Tuesday, November 29, 2016

Pontevedre Pensées: 29.11.16


Shopping: My elder daughter gave me a wonderful Swiss army knife for my recent birthday. One of its 56 implements is a plastic toothpick. Having mislaid it, I checked on line and found 2 shops in Pontevedra on the company's site. Here's what happened at the first one yesterday. Its window, by the way, was full of different models of the the knife:-
Hola. Do you have a replacement toothpick for this knife?
Can you order me one?
Why not?
It would be difficult.
How so?
I'm not an official distributor.

So, on to the second place today . . . Without too much confidence I'll be able to avoid shopping on line. Meanwhile, the obvious questions are: Where does Shop 1 get its supplies from? And: Are they genuine or fake? I don't suppose it matters for the toothpick, though.

Taxation: Per El País: Spain collects significantly less tax than most of its EU neighbours: measured in terms of the contribution to GDP, at 34.6%, Spain’s is almost six percentage points short of the average, which is 40%. The biggest difference is income tax (IRPF), where Spain’s contribution is two percentage points below that of its neighbours. One consequence of this is that, for decades if not centuries, the Spanish state has compensated by hitting you with taxes every time you do anything remotely official. Especially if you want to transfer property, when there's no only a capital gains tax but also a transfer tax of at least 7%. Anyway, the article provides reasons for this situation. Essentially: The experts attribute the shortfall to the generous exemptions, deductions and rebates, as well as to widespread fraud. Guess which class bears the greatest tax burden.

Property Ownership: Reader Maria has kindly made some comments on this over the last few days. Spain has the highest first, second and third property ownership in Europe. I can't help wondering whether one reason is that people here don't move up from their first place but, instead, invest surplus income in additional properties. Starting with a holiday place not very far from where they live. At least in Pontevedra.


Italy: I've previously cited Don Quijones views on the banking system there. Attached is an article which goes on from this to predict that Italy will eventually have to exit the EU. A couple of samplers: Since the beginning of 2008, the US and the UK are currently registering output up by about 12% and 8% respectively. Over the same period, Italy’s GDP is down by 8%. . . . Since the beginning of 1999, the UK economy has grown by almost 40%, against about 25% in Germany and France. But Italy’s performance is in a different league. Over the last 17 years it has managed to grow by less than 6pc. In other words, since the formation of the euro, Italy’s economy has essentially stagnated. Along with this stagnation has come an employment disaster. Unemployment now stands at about 12% of the workforce. [Spain's, by the way, is around 20%]


Airports: Hard as I find this to believe, there is actually a Committee for the Coordination of Airports. On the other hand, I'm not surprised that the foto of it showed at least 18 members around a U-shaped table. However capable they might be in facing their challenge, they aren't helped by the refusal of the mayors of Santiago, La Coruña and Vigo to come clean on how much they subsidise the various airlines. 

Cash from Madrid: The president of our regional government, Sr Feijoo, has said he won't stand for Madrid reducing subventions to us because more money will be needed to bribe the Catalans and Basques not to to press independence demands. Good luck with that, Alberto.


Marriages: In Pontevedra province:
2009: Civil, 1821: Religious, 1698. The first year in which the former predominated. Total: 3,519
2015: Civil, 2165: Religious, 793. Total: 2,958. Down by 16%



A priest here in Galicia has introduced a special Confession table in his church, calling it La Isla de Misericordia. Or 'The Island of Mercy'. I can think of nothing less likely to make me confess than doing it in public, face-to-face with a priest. But I guess it makes sense to him.


Italy needs reform and a euro exit is inevitable: Roger Bootle

On Sunday Italy goes to the polls to vote, not on membership of the EU, or even of the euro, but rather on an apparently arcane political matter, namely the powers of the upper house of the Italian parliament, the Senate. But there are close connections between this vote and the matters of the euro and EU membership.

For a start, the referendum was triggered by the failure of Italy’s Prime Minister, Matteo Renzi, to change the constitution. He believes the extensive powers of the Senate effectively block attempts to reform the Italian economy.

Moreover, Mr Renzi has suggested that if he loses he will resign, thereby plunging the country into a period of political chaos and emboldening the eurosceptic Five Star movement. As with other referendums and elections, the vote will be regarded by the populace not so much as an opportunity to express a view about the precise details of institutional reform, as a chance to give their verdict on Mr Renzi’s government in particular and the state of Italy in general.

And it really is in quite a state. The Italian banking system is appallingly weak. Almost 20% of loans are “non-performing”, meaning that borrowers are not paying the interest due. Many will probably not be able to repay their debts. At some point or other, there is going to be a reckoning, and it is not going to be pretty.

