Buenos Aires steak house - A different business story

“The financial crisis has helped us to grow”, said the Chief Executive of Buenos Aires, an Argentine steakhouse restaurant, the second group enterprise steakhouse in London

The ultimate Argentine experience is the motto of Buenos Aires steakhouse restaurant. With six restaurants around and in London, this company has learned how to expand itself amid the global financial situation.

Cristian Barrionuevo, chief executive of Buenos Aires says that in 2011 sales fell 10%, however this did not stop him from opening one restaurant per year. 2012 was the big bet. Buenos Aires opened last summer its sixth restaurant in The City. To rent a building in this area costs around £400,000 per year, however, Mr. Barrionuevo explains this has been possible because when many pubs are closing the situation changes and “now landlords give you more opportunities to let the premises”. For example,  Mr. Barrionuevo obtained 18 months for free in the rent of the last building, what it means a total saving of £300,000. In this sense, “the financial crisis has helped us to grow”, continues Mr. Barrionuevo.

The greatest challenge for Mr. Barrionuevo was that he did not have initial capital to invest in his new business. With the revenue of one restaurant, he invests in the next one. “This way of acting always makes you feel in tension, you have to work harder to success since you have invested everything you have”, describes Mr. Barrionuevo.

Since in 2007, when Buenos Aires steakhouse restaurant opened its first restaurant in London, many things have changed. Now, banks give Mr. Barrionuevo loans because they see a continuity in his businesses. In the first restaurant there was more drawbacks to borrow money or to negotiate the contract clauses with the landlord. Once your business has developed a brand, name and logo, “you are the one to impose the conditions”, Mr. Barrionuevo explains. Nowadays, Buenos Aires is a Group Company with a turnover of more than £4m. Here, it is easier for them to expand their business.

Nevertheless, it has not been always that easy. Mr. Barrionuevo, Argentine by birth, had to move to Spain because his son had a skin disease and he needed the Spanish climate. There, in Valencia, he decided to open his first of all restaurants in 2006. His experience was definitely different if he compares Spanish and English (UK) businesses. As Mr. Barrionuevo specifies, “the expenses are higher and the benefits are lower in Spain because you pay the same amount to the suppliers as you would do in UK, but you earn less benefits” because the price costumers pay in Spain is lower. In other words, in Spain there is more work to do, and less benefits to earn. In these circumstances, Mr. Barrionuevo had to close his business in Spain one year later.


Businesses in UK
Mr. Barrionuevo opened his first restaurant in London in the area of Purley in 2007, what eventually becoming the “Steak Palace” of the area. A year later, the second restaurant was opened in Maidstone, which was the only Argentine steakhouse in Kent. In 2009 was the time of the Argentine steakhouse restaurant in Croydon. This time, a market study was already necessary to know the area and the public with the purpose to define his product and to build a particular style of restaurants. Next year, another restaurant was opened in Fulham, the first London based venue. In 2011, Mr. Barrionuevo decided to expand his business in the area of Wimbledon. In the new one (2012), Mr. Barrionuevo bet for the City, where he needed different strategy; or as he explains, “each area needs different inversion, because it has different clientele, and the one in the City has more bookings” since it is the biggest one among the sixth of them.


Know-how
Cristian Barrionuevo has worked in gastronomy since he was 15 and his experience, first as a employee and later as an employer, has made him to value his own business. As he relates, “the skill for success is to concentrate in the details”. 80% of his staff are Spanish-speakers with knowledge of Argentina’s traditions. The atmosphere, the quality of the food and human contact are essential attributes in Buenos Aires steakhouse restaurant. Mr. Barrionuevo points out that the most important thing is a good management of the product, “knowing every time what it is happening in your business”.

