Wolf Richter On The Keiser Report
"Debtonomics and the NSA"

Wolf Richter on the Keiser Report
"Where Is The Fear"

Wolf Richter on Max Keiser's "On The Edge" 
"The Pauperization of America"

Wolf Richter on the Keiser Report
"Where the Money Goes to Die"

Clarke and Dawe: European Debt Crisis
Two favorite Australian Comedians

Clarke and Dawe: Quantitative Easing
Big industrial-strength printers, all facing the window

The Fastest Drive Ever Through San Francisco
Don't try to do this yourself

humanERROR - by "Frying Dutchman"
Powerful, lyrical appeal to the Japanese. Slams nuke industry, MSM, bureaucrats, and politicians.

« What do Henry Kissinger, Le Duc Tho, Yasser Arafat, President Obama, And The European Union Have In Common? | Main | Fear Mongering And Hysteria About The Fiscal Cliff »

Spain’s Unfinished Transition From Dictatorship To Democracy

Contributed by Spaniardfbm, who has a law degree and works as public servant in Seville, Spain. This is a shorter and edited version of the original article first published on Liberal Villainous.

Spain’s economic problems lie neither in the financial sector nor in the budget deficit. They are only symptoms of deeply rooted institutional problems that determine a great variety of issues, from how the budget is composed to who receives a loan from the politically controlled banks (cajas). Neither banks nor public workers have ruined the country, but politicians, a separate class born out of the “Transition” from the Franco dictatorship to democracy.

Until Franco’s death in 1975, Spain was governed by a fascist bureaucracy, called “Corporate State.” It was formed by the ruling party, the only Workers Union, the only Employers Union, the Catholic Church, and local entities. During the “Transition” to democracy, a series of measures designed as exceptional were adopted to promote regime change. Politicians, out-goers and incomers, agreed on surrounding themselves with class privileges (some old, some new) to ensure the former a comfortable retirement and the latter a slew of protections and privileges.

These privileges were extended to regional pressure groups—Basque, Navarrese, Catalans, Galicians and Andalusians. They were intended as temporary and geographically limited, but over time, they have become permanent and widespread in all 17 autonomous regions and thousands of local authorities.

Since the arrival of democracy, the Corporate State has covered itself with a democratic umbrella. The single party and the single workers union have been split in two. And a powerless (except in the lower courts) democratic bureaucracy has been created, giving the country two de facto bureaucracies for the same purposes. And that has been multiplied by 18, if we count the central government and 17 regions with its governments, parliaments, ombudsmen, etc. And by thousands if we take into account the local entities. So the current status is that of a double Public Administration:

- The Corporate Administration. Legacy of the Franco regime, it is formed by political parties, especially the hegemonic People’s Party (PP), the Spanish Socialist Workers’ Party (PSOE), and the Nationalists, plus trade unions, employers unions, local power, and NGOs (previously only the Catholic Church, but now diverse).

- The Democratic Administration. Formed by the Legislative, Executive, and Judicial powers, it is commanded by politicians and served by funcionarios, such as police, judges, prosecutors, tax authorities, etc. The Democratic Administration is tied to the rule of law. It exercises power over citizens and is supposed to protect them from politicians. Its presence is mandatory when citizens´ rights are in peril.

But in practice, the Corporate Administration occupies positions at all levels within the Democratic Administration, even those that imply the exercise of power over citizens, such as judges, and despite the Law and un-executed court orders that should have ousted them. For example, a 2008 report by the Andalusian Court of Auditors “detected” that 33% of the central-services staff belonged to the “parallel administration,” as the courts have labeled it. An unprecedented request (August 2012) from the Andalusian Regional Ministry of Finance, asking other ministries about the personnel they employ directly or indirectly who are neither funcionarios nor lower-level workers, reveals how the Corporate Administration lives and spreads chaos.

However, the real numbers are likely unknown due to a lack of transparency in public and private entities, and due to the decentralized style of management and the occultation techniques that the Corporate Administration has used to survive and thrive under its democratic umbrella.

Franco’s tax and budget system having largely disappeared after the “Fuentes-Quintana” reforms of 1977, the Corporate Administration is funded through “special laws,” “special rules,” and “exceptional mechanisms.” The act to “repair union assets damaged during the war and dictatorship,” for example, paid for “repairs” to the CCOO—a Union that didn´t exist in Franco´s era. And the payments far outstripped those given to the CNT, a real anti-regime union at the time.

While special rules on pensions, unemployment, etc., established within general laws for the wellbeing of the political class, are a source of funds and power for the Corporate Administration, the main source lies (in my experience) outside the law—here, anything is possible if you are a politician.

This can take many forms through biased interpretations of rules or “exceptional mechanisms” designed for severe conditions that in practice have become common instruments. They’re exempt from control unless a scandal explodes into the open. These include Government Agreements (even secret ones are “enforced”), Social Partnership Agreements, Exceptional Grants, Nominative Grants, (false) Regulated Subsidies, (false) Conventions, (false) Concerts, (false) Open Calls for Proposals, etc. They are hiding under different names within framework agreements between politicians, trade unions, and employer unions for sharing the pie of public funds.

The Andalusian Supreme Court of Justice has repeatedly failed against the Government and its “open defiance of the rule of law.” This assertion has been ratified by the Spain’s Supreme Court of Justice (STS 29-November-2009 E.G.M.A.S.A.) and reiterated by the lower courts, the last one on September 11, 2012, with no political or penal consequences.

