New Spain against the EU, but for Catalonia

Mariano Rajoy has gone from the political arena in Spain. Catalan and Basque separatists retaliated and persecuted Rajoy during last year’s Catalan movement for independence by voting for the socialists and leftists of Podemos, which has forced Rajoy government.

The political situation in Spain deteriorated nearly two years ago, as Rajoy headed the government, relying on a very weak coalition. The coalition was formed under EU pressure in order to prevent the Podemos party, which opposes austerity measures, has seized power, and in order to prevent the project of independence of Catalonia.

Socialist party leader Pedro sánchez has promised to discuss the situation in Catalonia in the “government to government”, that is a drastic change after the refusal of Rajoy even from dialogue with the former Catalan leader Carles Buchtemann, which is in Germany,after he was arrested by the German authorities at the request of Rajoy.

The Spanish Parliament refused to trust the government, Mariano Rajoy. The new Prime Minister will be the leader of the socialists Pedro sánchez. The debate in the legislative Assembly continued for the last two days. How was the discussion?

Now the political future of Spain is in limbo at a time when populists in Italy are committed either to break their relationship with the EU, or to force Brussels to agree on new reforms.

Matteo Salvini is preparing to deport thousands of refugees. Italian politicians are calling for Germany to leave the Euro, speaking out against German authorities over the rest of Europe. And now the Spanish socialists are trying to collect weak minority government, which nose in front of Podemos, using his support to get rid of Rajoy, and to gain power.

Sanchez tries to do it alone with the support of 20% of the Spanish voters in the creating of the Cabinet. He does this in order to ensure that Brussels did not protest against the participation of Podemos in the new government, which will insist on the abolition of the austerity policies required by the EU, ECB and IMF.

Obviously, he is ready to repay the separatists for their support. Brussels can’t push it too hard, because it will allow the Catalans to promote their independence this fall, at the same time throwing a bone to the inner enemies, weakening the policy of economy.

Brussels at the moment, deprived of the levers of the struggle with populist movements in southern Europe. Even the experts of big banks finally admitted that this time, unlike Greece in 2015, things are really different.

Italy has a little chance to improve the situation, while remaining in the Euro zone. Virtually all her stimulus due to the strong current account surplus and the performance of its obligations under TARGET2 are to leave the Euro zone.

That’s why Paolo Savona said that it would be better if Germany left the Euro, not Italy. This underlines the main problem that Germany urged the continent to dryness due to currency arbitrage.

The exit of Germany will be similar to the release of the new Lira as the Euro will drop 20% over night and this adjustment will lead to “turbo charge” the rest of Europe.

Also it would help Spain, which in this respect could not benefit from leaving the Euro because of its less favorable position in respect of the foreign net investment.

The bottom line for both countries is simple the old adage: when you owe the Bank a thousand dollars, that’s your problem, when you owe the Bank a trillion dollars, it’s the Bank’s problem. The Bank in question is the ECB and the Bundesbank.

Sanchez should absolutely correct logic, trying to reassure Brussels a waiver of Podemos as a coalition partner. He also said that complaints of Catalonia against Madrid will finally attract the attention that informed the EU authorities simply ignored, given the possible collapse of the financial system of Spain. If Catalonia becomes an independent state, Madrid will not be able to meet its debt obligations.


The dynamics of the 2-year government bonds Spain to 2018

The larger question is whether Sanchez to go along the path you have chosen. Maybe not. Even if they gather together, there are real risks associated with the fact that his government will not live long. However, I wonder what he’s trying to find the right balance. In any case, the markets won’t like it. And the problem here is a substantial debt of Spain.

If Sanchez will form a government, he will have an automatic ally in the new leadership in Italy. And together they can really put pressure on Brussels in a way that could not do before.

Podemos’s leaders know that the goal is to break the Brussels in terms of Finance of Spain and to be patient. It is unknown how this may work, but tactically this is quite the right way.

New Catalan Prime Minister Kim Torr had already planned on 1 October, a referendum on independence. So the clock began the countdown. Because if you are prone to independence, the government in Madrid will last the next 4 months, all the situation will change completely.

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