“Steakhouse business is on fashion and the Argentine steak is different”, explains Mr. Barrionuevo. All the products in Buenos Aires restaurant are Argentinian; from the wine, to the meat until the cook. “Everything can work if you know how to organize your business”, says Mr. Barrionuevo. Some products need more management than others and to know what everything costs and how much earnings it produces it is fundamental to maintain the business line. “We have to work harder to maintain what we have”, Mr. Barrionuevo says. He works from Monday to Monday and the secret is to be always available, definitely to be present.

This kind of restaurants has a specific target and the competence is still low because there is not one Argentinian restaurant next to another. Buenos Aires steakhouse restaurant has a strategy of innovation in menus, specialty dishes, or tango night!. Besides, Mr. Barrionuevo is thinking to introduce again some tapas menu in his next restaurant in 2013 as he did in his restaurant in Spain.

Nowadays, Mr. Barrionuevo has developed a sense of business, and he does not open a restaurant everywhere. Mr. Barrionuevo´s purpose is to continue growing but maintaining the same style, developing a brand identification and recognition of all his businesses.

A familiar chain
Buenos Aires steakhouse restaurant has grown, but it has not lost its identity. Mr. Barrionuevo identifies his company as a “family business”. Mr. Barrionuevo appreciates his employees as his friends. Some of them has stayed with him since he opened his first restaurant six years ago. In 2007,  he needed some support for the initial capital to open his first restaurant in Purley, what it received from his friend and wine supplier. “He helped with in the worst moments and he is still working with me”, Mr. Barrionuevo mentions this behavior as a principle to maintain a business and to build strong relationships with the staff.

When you come in to Buenos Aires Argentine steakhouse restaurant, the local´s elegance grabs you. The informal style regarding quality/price, the Spanish language and music along with the quite atmosphere make you feel in another place out of the hustle of the city of London. Their objective is “to establish a place out of the business routine, where costumers can come here and relax”, specifies Mr. Barrionuevo. The image of the restaurant seems expensive, but as Mr. Barrionuevo says “we are one of the less expensive, specially among the City”.

Regarding to the finances, Mr. Barrionuevo explains that everything is well distributed according to the expenses. He needs a balance between the cost of food and staff, the bills and the rent of the premises. “If we have a net benefits of 15% in the Buenos Aires restaurant at the City for example, means a good equivalence, since we have to pay £75,000 of renting per quarter of three of our buildings”, specifies Mr. Barrionuevo.

The “forgotten army”
There is no crisis if there is money. Something as clear as that is what make businesses stay afloat nowadays. UK policy about lending money to start-ups is riskier than to lend it to a business already consolidated. However, Small and Medium-sized (SME) companies accounted for “99.9 per cent of all private sector businesses in the UK”, according to the Federation of Small Businesses (FSB). They are the ones that can make the economy grow, and therefore, they need backup from the government. As the UK's premier business lobbying organisation (CBI) proclaims “the British government should provide stronger support for medium-sized firms”.

Doha Round, the perpetual negotiation at the World Trade Organization

More than a decade after the first negotiations about the Doha Development Round, the agreement is still suspended. Several key issues are at stake in this Declaration, where lowing trade barriers, dealing on agricultural subsidies or improving trading conditions for the least developing countries are the most controversial factors for a multilateral agreement among World Trade Organization´s members.

Amid the current financial crisis, Kieth Rockwell, World Trade Organization (WTO) spokesperson, explains this lack of consensus is due to the reluctance of politicians to take risks. “The appetite for further trade opening diminishing when there are difficult economic conditions”, Mr. Rockwell pointed out in a conference hold at City university in London last 22nd of November, 2012.

There has been a rise in the number of trade restrictive activity that have been applied during the financial crisis. “In 2009 trade collapsed, contracted by 40% (the biggest contraction in trade since the Big Depression). However, a year later trade rose again by more than 20%”, because markets stayed open, specifies Mr. Rockwell. In accordance with this, the Dispute Settlement is a system which deals with these trade frictions. This 2012, WTO has seen “an increase of more than three times in the number of dispute settlement cases brought into the WTO”, as Mr. Rockwell announces.

