Saturday, October 31, 2009

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.


Charles Butler said...

God, you love those guys, Colin.

Edward hasn't hauled out the EU institutional inadequacy canard in a good, long time. Frankly, I'm surprised he's got the shameless balls to do it - seeing as he was dead wrong about the structural impossiblity of an ECB solution to the liquidity crisis. Note that they managed the crisis quite nicely, thank you. And when it came down to being geographically specific in their field of action - again structurally impossible - they started taking covered bonds at the window, bailing out the two banking systems that needed it most - Germany and Spain.

Of course, we all know that bumble bees can't fly and you can't park on a zebra.

As for Mr. Strickland, he was the one that tortured some consultants report into revealing 3 million unsold homes in Spain - one third of which had no roofs or walls nor the funding to change that sorry situation.

Note, with regard to the million unstarted homes, even Ambrose Evans-Pritchard didn't have the gall to count them as on the market when he cited the same report. That should tell you something about these characters.

Colin said...

Ah, yes but I always try to balance at least EH with you. And I did notice that he sneaked one million into his last report.

But they make for good alarmist reading. I used to think that he might be right but have now accepted that, if you have absolute power, you can do absolutely anything you want in the here and now, whatever the future cosequences.

I suspect the Spanish elite worked this out a long time ago, vis-a-vis Brussels. Self interest will ALWAYS arrive in the form of the 5th Cavalry. Or at least the Belgian equivalent.

But is it any way to run a whelk stall, as we used to say?

And are my assets safe?

Colin said...

Plus I literally forgot to write something yesterday and they were handy fodder at 9.30pm. But don't tell anyone . . .

moscow said...


Don't know if these guys HATE the EU......but it's a close call. Always fishing around for some spurious evidence to prove the inminent collapse of the EU....which then misteriously disappears.....never mind....on to more fishing around.

I seem to re-call I mentioned I did Economics. It's mostly all a lot of rubbish. Adam Smith, perhaps Ricardo, Schumpeter,a bit of's been downhill ever since.

The best example is that guy Authers at the FT. He had this nice graph showing how the pound had no way but upwards against the Euro. It all looked so cooly rational (at least it did compared Ambrose Prickard's rantings) delivered with that unique apparently nonassuming Oxbridge charm and assurance. Codswallop!

I can't be bothered with EH. It's more than obvious he is another EU-hating Brit or Anglo-whatever. Actually, he is much worse than Ambrose. At least Ambrose is entertaining and says the same with half the words and in a clear down-to-earth English. And without all those superfluous-pompous graphs and statistics.

About corruption. It's a sad business. But as I said, one by one they are all ending up behind bars....and more will come. Spain is still a young democracy, perhaps even it is still what someone called a 'low-density" democracy. It is a pity you dismissed my comment about 19th England with such nonchalance. History is relevant.
I believe democracy has the habit of sorting itself out in the long-run. There is nothing cultural about it, time and continuing reforms will do the trick. Civil society is still evolving. It won't be quick, but there is no need - yet - to always see the glass as half-empty.

For an authoritarian bureaucratic and corrupt regime, the EU is doing extraordinarily well. It might not last, but Europe is right now the richest part of the world - I read this comment in "Der Spiegel" one month ago, but since the Euro has gone up since then, it is probably even more true now.

As I said, next year things might look differently, but right now that's definitely not at all bad for such a sclerotic uncompetitive unwieldly entity.

Meanwhile, in Britain,.....I see Cameron has got himself into a terrible tangle with The Sun and the Lisbon Treaty. It will all end up in tears........

Colin said...

Hola, Moscow.

Good to hear from you again; I feared you were having another break . . .

First things first, I just read and enjoyed your exchange with Graeme. As you might expect, I am more with you than with Graham. Though, as you kindly volunteered, some of his proposals might produce quicker results.

I do have some difficulty with your use of the word ‘hate’. Is it really true that, just because someone passionately believes their views (and the institution which embodies them) are right and those of someone else wrong, he must hate the other and or his institution. I don’t, for example, hate my sister for her extreme Catholic views.

