Spanish
life is not always likeable but it is compellingly loveable.
-
Christopher Howse: A
Pilgrim in Spain.
Life in
Spain
- Madrid v Barcelona: Time for Solomon to step in? See here on the latest developments. The final sentence of this seems about right:- How this escalating clash between Madrid and Catalonia is resolved over the coming week will define the fate of Spain for years to come. Assuming it is resolved, of course.
- The Local gives us here - or attempts to anyway - the secret of Spanish longevity.
- In contrast, it reports here on Spain's sudden and drastic reduction in her global health ranking.
- Further down the negative road, here's something - in Spanish - on the death of the entire country.
- Guess which country has garnered 60% of EU fines for maladministration of funds over the last 5 years. Way behind, at no. 2, is Belgium, followed by Greece, at no. 3. And, no, it isn't Italy.
- So . . . Reader comments suggest that tap water around Spain - as I've always - assumed is safe to drink but of variable taste. Well water - rather obviously - less so. People who only have the latter justifiably choose to buy bottled water but might, like reader Maria, go for the 5L bottles which cost about 50c, rather than the vastly expensive branded stuff from the likes of Nestlé. Which is what I buy for my sniffy daughters and visitors who turn up their refined noses at what comes out of my taps.
Here in Galicia, our many rural dwellers continue to be up in arms again the speed-bumps which our local councils insist on placing in profusion on secondary roads. There's possibly no connection but yesterday the horrifying statistics on tractor accidents and deaths here were published. Someone in authority commented that some drivers treat them like Formula One cars. So, no different from any other vehicle on Spanish roads.
People here are also increasingly annoyed by the refusal of Franco's descendants to obey the law and open up the Meiras palace to the public, though the latest news is that they've caved in to the pressure and threats of legal action.
In 4 days in Segovia, Ávila and Toledo last week, we weren't hassled by a single beggar. Yesterday in Pontevedra, I was accosted by 3 new ones in an hour and half. (Our regulars don't bother to bother me.) Anyone got an explanation for this difference? Does it come down to the attitude of the city/town council?
The best news of the week - In it's upcoming fiesta gastronomica, the nearby town of Porriño will be offering vegetarian tripe. Made from tofu and comisu[?], whatever the hell that is.
Finally . . . Just in case anyone is interested . . . To exclude unwanted articles from Google Alert's search, you have to add the unwanted item(s) - preceded by a minus sign - in the same box as the article you do want. If you add them as new items, you will get even more of them!
Today's cartoon:-
THE ARTICLE
Queen Angela
commands a German economy unfit for the 21st Century
The German economic
supercycle peaked two years ago. Chancellor Angela Merkel’s
unenviable task over her fourth term is to manage national decline,
whatever the make-up of the next coalition.
The pathologies eating
away at the country’s pre-digital 20th Century economy have been
masked by distortions of monetary union, and lately by the ‘QE
boom’ and cyclical overheating. Monetary policy today is far too
loose for German conditions.
The Bundesbank warns
that this year’s torrid economic expansion is not sustainable. It
estimates that trend growth will fall to 0.75pc a year by 2021 unless
something is done to revive Germany’s stagnant productivity.
This is ‘Japanisation’,
and it is happening for much the same reasons as in Japan. The
workforce has already flattened. The Bundesbank assumes that
it will shrink by 200,000 a year in the early 2020s under any
plausible scenario for immigration - and that calculation was made
before the anti-Muslim AfD party swept into the German parliament on
a backlash vote.
The ‘demographic
dividend’ of the baby boom is expiring. Half a million Germans will
retire each year from now on. The old-age dependency ratio will rise
from 26.5pc to 39.3pc by 2025, before spiraling up to 56pc by
mid-century.
The presumption is that
ageing societies have a status quo bias and lose their cutting edge
over time. “It is likely to affect technological progress and will
have a dampening effect on macroeconomic productivity growth,” said
the Bundesbank.
Germany’s Council of
Economic Experts rebukes Angela Merkel’s coalition for
failing to fix the roof while the sun is shining. The political class
is “resting on its laurels”, lulled into a false sense of
security by the prop of a cheap exchange rate and a temporary
remission in the eurozone crisis.
“The reform track
record of the current government is disappointing. The economically
successful period was not used sufficiently to prepare the German
economy for disruptive technological changes,” it said.
These challenges are
legion and forensically dissected in “Die Deutschland Illusion”
by Marcel Fratzscher, head of the German Economic Institute (DIW),
who says foreigners who fawn over the German model do the country no
favours.
There is no miracle in
his view. Germany’s growth since 2000 has been dismal by its
own past standards. The country has suffered a loss of dynamism
compared to East Asia, the Anglo-Saxon countries, and Scandinavia.