This rise of trade fictions is a consequence of two elements: the economic situation and the power shift. Since China entered the WTO in 2001, the number of dispute cases has increased. Why? Power is shifting from West to East and it has been accelerated by the crisis. What matters here is that the U.S., China, EU and Japan are the world´s biggest trading nations. China is the second largest importer and exporter and it faces more trade frictions. According to Mr. Rockwell, as long as cases are coming to the WTO dispute process “is a good thing” since -Mr. Rockwell continue- “its a forum in which all types of trade can be discussed”.

However, inside the Doha commitments, there is one particular issue that have been proved irresolvable until the moment; agriculture. Agricultural subsidies and agricultural market access (mainly tariffs) are perhaps the most complicated things to solve. The WTO focuses on trade distorting subsidies. Mr. Rockwell specifies that, “there are means of supporting agriculture which are less distorting than others”. Encouraging production, for example, is what is called “trade disturbing”. Why? Because if a developed country has a super-plus production, it might sell it to a third developing country and hurt its economy.

Inside the WTO, there is a coalition of developing countries; the G-20 (not to be confused with the G-20 group of finance ministers) that tries to pressure the developed states to reform their agricultural practices, providing some flexibility for the poorest economies. This last October 31st, the WTO Director-General, Pascal Lamy, said in the G-20 trade measures report that those economies slowdown pressures on trade restrictive barriers. Although, the uncertain economic situation has made negotiations stalled.

The Doha Development Round has focused mainly on improving conditions on the developing countries. But, what has it delivered for them up to this point? Sincerely, as the WTO spokesman affirmed, little progress has been made since 2008 because they do not have agreements. Here it comes the problem of security and, lets be honest, corruption; that makes more difficult to build business there. Mr. Rockwell clarifies at this point that developing countries have to find what they call “needs agreement” to identify what they need to do to implement any agreement, as for example improving border crossing points or infrastructure. “There are a wide key issues that are important to them and we have to identify these needs and see how much will cost for them”, describes Mr. Rockwell.

This means that “trade is not a good thing all the time for everybody”, as Mr. Rochwell manifests. There are trade downsides because least developing countries need special protection,  they are fragile and their trade infrastructure is poor. The disadvantage is that they do not have the same competitive capacity to deal with free trade. Therefore,  as WTO spokesperson revels, “it all depends on each country and the country´s economic activity”. There are many factors that have to be taken into consideration, as the level of development or competitive system, to achieve fair trade, and not only free trade.

In relation to these problems, the last Public Forum (September 2012) discussed the failure of governments to reach agreements under the threshold if multilateralism can be delivered. Anabel González, Costa Rica’s Minister of Foreign Trade emphasized that, “We need to revitalize the multilateral trading system in the WTO” to be able to find global solutions for global problems as the global warming, finance or security. In the same way, Eduardo Pérez Motta, Chairman of Mexico’s Federal Commission on Competition stated that, “We are in a time of challenges […] and I think we have to reflect how the international trade system has to move forward”. The question is, can this be done in the Doha Round, or perhaps it is necessary a more open-creative path to redefine the current problems?

Editorial
What are development and developing countries defined?

The Doha Round is also known “semi-officially” as the Doha Development Agenda, since developing countries’ needs and interests are at the heart of this Declaration´s programme. It also includes the United Nations Millennium Development Goals (MDGs) which are eight objectives to achieve by 2015. Mr. Rockwell says, “in the most important areas, as reducing poverty, […] or access to drinking water, the goals have been met already well ahead the schedule [...] And to some extent, trade has been a key player in countries like China, Chile, India or Brazil”.