And does Ambrose really have to hate the EU to criticise it, if he stongly believes (you would say wrongly) that it’s not good for his country? Maybe he/they are on a mission but even this doesn’t necessarily mean that they hate the EU. The same applies to me, of course. I don’t believe in its future (though don’t deny any of its past/present successes) but I certainly don’t hate it. I don’t see it as a hateful fascist/ totalitatian regime, for example. Simply seriously flawed.

I, of course, did not study Economics, except as an amateur since some grasp was advisable for business. On the whole, I’ve enjoyed this and learned some useful concepts but I can’t claim to always follow EH and Charles Butler, though I like to think I usually get the gist.

Correuption: What can I add to what you and Graeme have said on this? Not much. It pains me that I hear no one Spanish saying much other than ‘Well, that’s what one expects of politicians; that’s why they’re there’. It will be interesting to see if anything comes of the El Mundo campaign. I don’t share your optimism that all of them will end up behind bars. The prisons aren’t big enough for one thing. Will we ever see Chaves’ head on a plate? Did Gil end his life behind bars? I didn’t by the way, intend to be dismissive of your remark about 19C Britain. As I recall, I couldn’t see why it was very relevant, except perhaps as an indication that things CAN be improved (as in the US case you mentioned). But, of course, (as with prostitution) there needs to be the political will to do this and while there is no popular will and corrupt parties pay no price, can you really see this happening soon? Yes, it might be sorted in the long run. But didn’t some economist say that in the long run we are all dead?

As for Europe’s wealth, you know better than me that comparisons based on recent shifts in currency are not very valid. Have Spaniards really got so much richer than Brits because the Spanish economy is performing so much better than the British economy? Does the statement of Spain’s net worth really reflect what is happening here and what is likely to happen over the next few years?

I see this morning that Cameron may have got himself out of trouble by welching on the commitment to a plebiscite on the EU. Learning to be a true politician!


moscow said...


Thanks for the long and measured answer.

Graeme SoW - you have to give it to him, at least he is nothing but consistent and persistently coherent with his own believes, even if to me at times he reads like a younger version of Noam Chomsky.

"To be on a mission" signifies to me very strong believes and a degree of stubbornness. I wonder why all this negative energy is directed with such force and determination against the EU. I conclude there are a number of reasons - which I have already explained in the past and I am not going to repeat today. If at the end I choose the word hate to define this phenomenom that is because it has the qualities of simplicity and effectfulness, although it might not be always entirely accurate to do so.

If being Eurosceptic means having doubts about the future of the EU and about the way things are carried out, then, I could probably classify myself as an Eurosceptic too. And the vast majority of the EU population as well. But you don't do away with democracy just because it's implementation is defficient or falls well short of the ideals. You don't do away with Spain's "autonomias" just because the system has imperfections and has resulted in widespread corruption. You don't throw away the baby with the water.

The problem with the gentlemen we discussed above, is that they seem to be focused on the possible failure of the EU with such intensity that it has hard not to believe that they wish it dead and done with. From there to hate there is a very small distance.

As for the EU's wealth - I agree that fluctuations in currency value should be taken into account. But Colin, imagine the inverse. The pound riding high. You would probably be able to hear the boasting and croaking all the way to Ponters. There would not be a day when we wouldn't read that the strength of the pound and the weakness of the Euro proves the superiority of Britain's economic policies. Euro-land would undoubtedly be cast in it's customary role of the sclerotic has-been. The Euro's strength is probably ephemeral, but the changes in a currency's level vis-a-vis others is an expression of it's strength or weakness. Given that at the beginning of this decade the Euro was laughed off as a 'toilet currency', it's current level is a bit of a vindication. And now we read in the press frequent references to the underlying strengths of the French and German economies (exaggerated I'd say - without a trace of irony). Some very intelligent people are out there eating humble pie by the truckload.

Undoubtedly, America will be back on track soon and much of the above will be forgotten. But I think there are lessons here to be remembered.