Spanish economy – meltdown or all well?
SPANISH ECONOMY - MELTDOWN?
So, what is going to happen to the Spanish economy? This is, obviously, something that concerns anyone living here but also the rest of Europe – who could suffer from any meltdown in the Spanish economy.
Who do we believe about the current situation – the Spanish government, the bond markets or economists? What is the truth within all the ‘white noise’ of conflicting vested interests and PR releases?
Well, I have always been deeply sceptical about the underlying strength of the Spanish economy. Indeed, anyone who has been following my writing over the past few years will know that I was treated like an irresponsible idiot crying in the wilderness about the forthcoming crisis five years ago. It was blatantly clear to me then, and over the following years, that a balloon of hot air was being pumped up to such ludicrous levels that it could only lead to a long term disaster.
However, I do not claim to be an economist and I am certainly unqualified to make any assertions on the Spanish economy from a professional point of view. That may not be the case, you may think, for a writer in the UK Telegraph who gives (see Relevant Info below) a pretty apocalyptic warning. Indeed, he suggests that the Spanish economy is in deep trouble.
Certainly, I think that matters are far worse than the Spanish goverment admits. In any case, they are renowned for unreliable data. If you ever doubt this then check out the Ministry of Housing, who declare that Spanish property prices are down only some 13% from their peak. If the subject matter was not so serious – it would be an assertion worthy of raucous laughter. In reality, Spanish property prices have dropped, conservatively, somewhere between 30% – 40%.
Meanwhile, earlier today, I was reading a (Valencian biased) Spanish paper and at random picked out the following: new car sales are down 25% (the 5th consecutive month of falls), the earnings of the big three furniture/furnishings fairs in Valencia are down 70% from their 2007 peak, some citrus fruit prices have fallen by 35% and the Generalitat of Valencia has a debt of some 10 billion Euros…
This is pretty much a reasonable ‘take’ on daily news. Meanwhile, national Spanish unemployment (paro) is over 20% (government figures) and probably, in reality, very much higher with, as I have stated before, little obvious reason why it should reduce for some considerable time to come.
I have not, of course, mentioned the state of the Spanish banks. I fear that their condition, particularly the local savings banks (the Cajas) is too terrible to contemplate – without first being firmly half-cut from too much Sangria. I dread to think what the Spanish banks true exposure is as a consequence of their lunatic involvement in the Spanish property boom.
Needless to say, one argument for underlying strength in the Spanish economy comes from those claiming that there is such a large Spanish ‘black’ economy (economia sumergida) that below the surface there is no real problem.
Well, there is certainly a massive Spanish ‘black’ economy. That is undeniable.
However, to state the obvious, when there is no work then there is no work – whether it involves ‘black’ money or not. If money is not circulating – then it is not circulating and if there is no sense of security and well being then people will not be spending and so on. All basic, human stuff but utterly fundamental.
In reality, therefore, I have no doubts, personally, that the Spanish ‘black’ economy mirrors that of the ‘white’ economy. If I am right then this means that the Spanish economy cannot rely upon all being well because everything is motoring along happily within the Spanish ‘black’ economy .
The Spanish governement is now reacting to the crisis and I expect some initial market optimism. Prime Minister Zapatero, amongst other things, is cancelling an unemployment benefit of 485 Euros and privatising 49% of AENA and 30% of the Spanish lottery and is offering tax breaks to stimulate small and medium size businesses. All of this – after previously applied austerity measures.
However, it is difficult to not to ask why nothing was done years ago?
Frankly, appallingly poor management of the Spanish economy has been followed by state denial, for far too long, that any major problem actually existed – despite clear evidence to the contrary. Now, rectification is in the hands of the very people who had their ‘hands on the tillar’ before the crisis and they are ‘aided’ by a state system that remains so elephantine that it makes the UK’s, by comparison, look like something out of Challenger II.
I stress that I am no economist – however, having studied the reality of Spain for a recent book I have no doubts that the next few years will be (to use a ‘weasal’ word’) challenging….
Does this all make me sound disenchanted with Spain?
You may think so – but you would be wrong!
I have lived here permanently with my family for some years now and I remain passionate about Spain and the wonderful way of life that it has provided (and continues to provide) for us.
However, am I angry about a self-made crisis – a crisis that is leading the most talented and dynamic Spaniards I know to seek work and a new life and prospects abroad? Am I furious about the present crisis causing untold hardship to those weighed down with debt and lack of prospects for the forseeable future?
I am.
RELEVANT INFO:
work in Spain and the Spanish economy
HOW TO BUY SPANISH PROPERTY AND MOVE TO SPAIN – SAFELY
(80,000 words, 327 pages, 26 sections and 9 expert contributors – e-book 14.96 euros)
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