Sustainable?
USA 1990 to 2013 in Trillions
GDP $6 to $15.6
Total Debt Government and Private
$8 to $43
19 minutes ago
Roubini Topic Archive: Spain
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It’s Time to Stop Using Chewing Gum and Chicken Wire in Spain
“Every leg of the eurozone crisis has been marked by denial of the full scale of the problems. Whether Spain’s authorities have been deceitful or wilfully blind makes little difference at this point. The banks will need more capital; the government will need external help, with all the market uncertainty and strings attached that this [...]
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Homeric Similes and Spanish Debt
“Nihil sapientiae odiosius acumine nimio“ (Nothing is more hateful to wisdom than excessive cleverness) Petrarch, “De Remediis utriusque Fortunae” Like Leo Messi charging his way through a packed Real Madrid defense, twisting now this way, now that, never stopping without being stopped, so did the Spanish sovereign debt surge forward, breaking directly into the red [...]
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Mr. Zapatero Said What……..?
Spain’s Tinsa Price Index was out last week, and showed Spanish property prices fell again in September, and at an accelerating rate. As Tinsa point out in their report, both “Metropolitan Areas and municipalities on the Mediterranean Coast,” whose rates experienced a significant drop from the previous month, have contributed decisively to this steep decline”.
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And Then There Were None
According to Spanish Prime Minister José Luis Rodríguez Zapatero speaking in an interview with the Wall Street Journal last Tuesday the European sovereign debt crisis is over. “I believe that the debt crisis affecting Spain, and the euro zone in general, has passed,” Mr. Zapatero said.
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On the Shoulders of Giants – How Spain Is Destined to Follow in Germany’s Footsteps
The current generation of policymakers seem to be like Captains of large ocean liners, out there on the high seas, bereft of either compass or adequate charts, trying hard to calm there worried passengers by telling them nothing is amiss. But the charts are there, if only they would look at them, and in the present Spanish case, unlike the old refrain, the future is ours to see, and it has a name: Germany.
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How Many Times Can One Driver Fall Asleep at the Same Wheel (And Live)?
“Break the thermometer, then you won’t have a fever.” – Former Polish President Lech Walesa
Watching the TV news here is Spain at the moment is often a rather discomforting and sad affair. The normal menu seems to consist of a constant stream of ministers who have to appear before the cameras and the public to explain something that they, in all fairness, don’t really understand themselves. And so it was on Saturday, as I tucked into my early morning breakfast of sausage and beans (Catalan style) in the village near my mountain retreat, there in the background I could see the face of Spain’s Labour Minister Celestino Corbacho (photo above), giving details to the assembled press corps of the latest government decision to make another six month extension for the 426 euro monthly “exceptional” payment for those whose unemployment benefits have run out. Why there are so many unemployed in Spain, and why renewing this subsidy is now an almost permanent necessity (this is now the third time that this “temporary” means of support has been extended), or what the real prospects of creating enough jobs to start reducing the unemployment mountain any time in the foreseeable future, was not explained. Well, the future is not ours to see, so “que sera, sera”.
Of course, the decision to extend the payment is to be welcomed not rebuked, but it is the set of circumstances which makes the measure necessary which is so worrisome, and the feeling that the country whose economy these ministers are responsible for managing is now more akin to a ship in mid Ocean, where the steering tackle is jammed and the captain has neither the faintest idea in which direction land is to be sought, nor knowledge of the appropriate wavelength across which to send out a Mayday rescue call.
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Controlling the Uncontrollable: Spain’s National Addiction to the Use of “Dinero B”
Well, before we go any further, I would like to make clear that what I am going to talk about in this post is not anything illegal, or even irregular (things like this must be going on in almost all Euro Area countries even as I write). Bending of the rules? Perhaps. Taking them to their limit? Certainly.
What Spain’s central, local and regional government does is take advantage of loopholes in Eurostat accounting regulations to generate debt that really is debt, but is not classified as such according to the Eurostat excess deficit criteria. Key areas involved are debts on the balance sheets of state (or regionally, or locally) owned companies, overdue payments for receivables (very common practice in Spain), and public-private-partnership-type leaseback-arrangements. None of these are (typically) classified as debt, though they do all have to be paid at some point, which means there is a stream of revenue (flow) impact rather than a debt (stock) one (unless and until Eurostat changes the rules). Which means that while they do not impact that critical debt to GDP number, servicing these liabilities does exaccerbate the annual fiscal deficit one. Which is why ultimately bringing Spain’s fiscal deficit under control will almost certainly prove to be much harder work than it seems.
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One Chart to Rule Them All, One Chart to Find Them (Out)
Look, if there is one simple chart which sums up everything that is wrong with current thinking at the International Monetary Fund, then it is this one.
Basically, I spent much of the day yesterday scratching my head, trying to work out how the hell the IMF could be forecasting Spanish GDP growth of 1.7% in 2012, of 1.9% in both 2013 and 2014 and 1.8% in 2015. And now it has dawned on me how and why they can. Quite simply they are forecasting current account deficits for Spain of 5.3% of GDP in 2010, 5.1% in 2011, 5.0% in 2012, 5.0 in 2013, 5.0% in 2014%, and 5.0% again in 2015. In other words, the assumption is that nothing fundamental is going to change in the post 2008 world, when compared with the years that preceded it. And this is clear when you come to look at the whole structure of current account balances revealed in the chart above, which are based on the IMF forcasts through 2015 as set out in the April 2010 World Economic Outlook. It is a case of plus ça change.
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Too Soon To Cry Victory?
Confidence Has Returned To Europe’s Financial Markets, But Lasting Economic Growth May Not Be So Easy To Achieve
ECB president Jean-Claude Trichet was in rather optimistic, one might even say jovial, mood at the press conference which followed this week’s central bank rate-setting meeting. Second-quarter GDP growth in the 16-nation euro zone would prove “really exceptional,” he stated, while the July bank stress tests marked “an important step forward in restoring market confidence.”
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Is There a Global Economic Slowdown in the Works?
According to Ralph Atkins writing in the Financial Times last week, “the pace of Germany’s recovery is helping dispel fears of a “double dip” recession across the continent as a result of the crisis over public finances in southern European countries”. Coincidentally, however, on the very same day, Alan Beattie writing from Washington informed us that the IMF feel “the risk of a slowdown in the global economic recovery has risen sharply”. This left me asking myself which is it: is the global recovery a question of up up and away, or are we at the start of a renewed slowdown (whether or not you wish to term this a “double-dip”)? So I thought I would take a look through some of the most recent data (both hard and soft) to see if I could make any sense of the situation.
