact created by the PSOE government,” answered that “when there was a Socialist government, the clear economic difficulties that we confronted were the consequence of a global crisis, not of poor management,” and added later in the interview “surely we could have done things better, we do not say that we were perfect.”
- 4.
From Cesar Molinas, “Theory of Spain’s Political Class,” El País, September 12, 2012.
- 5.
See Cesar Molinas, “Theory of Spain’s Political Class,” El País, September 12, 2012.
- 6.
“La banca española sufre en julio una fuga record de depósitos,” El País, August 28, 2012 and “El Banco de España cifra la caída real de los depósitos en 55.000 millones,” El País, September 19, 2012.
- 7.
See Fernando Vallespin, “¿Súbditos o ciudadanos?” El País, September 14, 2012.
- 8.
See CIS’ Barómetro Julio 2013, and “La evolución de la percepción económica y los principales problemas,” El País, September 11, 2011.
- 9.
From Andrés Ortega, “La desmoralización de España,” El País, September 11, 2012.
- 10.
Ignacio Torreblanca stated it very succinctly: “All sides prefer to live with malfunctioning institution rather than one that may work against them,” in “Spain Post-Franco Institutions Battered by Contact with Politics,” Financial Times, July 23, 2012.
- 11.
David Gardner, “The Silent Rajoy Is Deaf to the Spanish Emergency,” Financial Times, August 6, 2012.
- 12.
From “Parapetados tras las vallas,” El País, September 15, 2012.
- 13.
Bankia announced losses of 4.4 billion euros in the first half of 2012, which forced the government to inject cash. “Ousted Bankia Chief Blames Central Bank and Politicians,” Financial Times, July 27, 2012 and “Spanish Bank’s Ex-Leader Defends Record There,” New York Times, July 27, 2012.
- 14.
“Caja Madrid concedía prestamos a clientes sin capacidad de pago,” El País, September 23, 2012.
- 15.
Andrés Ortega, “La desmoralización de España,” El País, September 11, 2012. As of January 2020 we are still waiting for the sentencing of the Bankia leaders who were put in trial.
- 16.
See “La Politización eleva la morosidad de las cajas en 12.000 millones,” El País, October 31, 2010.
- 17.
Andrés Ortega, “La desmoralización de España,” El País, September 11, 2012.
- 18.
This section borrows from “El día que el Banco de España se doblegó,” El País, March 13, 2011 and “Un gobernador entre dos fuegos,” El País, May 13, 2012.
- 19.
As noted on Chapter 6, The BoS defended itself with seven arguments: that it lacked the appropriate instruments to address the crisis until 2009; that the economic deterioration was far longer and intense than anticipated; that the government had decided to reject the creation of a “bad bank”; that international banks were unable and unwilling to participate in the merge and acquisition process that was taking place in Spain because of the crisis; that they could not use the traditional tool to liquidate banks, namely forcing bondholders to take loses because of the potential contagion effect to other banks and cajas; that the corporate governance system of cajas was very deficient and politicized; and that the autonomous governments refused to approve the merges during the restructuring process. See “El Banco de España se defiende de su lentitud con siete argumentos,” El País, June 11, 2012.
- 20.
“El Nuevo gobernador critica la gestión de sus predecesores en el Banco de España,” El País, July 17, 2012.
- 21.
“Chastened King Seeks Redemption, for Spain and His Monarchy,” New York Times, September 29, 2012. Polls from Metroscopia (April 2013) showed that the king’s popularity rating had fallen from a positive 21 points to a negative 11 (among those aged 18–34 the figure was minus 41). He polled below 27 other social institutions, including tax inspectors. The Centre of Sociological Research in 2011 showed for the first time that the monarchy’s popularity fell below 5, achieving 4.89 out of 10.
- 22.
From “Spain’s Jobless Rely on Family, a Frail Crutch,” New York Times, July 29, 2012.
- 23.
See Global Competitiveness Report from The World Economic Forum.
- 24.
See http://reports.weforum.org/global-competitiveness-report-2012-2013/ (p. 24). See also “Competition Gap Grows in Europe, Study Says,” New York Times, September 6, 2012.
- 25.
William Chislett, “Expect the Pain in Spain to Continue,” Financial Times, April 12, 2011.
- 26.
Data from the OECD. See “Estado de la educación 2012,” El País, September 14, 2012.
- 27.
The 2007 CIS’s 2671 survey asked participants “Please tell us to what extent you feel that corruption is widespread in politics: very, quite, not very, not at all.” The response showed that 51.9% of those surveyed responded with ‘quite’ or that nearly all politicians were involved in corruption. This is moderate compared to the data from the CIS’s June 2011 barometer (Survey 2905) where the “very or quite widespread” figure reaches 86.6%; and the 2826 survey which showed that 79% thought it was very or quite widespread and a mere 6.5% thought that it was not very or not at all widespread. See more at: http://phys.org/news/2012-06-perception-corruption-spain-european-average.html#jCp.
- 28.
From “Political inquire Makes Judge a Star, as It Reveals Flaws in Spain’s Courts,” The New York Times, Wednesday, July 31, 2013.
- 29.
See Daniel Dombey, “Legal Cloud Hangs over Some of Spain’s Best Known Companies,” Financial Times, January 2, 2020.
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Royo, S. (2020). Bank Bargains and Institutional Degeneration. In: Why Banks Fail. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-53228-2_7
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