Europe and the markets are staring at us. Catholics and Protestants confronted post-Christmas holidays reentrée earlier than us. They are one week ahead of us, and GDP figures will show this fact. Less days at work means less production, which leads to a lower GDP. “So what!” the enthusiasts say. The parades celebrating the arrival of the Three Wise Men are nice and create employment. They might be a bit tacky, but they are monumental and they even serve an educational purpose!

When things take an unexpected turn, we turn our backs on Europe. The separation began with our latest Austrians. The Peace of Westfalia, in 1648, put an end to the Thirty Year’s War. That succession of battles that traumatised the continent also resulted in the segregation of Europe. A year later, in Rogensburg in 1652 the emperor of the sacred Roman Empire, a successor of Carlos V, failed to keep the European peoples united. They won’t accept a single authority. Nonetheless, they did achieve something even more important: a legal system for conflict resolution not based in the use of force.

Commerce prospers among new territories and independent cities–more than 300. At the same time, a currency exchange system ensures price stability, as well as convertibility. In the meantime, Spain is progressively getting away from the reforms. The country is rather focused in its overseas adventures and its royal and ecclesiastical absolutism. We keep ourselves apart. We prefer our empire in decline, where the prices rise faster than in the rest of Europe. An empire where “casticismo” (a Spanish expression referring to what is typical, pure and genuine of the country) is fostered to maintain people’s identity.

Ortega said: “Europe is the solution”. In other words: capitalism and the principle of legality overseen by the State, guarantor of the common good. Professional servants of the State who had to go through a compulsory competency test. These demands are gone. There’s no merit without good friends and scams. The market without competition rules is also vanishing. They are instead replaced by discriminatory privileges. Financial institutions ceased to be credible trustees to become speculators backed by the ruling elite.

Confusion invades the common good. Apologies and accusations are all over the place. The latest, the one of the Bank of Spain. During the past two mandates, did the Governor and the Board of Directors enjoyed the same autonomy than the Federal Republic? Didn’t this renowned German institution, during the years of the universal bubble also failed when it had to supervise its institutions?

Confusion moves forward. Arbitrary proposals for the privatization of hospitals without giving citizens any kind of reasonable arguments. Statements such “private organizations are more efficient than the public ones”, are presented as being convincing enough. Watch out! In this country private railway companies and freeways had to be rescued by the State. Madrid’s public highways will be the next invoice for tax payers. How are the costs of public and private hospitals estimated? It seems one should take into account fixed expenses, building construction, surgical equipment, furniture and health plan. Afterwards the variable costs will surge: remunerations, drugs and diverse maintenance epigraphs.

Nothing is said about these tiny details. Therefore, confusion storms. The only truth is that there exists a latent deficit. Plus the price deficit that comes when expected profits are not achieved. Meanwhile, the official message calls for austerity. A very tough remedy that had to be put in quarantine because the crisis is staying and the unemployment is rising. According to Eurostat data, in Spain there is a 26% of unemployment.

Telefonica follows Bankia’s generosity while it tries to find a position for this Cuban adventurer belonging to “Juventudes del PP” (the youth wing of Partido Popular). We shouldn’t forget the guy from Big Brother, who dispenses employment and other kind of goods. Councils with lots of legislators and with more counsellors than legislators. They offer counsel to Ministries while calls for public examinations to better access to the Administration vanish.

I insist: without the so much talked about ‘Spain bailout’ and the intervention of the Troika, we won’t clean up imbalances. Confusion will keep growing, including the Catalan situation. Too much incompetence that instead of convincing citizens, irritates them.

Naturally, the country resists. During the last three years, exports grew at almost the same pace than North America’s, around a 20%. There are essential differences, though: devalued dollar, export credit rising to a 25% in the US whereas it remains almost flat in Spain.

The government must be very busy. So busy that it has no time to think and take reasonable action. Companies struggle while they try to bring discipline to work attendance. In the last twelve months, Spanish exports kept growing regardless of the European crisis. A 5.2% compared to a previous 4.2% in France, whereas the Eurozone registered an average of 4.8%. With regard to exports we follow a similar trend than Germany’s.

