Local debt is the big untold story of the Euro crisis and, if that was not apparent before, it became glaringly so when Cataloniaâ€™s President this week told the world his autonomous Catalan Government would struggle to meet its bills at the end of this month.
Looked at from afar it might be difficult to interpret what this â€œlocalâ€ problem means for Europe and those countries dependent on European consumer markets â€“ but weâ€™re always talking about a Euro problem when in fact it is a thousand local crises too. Put in American terms Cataloniaâ€™s problems are probably best likened to a successful area in the USA, like Austin, Texas, asking for a bailout.
The capital of Catalonia is, of course, Barcelona and Barcelona has a global reputation for excellence that stretches back to its management of the 1992 Olympic games.
A succession of charismatic mayors has turned Barcelona into a poster for regional economic success. Barcelona has done pretty much everything that the text book says a regional economy should do. It did â€œclustersâ€ â€“ it has a very strong cluster of companies in global logistics, it maintained regional manufacturing and grew a strong service infrastructure, it has a strong creative economy, the ESADE business school has a global reputation for management education, it has a very strong, competitive culture. And it has the worldâ€™s best football club, which gives the city global exposure week in, week out. Catalonia accounts for a quarter of Spainâ€™s GDP. It is a success story.
But local indebtedness in Europe should come as no great surprise either. Germany and France bother have large local debt problems that are anything but transparent. In fact in the case of France much of the local debt was inherited from the central Government, which â€œdelegatedâ€ the debt to localities where national funds were spent, effectively reducing the national debt headline figure.
Here is the big picture
In April last year the Economist also warned of all the mini-Greeces in Germany:
Germanyâ€™s 11,000-odd municipalities had a deficit of â‚¬7.7 billion last year, the second-highest everâ€¦. in NRW( North Rhein Westphalia) local social spending rose by 274% between 1980 and 2006, whereas revenue went up only by 104%.
Local debt refinancing in Spain this year, though, is Euro 36 billion with Euro 13.5 billion of that falling to Catalonia. The reality is that, at this local level in Catalonia, the failure to refinance debt will lead to real wealth destruction and impair Spainâ€™s prospects for years to come. When a success story like Catalonia hits the skids like this, you know the problem runs deep, very deep, but Catalonia also symbolizes something about Europe right now. It is not just a financial crisis but an existential one.
The same thing is happening in the United States. Iâ€™d love to see the Canadian numbers.
Lionel Messi is only 23 and about to explode on to the world stage as one of the best soccer players ever to play the game. Here is how the New York Times sees it.
He is 23, with a grown-upâ€™s income reported to exceed $43 million this year. Yet Messi still has a boyâ€™s floppy bangs, a boyâ€™s slight build and a boyâ€™s nickname, the Flea. Even the ball stays on his feet like a shy child clinging to his fatherâ€™s legs.
It is a boyâ€™s fearlessness, enthusiasm, calm and humility, too, that help explain why Messi is already considered one of the greatest ever to play the worldâ€™s game. In the space of 18 tense days from April to early May, Barcelona played four ClÃ¡sicos against its archrival, Real Madrid. The Madrid strategy was to strangle beauty out of the matches, to use nasty muscle against Messi, to shoulder him down or shiver him with a forearm or take his legs in scything tackles. Once, he was sent rolling as if he had caught fire.
Messi made small appeals for fairness with his eyes and hands, but he remained unflappable and without complaint. He did not yell at the referee or clamp a threatening hand around an opponentâ€™s neck or fake a foul and dive to the ground. He remained apart from ugly words and scuffles and expulsions that marred the matches. Instead, he trumped cynicism with genius.
The description of his play reminds me a lot of how Wayne Gretzky was described early in his career. Too small for the rough stuff but impossible to contain and yes he brought genius to the ice.