Friday, January 09, 2009

As someone who’s on record as saying years ago that Spain’s economic boom was phoney and that it would end in copious tears, I can’t claim to be at all surprised that the Spanish government is claiming December’s economic data was ‘unimaginable’ only six months ago. Or that the developments we’re now witnessing are light years away from the predictions made by the government both before and after the general elections, only nine months ago. What does surprise me is that President Zapatero and his colleagues don’t appear to be copping too much blame for the increasingly dire situation - perhaps because the main right-of-centre paper [El Mundo] is far more interested in attacking the leader of the right-wing Opposition than the left-wing government which has managed the economy over the last four years or so.

So, how bad are things? Well my [useless] market research sample of one suggests in Pontevedra they’re polling along pretty much as usual. As far as I know, none of my neighbours have been made redundant. And, while the boom may be over, vast blocks of new flats - started 2 to 5 years ago - continue to rise all over the city. Elsewhere in Spain, though, things seem to be very different, particularly in those parts of the country reliant on money from Brits, the new poor of Europe. On this, here’s an article describing what’s happening down south. Addressing Spain as a whole, the [arrogant, obsessively eurosceptic Anglo?] author writes:- “When historians begin to assess damage from the credit crunch, Spain will surely be singled out as a classic study of what can go wrong inside a monetary union when the policy requirements of its members become hopelessly misaligned. It is simply not possible to pursue the best interests of every participant when some nations are running trade and fiscal surpluses while others clock up huge deficits. Ten years after it was launched, the euro is propelling Spain towards disaster.” Strong stuff. But, then, if deflation really does hit us, it surely will be a disaster and there’s no knowing what will result. Particularly as regards social unrest. Given regional/tribal tensions, Spain is difficult to run at the best of times so I don’t envy Sr Zapatero the challenges of the next two or three years. No wonder he no longer looks like the relatively wrinkle-free ‘Bambi’ of a couple of years ago. Truth to tell, though, he probably ain’t seen nothing yet. And it may be a bit of hubris to be letting it known that he’ll be happy to stand for a third term in 2012. Assuming he hasn’t had a fatal heart attack.

As for Brits who are already property owners in Spain – or thought they were – today sees the big demonstration down in Andalucia against the infamous property abuses the construction boom brought with it. And tomorrow is the day I assess the Spanish press for reports on the campaign by people whose money Spain seems to now need more than ever.

Meanwhile . . . Interesting to read that Britain may be moving from individual garbage bins to the far-more-sensible Spanish model of large communal containers. But will they be emptied every night, as they are here? I suspect not. Anyway, go to the end of the article for a potted history of British rubbish collection over the last 712 years.

Two customer service tales to finish with today . . .

An English friend who returned to the UK last year called his Spanish bank this week to chat about how the fall in the pound had hit him and about the possibility of some sort of arrangement that would suit both parties. At the end of his sob story, the bank employee replied baldly “And?”. “Well”, he repeated, “I have a problem with the mortgage payments.” “That’s your problem, not ours” she replied. As he said, he really should have known. But one forgets. Perhaps the banks will review their policies when the foreclosures have turned them into estate agents with a full inventory and no customers. Or perhaps they won’t.

My partner decided to have a neck massage today. The girl who gave it was very pleasant and efficient but clearly thought there was nothing odd about this little conversation:-
Oh, I see in your leaflet that you do foot massage as well. I think I’d like one of those one day.
Yes, well, we don’t actually offer that yet.
But it’s in the leaflet with a quoted price.
Yes but the girl who’ll do it hasn’t been trained yet.
So, when will she be?
Well, she’s hoping to fit it in this year.

I guess if the downturn is as bad as feared, she might just be able to find the time, untroubled by difficult customers asking for services that are advertised but unavailable.


moscow said...

You are on record? Many people are on record. It was an altogether easy forecast to make.

I would qualify your statement about the growth in the economy being phoney. Out of 15 years of growth, how much were phoney? two years, three perhaps? Let us be radically pessimistic, and assume it was five. That still leaves ten years of real growth.

Not all growth, by any means, was linked to construction and tourism. Spanish companies have benefited from the Euro in more ways than one. It has created the level playing field which has allowed them to expand and compete internationally. I am under the impression (wrongly probably) that you vastly underestimate this phenomenon.

One more time, Spain will have to implememt structural reforms. The Euro-sceptics in Britain would love for countries such as Spain and Italy to fail and so have the whole thing unfold. And they sense - or simply believe - that the PIGS are the weak link in the Euro structure. Part truth, part wishful thinking.

I agree with you that there will be pain - in Spain. What I believe is that the pain will be even greater than you think, because Spain will never leave the Euro - and will hence have to undergo painful reforms. The only question is, will Zapatero bite the bullet? Or will Spain have to wait for someone else to do it?

The commentators in the DT certainly don't lack imagination. By the way, the pound has risen the 01.01.09.

Colin said...


Well, I didn’t claim exclusivity, of course, and I’m sure you’re right that a lot of people were being wise before the event. But I don’t recall reading much by way of criticism/warning in the Spanish press. Nor do I get the impression the Spanish government anticipated or planned for the inevitable bursting of the bubble. Maybe the folk at 5 Spaniards did – in line with their latest commentary [see below] but I wasn’t reading them back then. Was it really wise to let your population grow by 10% on the back of a phoney boom?

It is quite possible that I underestimate how much Spanish companies progressed after joining the EU, but only because of ignorance, not any sort of antipathy to Spain or the EU. You gave me a long list of companies but I didn’t know many of them, I must admit. Most recently [ignoring Zara] some companies have become internationally known but, of course, there was a lot of money swilling around with which to make foreign acquisitions that may or may not turn out well. This is not sarcastic . . I would welcome info re which sectors have done well in the last 10 to 15 years, other than construction and tourism. I guess I could research this but suspect you have some data at your fingertips.

I must admit I thought it was generally felt that the construction boom lasted nearer 10 years.

And, yes, I’m as sure as you are that Spain won’t leave the EU. What a shock that would be after her being the largest beneficiary for so long. I’m sure any number of rules would be bent to keep her in. Yes, exit is unimaginable. But then so was much of 2008 in 2007. But one wonders how much social unrest there will be and what the consequences will be, especially as you say the pain will be even greater than I believe it will be.

Yes, I saw the pound had risen but I don’t place too much importance on occasional fluctuations. I am waiting to see whether the pessimists are right about the euroland 2009 performance and the response of the ECB to developing events. I have heard it said that they are consistently slow and wrong. Possibly because they have to balance competing interests.

PS If there are, indeed, eurospectics who would leave to see
some members 'fail' and leave the EU it would, again, not necessarily be because of antipathy. Merely the satisfaction of being proven right. A common human sentiment. It doesn't have to be schadenfreude. As for me, I live here. I certainly don't want to see the 'Spanish Euro' devalued by the 30% my Spanish friends felt it merited at dinner last Friday night. I may have to sell up and move somewhere else!