There is also a public sector financial crisis. Over recent years, the Italian government has battened down the hatches in an attempt to reduce the burden of public sector debt. But it has failed. As a share of GDP, Italian government debt stands at about 130%, and rising.

In fact, the Italian government is no longer over-spending. Indeed, if you exclude interest payments, it is running a surplus of 1.4% of GDP. The problem is that it cannot exclude interest payments. And they are huge, amounting to about 4% of GDP every year.

As in just about every other notable case, the way to get on top of the Italian debt problem is through economic growth. It would help if there were a return to positive rates of inflation, rather than the stuttering deflation that currently envelops the country. In many ways, though, these financial problems are less serious than the underlying economic weakness. Some readers may remember that in the 1950s, 1960s and 1970s Italy was a powerhouse of economic growth. At one point its GDP passed the UK’s, an event trumpeted by the Italians as “Il Sorpasso”.

But recently it has been a very different story. It is common to compare the performance of the world’s major economies since the onset of the financial crisis in the first quarter of 2008. All industrial countries suffered a loss of output in the first few years, but most then managed to recover. Since the beginning of 2008, the US and the UK are currently registering output up by about 12pc and 8pc respectively. Over the same period, Italy’s GDP is down by 8pc.

If this comparison seems pretty stark, then you should reflect on Italy’s performance since the euro was established in 1999. You may recall that this bold monetary construct was supposedly going to unleash a wave of prosperity across Europe, including Italy. Britain, which stood aside from the single currency, risked being left behind, mired in comparative poverty. Staying out of the euro was the Brexit of its time. The warnings of looming under-performance, accompanied by forebodings of the imminent departure of key Japanese and American firms, were its version of Project Fear.

To put it mildly, the outturn has been somewhat different. Since the beginning of 1999, the UK economy has grown by almost 40pc, against about 25pc in Germany and France. But Italy’s performance is in a different league. Over the last 17 years it has managed to grow by less than 6pc. In other words, since the formation of the euro, Italy’s economy has essentially stagnated. Along with this stagnation has come an employment disaster. Unemployment now stands at about 12% of the workforce.

Nor is the long-term outlook very promising. The Italian birth rate is running at about 1.4 per woman. The United Nations projects that by 2035, Italy’s population will have fallen by about 2%. Quite apart from what that would do directly to reduce the size of the Italian economy, this is not exactly an environment in which Italian businesses will be galvanised into investment.

It is pretty clear what would bring a revival of the Italian economy and ease many of its financial problems, if not solve its population crisis. Italy needs a much lower exchange rate. While it is in the euro, of course, it does not have a currency of its own to depreciate, and the exchange value of the euro is determined more by the performance of its Teutonic neighbours.

Not that a weaker currency would solve all problems. Italy needs fundamental reform, and not only to the powers and practices of parliament. But if it could enjoy a boost to competitiveness of 20 to 30% through a lower exchange rate, this would lead to a surge in net exports and higher economic growth, with corresponding gains to employment. In such an environment, it might be easier to get through some of the many reforms that Italy needs.

You may think that a referendum on the powers of the Italian Senate does not promise to be anything like as exciting as the Brexit vote or the US Presidential election. But it is well worth keeping an eye out for the result of Sunday’s vote. Among other things, it may set Italy on the path to leaving the euro. Whatever the outcome on Sunday, though, I have come to believe that this is not a matter of if but when.


Sierra said...

Checking Google, it appears Roger Bootle has recycled that article, just changing Italy for Greece!

Colin Davies said...

ROFL . . .

Perry said...

Bootle notes that Italian reproduction is only 1.4 children per woman. Sierra's comment about Greece prompted be to check Greek figures. Greece's population census of 1961 found that 10.9% of the total population was above the age of 65, while the percentage of this group age increased to 19.0% in 2011. On the contrary, the percentage of the population of the ages 0–14 had a total decrease of 10.2% between 1961 and 2011. Yikes!!!!!


The Ageing of Europe article gives further pause for thought to those who are familiar with Spengler's book "How civilizations die". https://en.wikipedia.org/wiki/Ageing_of_Europe

However, I am more concerned with the UK.In 2012 the UK's total fertility rate (TFR) was 1.92 children per woman,[28] below the replacement rate, which in the UK is 2.075. In 2014, 27% of births were to mothers born outside the UK, a 0.5 point increase since 2013.


Two thousand years ago, the decline of Pax Romana began. George Santayana said it very well. "Those who cannot remember the past are condemned to repeat it".


Fanaticism consists in redoubling your efforts when you have forgotten your aim.

All the best.


Perry said...

Me, not be.

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