VALENCIAPLAZA.COM | Víctor Alvargonzález is executive director at financial advisor firm Profim. Alvargonzález points at the root of all Bankia’s problems: in his opinion, a bank managed was destined to become a systemic disaster waiting to happen. He believes Spain’s finances hurt more from lack of credibility than soundness, though.
Is it time to avoid the Ibex for a while? We have been sort of avoiding the Spanish market for over two years now, but we have not forgotten the US’, or those of certain emerging countries. Moreover, we believe that we must take advantage of the political incompetence of the euro zone and the corrections this generate at a global level, the waves of discounts, to invest in countries that do have prospects of future growth.
What is Bankia’s share in the situation the Spanish banking system is going through? Bankia is a symptom of something much deeper: the original mistake was to claim that the way to fix many small problems, the savings banks’, was to put them together, what only made them into a bigger and indeed systemic problem. It was a mistake to create savings banks in the first place, a bank run by politicians is an economic aberration, and it was a serious mistake not to liquidate them when we were in the Champions League, so to speak. There was a moment in which there was money to do so, and buyers, but the process has been a crude succession of mistake after mistake. As Einstein said, insanity is to repeat something forever and pretend it give different results.
What is the psychological component of the risk premium, of which even the least versed in the subject talks nowadays? The world of credit is based on credibility and credibility is a psychological concept. The risk premium is not just a reflection of bad management. There are countries with higher debt burdens but don’t suffer like we do. But the lack of credibility of a country and its government affects the risk premium, too. Constantly changing its discourse, spending more than it should, promises not fulfilled and presenting a budget in which fat and muscle get the same treatment so it ensures future recession… everything has consequences. And above all, nothing has been done to seriously correct an elephantine State. This just do not generate credibility.
Is there any green shoot in the Spanish economy that you at Profim would deem worth mentioning? Not right now. They will come the day the government is consistent with what it said: it said that this is a state of national emergency, so it must take emergency measures, instead of five-year plans. We must have the courage to recognise that our model of State is too expensive. You cannot have multiple parallel administrations. And as an economist, I would be happy with both solutions, either centralisation or complete decentralisation, but no duplication. The State cannot maintain huge real estate assets, or keep wasting money on savings banks, and so on.
I said it long ago, if the Spanish government wants to convince the markets, it must be willing to put really important figures on the table, figures of national emergency. And, obviously, it must obtain help from the EU and the ECB. But it is easier to have them on your side when you make the right decision, and in Spain there is so much excess still to be cut. We need braver politicians.