Nonetheless, these figures are not enough to escape the standstill. The latest Indicator of the Industrial Climate grew a modest 0.4% in December, compared to November’s. This economic indicator is the average of three variables: total level of order in the industry, production expectations and level of stocks. Among the three, only the production expectations are positive, although they don’t cease to be expectations. But the orders fall again reaching a -39%, whereas the stocks grew. Winter is here. Too cold to sit on my bench in “El Retiro” (a popular park in Madrid). Well, I’ll go shopping, patriotically.

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But trade balance figures support Rey’s optimism. Indeed, services and goods external trade in September gave Spain a surplus of €8 billion. Domestic consumption has fallen. Yet, an average growth rate of 12.5 percent in exports during the last 33 months is evidence of an important improvement in competitiveness.

Remittances from migrants and debt interest payments are on the upward trend and caused a current account deficit of 0.4 percent of GDP. Capital outflows have reached €216 billion between January and September. The external debt burdens the country’s economy: in 2013, Spain will need €230 billion including refinancing. Debt haircuts and maturity extensions will be unavoidable.

If the euro zone is faithful to its word, Spain will have to receive its needed rescue. The government has implemented most reforms in the electoral programme–pensions being the latest one. The financial sector, though, continues spitting uncertainty: the nature of the savings banks, the end of Bankia, the bad bank Sareb and how it will work…

Austerity impositions will be triggered by the very situation of the Spanish economy rather than Brussels’ diktat. Money supply levels were negative in 2012 because of a recessive private and public demand. Without higher public income, the state will struggle to maintain pension and health coverage spending. The bailout is a patriotic must.

Indeed, Spain needs technical but also political assistance to redress the hesitant and often deficient action of the current government. Even if backed by an overall majority in Parliament, the government seems unable to offer a solvent alternative to a messed institutional framework and an economic policy that has failed.

In 1962, a World Bank report said about the Spanish economy: “the government cannot stimulate the private and public initiative unless it fixes its cumbersome and inefficient fiscal system, and simplifies its administration.” Today we need again independent help to fulfil that claim that has been proved right many times before: “Spain will surprise evebody.”

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This is the result of effort and quality too, because it is quality that opens foreign doors and scores well after strict controls imposed by importing countries. Spain’s quality demands, in this regard, are softer than they should be, and we are flooded with textile, cosmetics and energy products whose standards are evidently low. Spain’s imports watchdog, a service called Soivre, hasn’t been properly updated.

Besides, the supervisory system in the European Union can be challenging when a product enters from, let’s say, Amsterdam and goes across the continent towards any direction. It is worthy keeping in mind that Spain’s trade deficit with China is three times larger than with Germany.

Yet, a reinforcement of the Soivre will not come any time soon. On the contrary, professional and special administrative bodies of the State are being left behind, their numbers cut or stalled, while local authorities, regional governments, central cabinets and public sector companies expand in creative ways the numbers of their faithful staff. Not all bureaucracy is the same. But nothing has been done to correct this anomaly.

During the 1960s, once the macroeconomic adjustments advised by the OECD and the International Monetary Fund had been implemented, a mission from the World Bank published an in-depth analysis on the organisation of the Spanish State and came to the conclusion that there was excessive intervention in transports, agriculture and banks, and too much protectionist rules. Spain needs today a proficient study of its public institutions as much as financial support to recover capital flows.

There was a toxic bubble that infected our banking system’s balance sheets, but there also is a bubble that has inflated staff numbers in regions and town councils. Decentralisation was once a logical development, but it has turned into an unreasonably heavy burden.

The central government bears many responsibilities in this snow ball-like problem. Blinded by party-politics criteria, independent civil servants with specialised knowledge have been pushed away. Never mind that Spain has increased public worker numbers in 200,000 between 2007 and 2012, or that almost three out of four euros from the taxpayer goes to wages in the public administration. It is time we have a braver government in Madrid to tackle a braver reform.

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We didn’t suffer any tragedies afterwards, but was due to falling oil prices. Economies recovered competitiveness and economic life continued its course. The history of fixed/variable exchange rates has been constant for over a hundred years. Gold, the dollar-gold standard, the various pre-euro European attempts were always followed by ruptures and volatility in exchange rates. None of these mechanisms managed to repeat the feat of Alexander Hamilton, first secretary of the Treasury of the United States, when it consolidated the debts of several U.S. states caused by the War of Independence, grouping and exchanging them for federal debt. It was a political decision. It was Eurobond, if you ask me.