German industry may
have perfected the proverbial spark plug but it has been left
behind by the information and data revolution. Less than
1.8pc of broadband connections in the country use high-speed fibre
that is 20 times faster. Lower than Turkey and Mexico, and the lowest
in the OECD club. The system still relies on copper wire.
The government refused
to exploit the lowest borrowing costs in history - below zero for
seven years even today - to upgrade its outdated infrastructure. Net
public investment has been negative for most of the last fifteen
years. Finance minister Wolfgang Schauble has pursued his Holy Grail
of a balanced budget, disregarding all else. This is now written into
the constitution.
Historians may one day
deem this to be a strategic blunder. Germany is overly-reliant
on an engineering model in a world where digital technology and
artificial intelligence are changing everything. Cars are
becoming computers on wheels. The advantage is shifting from
Wolfsburg to Silicon Valley.
The big German
car-makers have deep pockets and superb technicians. They will fight
back hard with their own range of electric vehicles (EVs) after
wasting several years deriding the ‘Tesla’ threat. But as Daimler
chief Dieter Zetsche said last week, profits on EVs may be half what
the company makes on the internal combustion engine. Since EVs have
far fewer moving parts and last much longer, they will not for long
support an automotive sector that today makes up 14pc of German GDP.
The car industry bet
the farm on diesel and will struggle to extract itself quickly. These
diesel engines were supposed to be the bridge to the EU’s
low-emission standards of 95 grams of CO2 per kilometer by 2021. But
diesel production is now in run-off. Paris, Madrid, and Athens have
bans coming into force. Asia is closing the door.
German car-makers can
off course switch back to petrol quickly. The core problem is that
they are not ready to meet these emission targets with petrol
engines. It is proving very costly to further refine the combustion
engine to this level in time.
Worse yet - for them -
China has imposed draconian rules stipulating that zero-emission
vehicles must make up 8pc of total sales next year, rising to 10pc in
2019, and 12pc in 2020. This is an earthquake. German manufacturers
cannot come close. They risk being shut out of the world’s largest
car market.
It touches on Germany’s
broader problem with China. For a giddy decade German exporters were
able to ride the ‘China wave’, becoming the supplier-in-chief of
machine tools and capital goods for the industrialisation of Asia.
But this catch-up phase is over.
The German Council of
Experts says exports to China have stalled since 2015 and now
something more threatening is happening. “China is increasingly
exporting products that coincide with Germany's top export
categories,” it said.
As China moves up the
technology ladder it is competing toe-to-toe with German companies
across third markets. The Lehrer has outgrown the Meister. The
destruction of Germany’s once world-beating solar champions by
Chinese upstarts shows just how fast this can happen.
The Council cited a
study estimating that a permanent 10pc decline in German exports to
China, would cut German GDP by 4.8pc within a four-year period. This
is a startling level of dependency.
Part of Germany’s
Wirtschaftswunder over the last twelve years has been real, but part
is a mirage caused by the structure of monetary union. The euro
system allowed to the country to lock in a 15pc to 20pc advantage in
intra-EMU competitiveness by holding down wages in an ‘internal
devaluation’, made possible by the Hartz IV labour reforms.
Unit labour costs in
manufacturing fell 4.4pc in the single year of 2005 as companies such
as Volkswagen forced through effective wage cuts by threatening to
shift plants to Eastern Europe. This led to German ascendancy
in the eurozone but at the cost of a Lost Decade for the European
economy as a whole.
Less understood, it
also caused the pauperisation of Germany’s own working class
although efforts are belatedly underway to cushion the effects. Half
the population saw a protracted fall in real incomes. The
reforms pushed almost seven million people into part-time ‘mini-jobs’
paying just €450 a month, flattering the jobless statistics.
“People are
struggling to survive,” says professor Richard Werner, a German
economist at Southampton University. “We have a bigger
proletariat. Hidden unemployment is at a least one million.”
Critics say economic
policy-making was captured by the exporting elites, and justified by
a mercantilist ideology that extolled export-virtue as close to
godliness. Berlin long patted itself on the back for achieving a
current account surplus of 8.5pc of GDP, technically illegal under EU
rules.
This is at last
changing. Elga Bartsch from Morgan Stanley says Berlin has woken
up to the “dark side” of these chronic imbalances: capital is
rotated out of the country; the structure leads mechanically to a
lack of corporate investment within Germany. It is a trap for
Germany itself.
As Adam Smith famously
wrote, there is much ruin in a great nation. These are slow,
corrosive effects. Britain knows them well from past episodes of
complacency. But they are also powerful and hard to reverse.
By the time Mrs Merkel
hands the Kanzleramt to her successor in 2021, the trajectory will be
obvious to everybody. Historians will judge the economic reign
of Queen Angela in a harsher light than today’s media.
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