G-20 developing group includes countries as Egypt, India, China, Argentina or Nigeria. There is a question that arise here such as; can all these countries lump together into the same category? I do not think so, since there is a wide range of differences in development among countries. Therefore, how do you define development? Is China still considered a developing country? Probably not. The group of countries defined as BRICs (Brazil, Russia, India and China) have advantage over other poorest countries that need special and differential treatment.

UNICEF data shows that “more than 30 per cent of children in developing countries – about 600 million – live on less than US $1 a day”. Are then the objectives being met? There are many countries that still live under the threshold of poverty. Ghana, for example, is part of the WTO since 1995 but it is not included on the G-20 developing countries. Its main exports are gold, cocoa and timber. However, “14,000 people died of AIDS in Ghana in 2011”, according to its official website. And there are many other countries in this situation. This makes me think, is free trade fair for them? We need to be aware that natural resources are found in some of the poorest countries. Therefore, there is something that someone is not doing totally fair to still allow that.

ABF plc is part of your everyday life

Who has never heard about Primark, Twining tea or bought a specific sugar or bakery brand? All these make Associated British Food plc

Diversification. This is the first an most successful rule for the Associated British Food plc (ABF) company. From its inception in 1935 until nowadays, ABF has grow broad-based food manufacturing and retail organization through market and product development strategies.

Its business splits into five segments that it makes them to be present in everyday life for many different people. But, what exactly does the company do? This differentiated conglomerate include products from cheap clothes, sugar and cozy brands that it has been always attractive to shareholders.  ABF plc works as a global manufacture in 46 countries and the group operates in the UK, Europe, U.S. and Asia. It is headquartered in London, the UK and employs about 96,915 people. Modernization and expansion has always been the core of its business.

Nowadays, the largest part of the Associated British Food profit is generated by sugar. And it is specially successful also in its retail market. “AB Sugar delivered a first-class result, exceeding last year's record profit following the investment made in recent years”, explains Charles Sinclair, ABF plc Chairman. He also emphasizes the Primark's rate of growth that it “increased this year with sales of £3.5bn, more than double those of five years ago”. Primark retail segment was encourage by the weakening of the euro having a 15% increase in revenue and operating margin profit in 2012 compared with last year results.

However, demand has slowed and commodity prices continue to rise. Grocery and Ingredients business sector are the ones that face more challenges due to strong competition, a continued strain on consumer spending and high costs for a number of commodities that it has led to lower profitability in both of these segments. The market developing that faces the major problems is Australia. The high cost supplier and the management teams in George Weston Foods, along with difficulties in Allied Bakeries in UK, are the biggest challenges nowadays because competitive pressures persist.

The weakness in the economies of ABF developed markets will be the most difficult challenge to overcome. ABF exposure to sales in the eurozone is about 20% what it is been affected by uncertainty and the government austerity measures. However, ABF strategy of market and product development make the businesses operating more successfully and the innovation of technology in the ingredients sector, for example, will make ABF to obtain better results in a near future. Specially important is the combination of high costs and competition environment in this sector, something that the group is counteracting with more differentiated bakery ingredients proposition.

ABF plc main strategy is continuing to review of longer term growth opportunities. The company´s success can be also seen in its decentralized approach, where developing its own corporate responsibility model (risk management) is one of the ABF plc greatest strengths. All their principles are part of the company´s long-term corporate strategy.

Hedge your risk at the LME

The LME is still primarily an exchange for producers and consumers 

to hedge there risk with the use of futures contracts. 

By Mª Victoria Gomis Sanz
People shouting, running, writing, waving hands, secret codes, phone here, phone there, you only have five minutes! Get the deal done! This is how the traders agree on the everyday prices at the London Metal Exchange (LME). The last physical place to deal with metal prices is in the floor room at the LME based in the City of London.

Sellers and buyers get in touch face to face at what is called “the ring”. Everyone wears a badge, and only people with red badges are allowed to sit in there and trade. 12 are the dealers sitting in the red leather sofa inside the ring trying to get an agreement on what the price of industrial metals will be. 80% of non-ferrous metals are trading in the LME such as Zinc, Cooper, Aluminum, Tin or Nickel. And volumes and prices vary from day to day depending on what is happening in the world.