Naturally, this determination has little chance in the EU in 2012. Disasters and tragedies of the two World Wars are almost forgotten. Current concerns are much more everyday ones: the tricks and traps of Greek financial excesses, the Irish or Spanish or Italian finance gaps, tax fraud on the one hand, or the virtues of German austerity and efficiency on the other. This is a neighborhood quarrel between those who spent more water and more electricity compared to those who respect strictly the rules of the community.

But young people can not find jobs, the value of the single currency wobbles and other less scrupulous nations with the rules of democracy or free trade advance positions.

In the absence of an immediate and vigorous rebirth of European consciousness, sustenance will have to be found outside the euro area. The Greeks will be the first to go and live through the rigours of the outdoors with a devalued currency that requires even greater efforts to buy oil and other essential commodities. However, the veil of higher sales of tourist services, the eventual repatriation of capital flows in search of opportunities will provide help for the hard journey.

Spain’s president Mariano Rajoy, who fortunately changes his mind as frequently as circumstances require, is now demanding the intervention of the European Central Bank or the implementation of the European Stability Mechanism to support the cleaning up banks and cajas. The brash president has nothing to envy to its Socialist predecessor. Bankia will be recapitalised with Spanish sovereign debt to discount at the ECB, of course, which will be forced to review all its operations and funding rules. The rule of a temporary facility to provide short-term liquidity to banks, three months maximum, should become a ten-year funding, for example. Other countries are already demanding the same treatment. Cyprus first, and why not, Ireland and Portugal.

Indeed, the Grexit requires an extremely wide firewall to prevent the spread of ‘every man for himself’ and one wants to keep the euro zone from becoming an accord by small number of countries while the rest simply return to their currencies as EU member States . On the one hand, the strong euro countries; on the other, States with their own currencies in which, as in Morocco and the Dominican Republic, payments in restaurants and shops are accepted in currencies like the dollar or euro and who knows if also the Chinese renminbi (in Spain, the success of the latter is secured with the release of commercial establishments of less than 300 square metres).

As I walk towards the Book Fair in Parque del Retiro, I ponder about the maintenance of the Single Market and what formulas, whatever they are, could get credit to businesses and sustain the real economy, even its growth.

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François Hollande’s arrival to the presidency of France is also good news: it’s the victory of the survival instinct of citizens who are suspicious about the virtues of austerity and recession, and fear it all will end with a deeper depression.

Prosperity is not, and neither was in 1929, just around the corner. In fact, the European Central Bank has simply managed to avoid that the markets crushed Spain and Italy. That relief and increase of the ECB’s balance sheet after opening liquidity windows pose no inflationary threat, yet it would have been better to have directly monetised government debt without going through the circuit of the banks (in emergencies, several articles of the European Union’s Treaty provide convincing legal basis); we would now know more about our financial institutions’ health.

The time has come for the European Stability Mechanism to start works or, while its engines are being greased, for the ECB to keep in the medium term afloat the debt balances of member states. Stability Pacts were established in times of inflationary threats. The unions were strong and the national economies productive, especially labour force-wise. Now the opposite happens. Unemployment is extremely high and there is only a remote possibility of an inflationary outbreak.

Please, note that the productive capacity of the real economy is largely intact but it needs credit and the return of investor confidence to the markets.

Does the ECB or any expert really doubt the resilience of Spain, for example, and its ability to repay its debts?  How could anyone refer to Spain as an insolvent nation when between late 2008 and 2011 it has neatly cut down the deficit on the current account of its balance of payments from 10% of GDP to below 3%? (moreover, a deficit that is consequence of interest payments on past debts, because Spain’s balance of goods and services is in surplus with EU countries and in balance with the rest of the world). This ‘current account reversal’ has almost no precedent in any developed country.

Mr Rajoy and his government, though, must replace provincial rhetoric and join the common front of the Italians and the French. With haste and without pause, Spain’s cabinet must build bridges with all political and social actors, and find the rigour and courage the moment requires.

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