Saturday, April 28, 2012

Over the years, I've had a few tussles with a reader in Russia who uses Moscow as his handle. Mostly about the EU and its future. At one point Moscow reminded me the whole point of the single currency was to force the weaker members to reform their economies, so there'd be convergence with those of Germany, Holland and the Scandinavian countries. So, I thought I'd take a look at where we are, after a decade or so of the euro straightjacket:-
Do we have now an economy as strong as Germany's? - No. We're in recession again.
Do we now have an export sector anything like Germany's? - No. It's pretty small and, though it was growing, the latest figures show a decline.
Do we now have an unemployment rate like Germany's? - Not by a very long chalk. In fact, we have the highest rate in Europe.
Do we now have a budget surplus like Germany's? - No. We're struggling to keep the deficit below 6%, double what EU rules permit.
Do we have a credit rating like Germany's? - You must be joking. It's way below and has just been reduced further.
Do we now have productivity levels like Germany's? - Err . . No. Nothing near it and our level hasn't improved in 10 years.
Do we have an exchange rate with which we can easily live? - Very funny. Even the pound is now rising against the euro, despite the UK having gone back into recession.

Hmm. There must be something we share with Germany . . . Of course! Thanks to constant high inflation, we now have a cost of living at Teutonic levels. So the euro hasn't been a complete failure, then.

But there is good news. My lovely neighbour, Amparo - the other side from the divine Ester - told me last night Toni has, indeed, gone off to sea again. But only for a month or so. He'll be getting back just as return from the UK.

Back to the EU . . . Whatever the achievable/unachievable each member has for its budget deficit for 2012, all of them have 3% for 2013. Which is laughably unachievable by Spain. It's been hard to understand why bureaucrats and politicians have stuck with this nonsensical number and. But now comes some evidence that even they don't really believe it. As if they ever did. The thinnest of thin edges of a wedge?

The weather: First of all, I have to stress yesterday wasn't at all bad here in the the Rías Baixas of Galicia. And today is gorgeous. But I am about to return to a UK where the forecast is for the coldest May in 300 years. I suspect that whatever is going to cause this will also hit Galicia, at least to some degree.

Walking down to town yesterday to collect my just-serviced car, I was passed by at least ten driving school vehicles, all with their normal complement of one pupil at the wheel and two to three more in the back. So, there's another industry bucking the trend. And possibly one in which we'll see more and more entrepreneurs investing their capital. Maybe.

Finally . . . The bars in Pontevedra's old quarter were all humming last night. Especially the new ones, which can count on the in-crowd patronising them for a few months. Possibly even a year. Until the next new place opens up. Meanwhile, here's some evidence to support my claim that people are using their cash not for clothes and shoes but for having a good time and laughing in the face of austerity.


Alfred B. Mittington said...

My dear Colin,

The whole point of the single currency was to bring the whole of Europe under the sway of Brussels, without such unpleasant midway hassles as democratic mandate or a true constitution. Nobody who knew both the north and the south would ever maintain that the Med Countries could become as productive as Germany, or that North Sea countries could reach such a relaxed Cualidad de Vida as our Southern cousins. The Euro, my dear boy, its the poison of Europe, not its medicine.

Yours pal, Al

moscow said...


moscow said...

Hello Colin,

Nice to see you are in good form again. But if you expect me to have changed my mind, sorry, I regret to say I haven't. Spain is reforming its economy. Nobody ever suggested Spain would become like Germany...ever....god forbid.
Sorry, Spain's exports are still (quite remarkably) growing and they are not that small any more. Spain is the only country in Europe that has managed to retain it's share of international trade (with the exception of Germany of course).
Things are tight because they are now starting to overdue the cuts. But it is good eveybody is finally starting to worry about growth.
Spain will come out of this one and it will be a stronger and fitter Spain. Not being in the Euro would not have prevented a crisis. We continue to disagree, it so seems. But I think you would have been a tad disappointed had I answered differently. Welcome back!

James Atkinson said...

Come on Moscow, if you have something to say, get it off your chest.

James Atkinson said...

I can't seem to get Spanish garlic at all easily now, it seems to have been replaced by the chinese variety surprisingly. Though it's interesting to note that the boxes containing said chinese garlic always seems to bear a Spanish exporters name. So I presume they have arrived at a mutualy beneficial arrangement. I have checked Sainsbury's, Tescos, Morrisons, Lidl, Asda. The change seems to have happened in just the last year. I wonder what will be next, peppers? Anyway, sorry to change the subject somewhat. What I should really like to know is how we in Europe are going to get any kind of growth without the stimulus of investment. Why would anyone invest with unemployment soaring and demand dropping in its wake?

Colin said...

My dear Moscow, How good to hear from you. I hadn't seen any recent evidence (normally the Russian flag) that you were still a reader.

I would have been mortified if you had agreed with me.

Yes, Spain will come of this but whether as part of an EU of 27 or whether as part of a smaller group with a different currency remains to be seen.


With growth of 17.4% to 185.799 million euros in sales, the export sector has recovered to pre-crisis levels, according to data released by the Ministry of Industry. With a contribution of 1.1% to Gross Domestic Product (GDP), the export sector has brought stability to the Spanish economy. The improvement in exports including emerging countries, has allowed the trade deficit is not increased because of rising global energy prices. The year 2011, Spain is among the countries with overall export growth, according to OECD forecasts. The international institution puts Spain in fifth place in the ranking, with estimated exports of goods and services 9.9%. Spain is placed after Germany and Slovakia, which will increase its sales abroad by 10.4%.

BBVA view of 2012

Spain back in recession again

In addition to correcting its economic imbalances, Spain has seen confidence erode, export growth fall, expectations of deeper fiscal adjustment in 2012 because of the failure to meet 2011 budget targets, weaker activity and, above all, a deterioration in employment in the fourth quarter last year. Estimates for 2011 show average GDP growth of 0.7%.

Many thanks for your welcome back.



Colin said...

Intriguing, James.

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