Spain's bank balance starts heading in the right direction

Some good news from Europe.

This chart, from JP Morgan via FT Alphaville's David Keohane, is quietly rather good news:

 

TARGET2 (Trans-European Automated Real-Time Gross Settlement System – yes, it's not a particularly good acronym) is the European inter-bank lending system, used for settling cross-border transactions throughout the eurozone.

If a Spanish supermarket buys beer from a German brewer and pays with a bank transfer, then the euros aren't just sent directly from one account to the other. Instead, they are channeled through the countries' central banks. The German brewer gets money from their bank, which gets the money from the Bundesbank, while the Spanish supermarket owes money to their local bank, which owes money to the Banco de España. The two central banks then settle those debts with the ECB, and that's the where TARGET2 comes in. Over the long-term, these debts and credits don't always even out, and so countries end up with balances with the ECB.

The chart above shows that the long-running trend for Germany to have ever-increasing credit, and Spain ever-increasing debt, may now be reversing. This is a good thing, because one of the few silver-linings of the crippling austerity the Spanish people have experienced over the last year is that the so-called "internal devaluation" – the reduction of wages in the country – is supposed to increase the strength of exports.

The TARGET2 trend also indicates that fears of a Spanish bank run are unfounded. While it doesn't leave the country in the all-clear – if people are taking money from banks in cash, it wouldn't show up on this account – it bodes well for the health of the banking sector.

But the most important aspect of TARGET2 for the eurocrisis as a whole is that it provides a mechanism for mechanical exit of the euro. We wrote about this in May with regards to Greece, but the short version is that if the debt gets too big, the ECB can decide to simply stop lending to the country. If that happens, the state is all but ejected from the euro in a stroke.

Greece may not be out of the water yet, but the knowledge that Spain is, for the time being, perfectly safe in the eurozone will help the country get its bearing. It still leaves Rajoy with the tough decision as to whether or not to officially request a bailout, but his hand is no longer as forced as it was.

Symbolic. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Anoosh Chakelian
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A view from Brexitland: Boston, the town that voted strongest to leave the EU

This little pocket of Lincolnshire is waking up to the realisation that its voice has finally been heard.

It’s market day in Boston. Stall owners are setting up, chattering and squinting in the crisp morning sunshine. Trade yawns into life amid the stands of fruit, squat pots of begonias, secondhand comics and pet supplies, as it does every Saturday.

But this isn’t every Saturday. The little Lincolnshire town is waking up to the realisation that its voice has finally been heard. It has returned the highest Brexit vote in Britain, with 75.6 per cent voting to leave the European Union. An aim that has boiled beneath its quiet, quaint surface for years.

Described by the Mail three years ago as “the town that’s had enough”, Boston is home to the highest concentration of EU migrants after London. In the period between 2004 and 2014, the migrant population increased by 460 per cent. Of the 64,000 people now living in the borough (some officials believe the real figure could be 10,000 more), about 12 per cent were born in EU countries.

This is a monumental demographic change for a sleepy farming town that was almost entirely classed as “white British” in 2001 (the constituency of Boston & Skegness is now 86 per cent white British, and 10.8 per cent “white other”).


West Street, Boston. Photos: Anoosh Chakelian

The new Bostonians are chiefly Polish, Latvian and Lithuanian – I also hear smatterings of Russian as I wander around. The market square is filled with elderly English people, gossiping and enjoying cooked breakfasts in the sun, young men excited about the Poland v Switzerland match that afternoon, and families of all backgrounds. It’s a mix, but anxiety about people speaking different languages is voiced by nearly every born-and-bred Bostonian I meet.

“If you close your eyes, you can sometimes only hear eastern European voices, and that can be scary,” remarks Paul, a 59-year-old engineer perusing the fruit stands. “Because of the language barrier, they all stay together, almost like a ghetto. People are people wherever they come from, and we wouldn’t have a maternity unit without them, but it’s been too fast. Integration takes time; you can’t do it instantly.”

“People joke here that you can walk through the town and not hear a single English person,” adds Chrissie Redford, a chief reporter at the Boston Standard, during a coffee break from reporting. “And that’s happened to me. My concern is now so many people have voted, whether that rift will get deeper.”

Three Latvian men in their thirties are sharing a beer in the nearby churchyard. Boston’s tall, distinctive medieval church tower, known affectionately as the Stump, looms over them. “What happens now?” asks Vitels, who is rolling a cigarette. He has been working factory shifts here. “I can’t go back to Latvia, there are big problems there. Romania, Bulgaria, everywhere there has been war. Nobody wants to live like that. [Brexit] makes me feel bad. People think I’m difficult, because I’m foreign.”

“The economy in Latvia is not good, but in Britain it’s very good,” frowns Gatis, who is self-employed. “Why are we here? Because we live much better here. It’s nicer.”

The English agree, which is part of the problem. “It’s a really good way of life in this area, and that is why it went so heavily for Out,” Mike Cooper, the tweed-clad owner of a local car museum, and Tory borough councillor, tells me, as we weave between the market stalls. “People feel that the massive influx is eroding their way of life. We’re not being racially intolerant; we’re living with it day to day.”