The total amount the LME traded last 2011 was $15.4 trillion, 3.5 billion tonnes and 146 million lots. What translated into the Copper price, for example, is £7720 a lot approx. Copper, Aluminum, Lead and Zinc weight 1 lot, 25 tonnes. Therefore, a day on average buying and selling, LME can take an account in the electronic system on £10000 lots of Copper (or £25000 lots in a busy day). Besides, trades on the ring that have to be added after, since the “outcry” goes through the electronic trading platform.

The financial tool used at the LME is often the three months forward contract, because this is the time a ship takes to go around the world to deliver the goods. At that time, you adjusted it for cash. However, if you need the metal sooner or later you use what it is called the “carry” on the electronic platform, that basically means the movements of selling and buying back the futures. They are not cash settles, like in the stock market, but what you buy or sell in the LME is the metal.

Hedges or speculation is the financial tool that is now use to lock in the price for a future delivered. Through it, they manage the risk of changes in prices in the future. The exchange is very actively traded by hedge funds but the contracts remain physically delivered. Banks as Barclays has a lot more hedge funds business than Triland, for example.

Thomas Steward, the Director of Newedge summarizes the trading with one sentence “at the end it is all about liquidity”. This is all about futures and options, the financial instruments the LME works with. That means what you will be willing to buy and sell in a fixed date. Prices change everyday, and products become more expensive in a long-term due to the extra cost of maintaining your goods. Storage, transport or salaries of the employees are an important part to take in mind when prices are set in a future contract.

However, what it is more interesting are the secret codes. The waving hands from the dealer´s clerks standing behind the trades. In that particular moment you can tell what it is going on. Numbers. If the hand shows numbers up, it means the price you want to buy that metal, and if the hand is opposite down means the price people want to buy it at. The agreement comes exactly when the hand is shaking. Bingo!

4.45pm that is the time when everything will get set, and prices and agreements make their shape. 15 minutes to the close, nerves rise. The room is chaotic. Everything happens so quickly.  Information goes back and forth in the room thousand times. One of these 12 men, a Company´s dealer from LME explains, “LME is all as simple as you want to sell your product at a specific price and you need someone to buy it at the same price, how to negotiate”. Basically, the information coming from everywhere in the world is reduced to the ring.

Nevertheless, the market reminds open almost 24h a day between the London, New York and the Tokyo offices, what means that market metal prices are available to investors anytime. Since 1877, the LME has become the biggest and most influential market. And it is the Europe´s only remaining ‘open outcry’ trading floor on London’s financial markets. This place is different from other markets since it gives you trust and it brings stability to the clients. Besides, it is widely recognized as almost the benchmark of metal prices.

U.S. leadership position threatened

I was reading and article bt Bill Emmott in The Times from October 24, 2011 and it is still actual. That makes me think that yesterday news are still today and tomorrow´s news. We usually think time pass so fast, but things are not changing at the same spead.

The mentioned article has as headline "Why we should fear America’s China-bashing", and it is explaining the    tough "fight" for being the first world economy. But, what it really called my attention is the sentence at the very end mentioned that "the euro will determine whether the world is going to face another financial crash". Do you think the euro is able to assume this heavy  responsibility? I will defend it but we need measures that really help the economy rise again.


In the current financial situation, protectionist measures as trade barriers are being raised and if you compare U.S. and Chinses growth on GDP or size of their economies, data scare. 10 years they predict. Lets keep the yesterday news on mind just to say, there it was.

14N: There is not "them"

Amid of the harshest recession in the European Union, there are countries like Greece, Spain, Portugal or Italy thaat cannot bear more auterity measures. Today, 14 of Novemember, 2012 thier citizens are striking in the streets fighting for their human rights.