This may surprise outsiders, but not locals. Public opinion is rarely moved by “technicalities,” and judges and prosecutors at penal courts—except for the judge Mercedes Alaya who got involved in this by chance—shiver at the prospect of starting a process against a whole government or worse, against most Members of Parliament, when there is no physical robbery attached to it to sell the case to the media.

Finally, the European Union and its funds have not helped. The European Commission does not want to fund permanent staff in Member States´ Public Administrations but in “independent entities such as Audit Companies, Trade Unions, or NGOs”. And that “principle of partnership” has come in handy to our political class to grant themselves the money directly or through a horde of facade-entities, with the support and blessing of Brussels.

When our former Prime Minister J.L.R. Zapatero said that Spain had not finished its Transition from dictatorship to democracy, I do not think this was the problem he had in mind. But this is the one we have, and the one that politicians can, but do not want to, fix: establish a real separation of powers with an independent Administration of Justice, and get rid of the Corporate Administration inherited from the Dictatorship, ruled by a despotic oligarchy, and covered with the veil of an imperfect democracy.

Spanish Prime Minister Mariano Rajoy (PP) has a singular problem: 84% of all voters have “little” or “no” confidence in him. The fate of Alfredo Perez Rubalcaba, leader of the opposition PSOE, is even worse: 90% of all voters distrust him! Those are the two top political figures of the two major political parties, and the utterly frustrated and disillusioned Spaniards are defenestrating them both. Read....  Punishment Of The Spanish Political Class By The People.

EmailEmail Article to Friend

Reader Comments (4)

How do the ownership of the CAJA´s actually work? The Caja´s appear to have a very complex ownership structure.
October 13, 2012 | Unregistered CommenterHardcore Uproar
I can´t talk to you about the Caja´s current regime. Lately, Cajas has gone mainly bankrupt and have been merged to dilute the personal responsibility of the managers. And have been supposedly transformed in full-fledged banks.
But in the previous years, before 2008-10, I think (this is not my area but I will ask a colleague) the rule was L-31/1985 August the 2, article 14, article 22 and 26. It worked this way. In 1977 the Cajas became commercial banks that had strong limits to investment banking (unfortunately, mortgages where not one of them). So they took money from savers and lent it to banks. The Cajas were supposed to be a non-for-profit organization. To accomplish this, there was a Foundation (a 100% public capital charity) side by side with each Caja, and the profits of the Caja should go to the Foundation.
The Caja government was, be it in the Assembly General or the Council, a 40% for the local politicians of the place where the Caja was created (mergers made it to lose any meaning), a 11% for the Foundation, a 44% for clients, and a 5% for the staff. BUT the Foundation were created and ruled by the regional governments, and that meant that were 100% controlled by politicians. That meant that a 55% was politically controlled. Plus the 5% of the staff, that was probably under the Single-Union control. And they were the ones that designed the Director General, while the Foundation "patronato" approved its salary.
Summed up by a colleague that has been director of Caja´s offices all his live (I believe he is in his 60s now) "politicians have killed the Cajas". "I received a call straight from the General Director to pass a mortgage without studying it. Do you know who is the person that you have there waiting, he asked?". My colleague refused to do it straight away, and wrote in the file "this loan has been granted without following the established procedure due to a call from the General Director and needs review". And this was only the kind of call you expected to receive. The worst for us (he has told me) was when the call involved some crazy public investment of millions of euros that you knew would never pay off. We had half the pay for objectives and, how in hell are you going to achieve them this way?. It was impossible. Some offices were in red forever. When you received that kind of call or transferred to that kind of office you were promised to be rewarded with a future assignments in a very healthy office, but you never knew if they were going to honor their word.
October 13, 2012 | Unregistered CommenterSpaniardfbm
I can only agree with these statements. It is amazing that both PP and PSOE claim that Catalans cannot be different from the rest of spaniards, but Basque are allowed to be different.

It is also amazing that every region and newspaper claims different budget numbers, but the central government makes no effort to publish the official numbers and stop these disputes between territories, but of course that TRANSPARENCY would imply that some politicians and regions would loose out their power and privileges if objective criteria (e.g. budget allocations normalized by territory and population) had to be established and followed up with corrective actions as done in the German landers.

Finally, the proof that Spain is not a democracy is the reaction of the central government to the request of the Catalan government supported by 75% of the catalans according to recent opinion polls that Catalan people should be consulted in referendum to see what they want for their future,.. Instead, Rajoy defends that the 1978 constitution, has precedence over people's opinion, because he thinks that the judges of the constitution appointed politically by him and PSOE can keep his Catalan children inside the house better with the doors closed than with the doors open, unlike Comeron with its seductive policy in Scotland.

In short, Spain has still so much to learn from the old democracies in Europe.
October 17, 2012 | Unregistered CommenterGonzalo García
I recommend you a very good tv Program in Spanish, Salvados. Last week’s chapter was about the Cajas corrupted system.
October 18, 2012 | Unregistered Commenterariel

PostPost a New Comment

Enter your information below to add a new comment.
Author Email (optional):
Author URL (optional):
All HTML will be escaped. Hyperlinks will be created for URLs automatically.