Cooper voted to leave, but there is no spring in his step. The local politicians and farm and factory owners know that this town relies on migration. Eastern Europeans settle in Boston because there is such a demand for agricultural labour, and for food manufacturing workers. Most of the vegetables we buy in our supermarkets are grown in Lincolnshire.

The perception persists among some I meet that migrants are “taking jobs from our own people”, but unemployment here is comfortably below the national average. The council estimates that around 20,000 economic migrants work in the Boston area, whereas the current number of people claiming unemployment benefits was just 630 on the last count, according to Office of National Statistics figures from May.


Boston voted for Brexit by 75.6 per cent.

But such a large low-paid workforce does cause difficulties. The average wage here has been forced down (£9.13 an hour, compared with the £13.33 national average) by employment agencies hiring cheap, flexible labourers. Similarly, rents have been driven up disproportionately by landlords taking advantage of the newcomers’ willingness to live ten to a house.

But migrants complain that they receive the blame for this, rather than those abusing their vulnerability. “It’s quite sad, because it looks like [politicians] aren’t interested in these things,” says a 40-year-old construction worker, Zee Barbaks, who campaigns against exploitative gangmasters. He and his wife, both Latvian, arrived in Boston 11 years ago. Before their two young children were of school age, they alternated factory shifts in order to look after them, “swapping them over in the car park”. I sit on a park bench with him while his son scampers around the playground.

“Agencies keep people out of holiday money and sick pay, they make them pay their wages on accommodation,” Barbaks says. “When women get pregnant they don’t give them work. Sometimes they use three people for one job – so those people are getting nothing.”

He is saddened by the huge local Brexit vote: “Ten years ago, Boston was empty. Before, every second shop was closed on West Street,” he says. “If you look now, there are loads of changes in a good way, eastern Europeans starting businesses. But now, if they stay out of Europe, in ten years’ time, it’s going to be like it was ten years ago. They’ve just done ten steps back.

“I understand that it is loads of people who have moved in, but if the agencies were sorted out, there would probably be less people here. This is what the government should be looking at.”

But it’s a perceived cultural divide, rather than material concern, which has driven Boston so strongly towards Brexit. Even the Ukip deputy leader of Boston Borough Council, Jonathan Noble, concedes that West Street was a ghost street when recession hit before the migrants set up shop (“so they have done some good here”).


Councillor Noble thanks Boston for voting Leave.

Although people worry about pressure on public services – difficulty getting school places and GP appointments, in particular – the local economy is healthy. The message they have sent to Westminster is a plea for identity.

“We’re British,” shrugs Mike, a 66-year-old retired lorry driver sitting outside a café. “I don’t care if prices go up; at least we’ll be running ourselves. We’re top of the league for wanting them [migrants] out. Some of the Polish people are nice, but there are too many.

“Barack Obama, flipping David Beckham, Bob Geldof, Cameron saying it’s good to have them here – that made me more determined, I got fed up with it. All the money is down in London, it’s disgusting. [Immigration’s] gone too far anyway, I doubt much will change. We should’ve listened to Enoch Powell. Good old Enoch,” he chuckles. His wife gives him a stern look.

“I’ve heard there’s a sign on a shop in West Street that says ‘No English’,” adds his friend Fred. “I might want to buy a Polish cake. But they don’t want to mix with us.”

Walking up and down West Street – where there are numerous eastern European restaurants, Baltic food stores, a Latvian bakery and Polish pub, and roars of “Polska!” from football fans – I can’t find that ‘No English’ sign. I doubt it exists. But it’s the perception that’s telling. English locals are the ones who feel unwelcome, far more so than their European neighbours (those I speak to are overwhelmingly positive about their hometown). They also feel their views are unwelcome in Westminster.

“We’re the ones living it,” says Chris Pain, who has owned a number of businesses in Boston and sits as an independent on Lincolnshire County Council. “When in London they say ‘we need more people’, we know that’s not true. They like it [immigration] because they can eat in nice restaurants and have people from abroad doing their menial work.”

There is hope for integration in a post-Brexit Boston, however. Young people I speak to are far more positive about their foreign neighbours. “I’ve grown up with knowing the EU,” says Kirsty, a 21-year-old graduate training to become a teacher. “I have no problem with the other communities. I’ve worked in McDonald’s and cafés around here with people from Poland, Lithuania and Latvia and they’re absolutely wonderful. People need to learn to understand each other more – actually communicate. And they don’t; that’s why there’s a misunderstanding.”

Also hinting at a more harmonious future is Sylvia Giza, 38, who has lived in Boston for 12 years. She works behind the counter of a Polish butcher’s off West Street. “We pay tax, we are educated, we buy a house. We’re not scary. I have three children, they go to school and learn English, and now they are speaking in English to me at home! So I take the book and try working and reading,” she grins, turning to her next customer – an English woman surveying the array of Polish sausages.

Anoosh Chakelian is deputy web editor at the New Statesman.