Greece
Eurozone is standby the resolution of IMF and Eurogroup to reach an agreement over two-year extension debt in Greece. What Greece is supposed to do is to get its debt down to a 120% of the GDP by 2020 (or what they are trying now until 2022).

Also, goverment is seeking to avoid the €5bn default thought T-bill auction, but as the FT exposed "Greek banks expected to buy the issue can only raise about €3.5bn of collateral acceptable to the European Central Bank".

Greece is still the biggest problem of the Eurozone, but Eurozone finance ministers should release the next aid by November the 20th.

Spain
The Spanish situation is not getting better either. Evictions have provokes two suicides already from vulnerable homeworkers to pay thier mortages. Central government is taking action to limit the foreclosures for two years. This is linked with the debate over banking reform and the so-called "bad bank" which will start working at the end of November with €5bn. Reuters explained that "the bad bank will initially receive €45bn in assets from the four nationalized institutions".

Besides that, the uncertainty over the bailout is still worring investors. On the other side, Spanish citizens will not see many changes in Goverment policy at least until the unveil of the budget deficit target (that it must reach a 5.5%).

The 14N is the second general strike in less than a year in Spain. The desesperate situation in Spain is aggravated by the 25% unemployment rate.

Portugal 
After the visit of Angela Merkel to Lisbon last Monday the 12th of November, 2012, anti-austerity protesters held placards telling her she was not welcome, as Aljazeera showed in a report. Besides that, some activist (4,226) wrote a letter addressed to Ms. Merkel where it explains that taking more loans from the Troika is not the solution for Portugal. Portuguese video information prohibited in Germany here.

Portugal also reaches a 16% unemployment rate, and to impose more austerity measures will only produce a deeper recession.

Italy
Italians have also similar problems. Now  Italy is about "to indict five S&P employees and two from Fitch Ratings for market manipulation" connected to their downgrades of Italy’s credit rating, according to the Telegraph information.

However, Mario Monti efforts seems to produce positive effects by 2013, according to Bloomberg with  less deep recession compared with 2012 (a GDP drop of 0.5% in 2013 against 2.5% of 2012) due to a reduction in the unemployment rate.

                                         -------------------------------------------------

All this information regarding to the most affected countries of the Eurozone does not mean "they" are the only ones to be hit by the financial crisis. Specially because this is a global crisis. today, 14N there are 23 countries demostratiing against austerity measures (France, Belguim and Germany among them). As the BBC news is showing today, UK will recover slowly from recession. However, according to King: "Output might shrink again in the last quarter of 2012".

This is not a battle between the South and the North European countries. I believe in a common solution, with deeper integration among all of Us. Perhaps, more regulation over the market will be the solution, to cede a bit  of sovereignty to the Union, or to create the banking union, etc. There are many possibilities on the table, they (We) only need to get an agreement all together. "There is just no work" information of BBC about today demostration, specially in Spain and Portugal. The problem is that demostration will not change anything about the current situation, unfortunately.

 In the overview, I will add that other countries in the world are also suffering the consequences of the global financial crisis, as Japan or U.S.

Many reforms, no positive results

Almost one year after Mariano Rajoy was elected president for Spain, there has been many major domestic and international changes. Spain's center-right conservatives swept convincingly into power as it usually happens when a financial crisis threatens the economy. Since then, drastic economic reforms has taken place in the country, specially fiscal and structural adjustments. Spanish´s Prime Minister said last 31st of October to Reuters that “Spain will come out of its current crisis through a combination of domestic reforms and policy decisions taken at a European level”. Is it the request of the bailout one of them? Lets analyze the situation.

The Spanish government is set to pass 43 new laws to reform the economy within the next six months. And the new budget entails 58% spending cuts and 42% increased taxes, according to the information published in Russia Today last 27th, September. Some of these austerity measures include reducing €10m spending in education and health, increase of taxes (for example up to 21% in the value added tax) and fees or the controversial labor reform. Spanish government is willing to reach an objective target of 5.5% of the GDP with a reduction in expenditure of more than two thirds. This will deposit a total revenues of €30.3m (GBP24.19m) in 2012.

