Oh, dear. Edward Hugh is now more pessimistic than ever. He feels there’s a “spectre stalking the corridors of Europe's most prestigious institutions” and that it is the Spanish economy, which “stays on a flat line while Europe's other economies, one by one, start to struggle back to life”. This, he says, is giving everyone so many sleepless nights because “Europe's current institutional structures - especially the monetary policy tools available at the ECB - are scarcely prepared for such a nightmare eventuality.” Is this going to prove the British eurosceptics right or will Brussels once again find the rules flexible enough to permit an effective response to the challenge? Who knows. Meanwhile, Edward see us “coming out of recession with a eurozone divided into three groups”. Which wasn’t exactly the plan, I guess.
One major reason for Spain’s economy flat-lining is that, as Mark Stucklin puts it, “Spain’s residential building trade is shrivelling up. All the resources that used to be dedicated to building hundreds of thousands of homes each year are increasingly standing idle. In the boom years the real estate sector, including construction, accounted for close to 20% of Spanish GDP. By some estimates it has now shrunk to 10%, but that is still substantially above the OECD average and way too high for Spain. It helps explain why unemployment in Spain is heading for 20%. Every point of GDP lost to the housing slump destroys 200,000 jobs. That in turn is bad news for the housing market, as people without jobs can little afford to buy a home or pay the mortgage.”
As if all this weren’t bad enough, the country appears to be awash with corruption. Which is another consequence, of course, of the phoney boom on the back of property-driven speculation. Reader Moscow has taken me to task a couple of times over the years for harping on about this but, frankly, it’s hard not to when the papers give us a new case every week. Why, things have now got so bad even El País and El Mundo have started to demand something be done about it. Better late than never, I guess.
But it’s not as if there’s no good news. If you’ve got a job, life is still good in Spain. All the cafés and bars and most of the shops are still open. And the country can still do well in this sort of survey.
Which is a consolation. I guess.