the good and the bad news is that economist design futures now 10 times faster
update july 2012 - spain has been cheated by the usa, germany and switzerland and brussels and luxembourg- until 2008 it was running a balanced budget
without the fraudulent rating agencies of usa subprime and america's macroeconomists who hire themselves out to speculators and big brothers- the global property bubble would have bust would have happened earlier, and spain would still have solvent banks (or enough money to sack their bust owners)
so spain wouldnt have borrowed so much from germany
and switzerland - it issued the rule that banks needed less liquidity the nore property they invested in
and luxembourg -sitezerlan's partner in eu
and bruseels whose grants fulelled spain's uncompetive strategy thes elats 15 years
solution -spanish politicains should demand that spain and germany elave the euro unless germany forgives half of spanish debt owed to german banks; as for switzerlan the whole of europe shjould stop trading with it while it runs bank accounts that represent every world evil; demand downsizing of half of brussels eu bureaucrats unless they want to come and work in spain
time for queen sofia of spain and greece who has networeked microeconomics more pasioately than any royal to linkin with other euroepan royals and sack any politician who disagrees with above
in mamy ways spanish youth have responded better to the fatal conceit of euro elders than other countries - love to meet the most entrepreneurial of these young people
Youth unemployment 2010: 41.6%
Youth unemployment 2007: 18.2%
At 35.6%, Spain has one of the highest school dropout rates among developed nations. With a paltry 0.8% growth rate in 2011 the country's youth can't expect the situation to change anytime soon. Spain is at risk of losing a generation to emigration which would in turn have a long-term impact on its economy.
spains problem as at may 2012 - according to deputy PM
Spain is asking for huge sacrifices from its citizens she said, with budget savings this year of more than 45 billion euros, which have meant spending cuts in schools and hospitals.
At the same time, she noted, interest payments on debt this year will rise to 30 billion euros.
"For states that are making the effort it's not possible to explain to their citizens that what they save through austerity will then be spent on higher interest payments on debt," said Saenz, a lawyer by profession and one of Prime Minister Mariano Rajoy's closest advisors.
Meanwhile, almost one in four Spanish workers is jobless and unemployment is expected to rise even further in the coming months as the economy contracts again after barely emerging from its last recession.
"Countries which are doing reforms need to find a way to be rewarded rather than punished," she said, pointing to her government's overhaul of labour market rules to make companies more competitive, as well as its reforms of the financial sector.
SWIFT EUROPEAN ACTION NEEDED
Spain says it can foot the rising bill to rescue its banks on its own, after a property market crash left them with more than 184 billion euros in sour assets.
And the government is expected to announce later this week guarantees that will help the country's 17 autonomous regions refinance their debt.
e problem in Spain is not that its politicians lack the resolve to reform. In recent months Mariano Rajoy’s new conservative government has pushed through a labour-market overhaul. Over the past year or so Spain has pared pensions and written debt limits into the constitution.
Spain’s problem is one of misdiagnosis. Its government and European officials reckon the main challenge is fiscal. They argue that the budget deficit, which reached 8.9% of GDP last year, must be brought down as fast as possible to boost confidence and cut borrowing costs. Spanish politicians have dithered about cleaning up the country’s banks, for fear that doing so would demand an injection of public funds which, in turn, would worsen the government’s finances.
Private debt, public pain
This fiscal focus gets things exactly backwards. Spain’s poor public finances, unlike those of Greece, are a symptom rather than the cause of the country’s economic woes. Before the crisis Spain was well within the euro zone’s fiscal rules. Even now its government debt, at around 70% of GDP, is lower than Germany’s. As in Ireland, the origins of Spain’s debt problems are private, not public. A debt binge by Spanish households and firms fuelled a property bubble and left the country enormously in hock to foreigners. After adjusting for all the foreign assets they own, Spain’s households, firms and government collectively owe foreigners almost €1 trillion ($1.25 trillion), or more than 90% of GDP. That is on a par with crisis-hit Greece, Ireland and Portugal, and far higher than in any other big rich economy. Spain’s banks were the conduit for this private borrowing binge, and are being hit hardest by the bust.
This episode features Institute for New Economic Thinking grantee Hans-Joachim Voth talking about the crisis in Europe. Voth, an ICREA Research Professor at the Universitat Pompeu Fabr in Barcelona and a German native, offers a unique dual perspective of a German seeing the impact of his home country's actions in Spain. Voth explains the short-sightedeness of Germany's handling of the euro zone crisis and suggests what Germany needs to do to help Europe finally emerge from the crisis. Below is an introduction from interviewer and Director of Institutional Partnerships Marshall Auerback. Watch the interview to see what Voth has to say!
Last year, there was a great sense of crisis about Europe, especially Spain.
The alarm was reasonable, as Spain was the one large economy where all the economic numbers appeared to have gone past the point of social acceptability: 25% unemployment and over 60% youth unemployment for those under age 25.
But as the country was collapsing, Germany continued to insist on “fiscal responsibility” and resisted significant recapitalization of Spain's banking system, which had collapsed in the wake of the country's real estate crash. Yet the only way to reduce the country's government deficit, as Hans-Joachim Voth argues in this interview, is by reduction of the private sector’s saving (which has deteriorated rapidly) or by movement of its current account toward surplus. Not coincidentally, Germany is a large net exporter, with competitive advantages over Spain.
Since Spain has adopted the euro, it cannot improve its competitive position by devaluing its currency. Its only hope for increasing exports is through a “race to the bottom” reduction of wages and other domestic prices. But doing so will reduce aggregate income and tax revenues—and this is a precarious path toward a current account surplus in any case because other periphery nations are in the same situation.
It is not clear that Spain can win the race to the bottom—against countries like Ireland, for example—and even if it were to win the race, that would simply mean that some other loser would take Spain's place.
Germany can only be a net exporter to euroland if some other euro nations are willing to be on the other end of the transaction. France, Italy, Belgium, and Spain are among Germany's 11 largest export partners, with each of these countries having a net deficit with it. It is the government and private deficit in these countries that’s effectively financing Germany’s exports and allowing it to run fiscal surpluses. Germany’s push for fiscal austerity combined with its export policy simply amounts to a mercantilist-type beggar-thy-neighbor policy of exporting its unemployment to its trade partners.
Within euroland, this strategy is at best a zero-sum game so long as Germany insists on fiscal austerity for all nations and yet plans current account surpluses for itself.
It is hard to fathom what the Germans are thinking, because as the crisis spreads from the periphery to the core, Germany’s export markets will fall like dominoes. Voth discusses the crisis in these terms in the following interview and illustrates the futility of trying to achieve euro zone-wide prosperity with a race to the bottom in a continent still characterized by woefully deficient demand.
What are his suggestions to end the crisis? Watch the interview to find out!