However, in the European framework there is not such a positive view of the Spanish recovery in a short term, and many external pressures are pushing Spain to ask for a bailout of its economy. Risk premium of Spanish 10 years yields bond is still above 400 basis points compared with German bunds. Besides that, foreign direct investment (FDI) was reduced to GBP15.83bn in 2011 half of the amount when compared to the previous year according to the World Bank. Even when the Spanish Minister of Economy came to London last 11th of October to ask for foreign investment, it has not been any change since then.

This information, along with the reduction of exports and imports, has made Spain to loss competitiveness in a international market. Spanish´s balance of payments has a negative commercial balance of €-3.1m (GBP-2.42m) according to data provided by the National Statistic Office (Aug,2012). The World Economic Forum expresses this insufficient competitiveness in 2012 because “the high levels of public debt coupled with low growth. [...] And political gridlock in some European countries stirred financial markets’ concerns about sovereign default and the very viability of the euro”. Spain is ranked 36 in the global competitiveness index with a 4.60 score (where Switzerland ranks first with 5.72 score).

Concerns in the eurozone countries have reached to Brussels, where it has announced to Spain and Italy the creation of a “Super commissioner” figure to exercise tighter control over budget as it was reported in the Spanish television last Thursday 29th, October 2012. Mr. Mario Draghi has made clear that they will do whatever will be necessary to keep the eurozone together, driving towards a greater integration, as the only safe way to protect the single currency.

Meanwhile, Spanish economy continues into recession, as the annual variation of the GDP represents in  the third quarter of 2012 (-1.6% in the Q3/12 compared to -1.3% in the Q2/12). This result is a consequence of a “negative contribution of domestic demand, partly offset by a positive contribution from external demand”, according to the National Institute of Statistics of Spain (press release 30th October, 2012). In the same direction, unemployment has increased until the 25% of the population on the 3Q/12, and the government gross debt reaches a general amount of €87.9bn (GBP70.9bn) in 2012 according to OECD data.

This data makes people wonder why Spain has not yet asked for the bailout from the EU. However, the decision is not an easy one. The main problem is the huge amount of debt from financial institutions. The global crisis of 2007 hit specially Spain because the great bubble housing speculation, where banks gave many loans and credits to people who could not return the payment. Now, institutions as Santander, BBVA or Bankia face an important recapitalization of their public debts, through cuts in Spanish population budgets.

While there has been many reductions of social expenditures since December 2011, Spain is running out of money and places to get it from. The Spanish government is now resorting to taking money out of the pension funds. This is one of the biggest problems. There are millions of Spanish families without any member of the family working, many are living with just the pension of their grandparents. This situation is exacerbated since family cannot pay the mortgages and banks are evicting 500 families a day.

The controversy is made by two sides of the question. If Spain requests for the bailout will imply tougher measures from Brussels. However, if Spain does not reach a deficit of 5.3% of the GDP by the end of 2012 it will have  no choice, but to ask for bailout. The social impact on Spanish population will mean more cuts, reduction on pension funds, frozen wages and increase on inflation (what is it already at 3.5%). On the other side, the bailout will go to recapitalize the banks, and not to the wealth of the population, who will suffer even more the consequences.

A year ago, monetary union was destiny to die due to European banking meltdown and the controversy about the measures in the single currency. Today, when a possible debt forgiveness for Greece is on the table along with some more austerity measures, the ECB is willing to buy unlimited Spanish bonds in the second market. Although Germany has the last word, it seems like the single currency is being saved for an imminent break down. Now the question is, what conditions is Brussels going to impose to Spain in the new “package” of measures for bailout? And even more, what consequences will imply for the Spanish population?