Spanish life is not always likeable but it is
compellingly loveable.
-
Christopher
Howse: A
Pilgrim in Spain.
Cataluña
- The Barcelona property market is suddenly chaotic, it says here. Though rents remain astronomical, at least for the moment.
Spain
- Here's where to go for free tapas dishes with your tiffin of choice.
- I wonder if City Post is still operating in Spain, given the allegations that, if not exactly a scam, it's highly inefficient, if not totally useless. It is/was an alternative to the national mail service of Correos and sells/sold its own ('Mickey Mouse') stamps and has/had its own (red post boxes). Or possibly doesn't. Be warned. Web page here.
- In Madrid last week, I was taken aback at how many new cinemas there seemed to be. So I was surprised to read yesterday that the industry had in 2017 its worst year since 2013. Perhaps there's too many of them.
- It's Three Kings Night tonight, throughout Spain. Some elements of which might strike liberals as a tad questionable these days. Here's The Local on the event. The first - and last time - I attended a parade I was almost killed by adults trying to grab the sweets thrown by the participants.
- And here, inevitably, is The Local on NY resolutions you should make if you live here.
The EU
- Switzerland, claims Don Quijones here, is also falling out of love with it. A referendum in the offing?
- See below an article by Ambrose Evans Pritchard on the possible dire economic future of the Project.
The USA
- Oh, what wonderful reading, especially on the mental health of The Fart.
- Just loved his daughter's description of how he creates what's on top of his head.
- As ever, The Times cartoonist - Peter Brookes - puts it succinctly:-
- I persist in my belief that Fart will eventually have a nervous breakdown. If he hasn't already had one. Or isn't the walking embodiment of one.
The UK
- Interesting take on Jeremy Corbyn: He appears to be content with his triangulation on Europe, flirting with Remainers but reassuring Leavers that their cause is safe with him. He is doing what the ruthless [and hated by JC] Blairites might have done to win power. Labour people these days have all swapped places. Mr Blair is the proponent of principled if forlorn opposition [to Brexit] and Mr Corbyn is the tribune of belief-free pragmatism. As I said long ago, he's transmogrified into the sort of politician he pretends to despise. All power corrupts.
Spanglish
- Here's a list of English words that, if you're a native speaker who doesn't speak Castellano, you might have difficulty understanding.
Nutters Corner
- Prominent US Baptist, Pat Robertson: I don’t think we’re gonna have a nuclear war. I don’t think that God Almighty is gonna allow that to happen to this world. I think there are too many other important things to be done. I just don’t think that’s in the Lord’s plan for this world. But if He has to take out Kim Jong-Un in order to accomplish that, that’s what’ll happen. But I just don’t think we’re going to have a nuclear war. Phew, thank-God He's that busy on other things and doesn't have the time to ensure the death of many, many thousands of people. Quite possibly millions. Accidentally merciful, then.
Finally
- A new product from Private Eye:-
THE
ARTICLE
Eurozone’s fleeting
boom is an illusion - Britain won't remain the sick man of Europe for
long.
Brexiteers must hold
their nerve. By a twist of timing, the eurozone is briefly basking in
economic glory while Britain languishes in relative stagnation.
It is an illusion of
the economic cycle, magnified by Europe’s elastic snap-back from a
needlessly severe recession. The EMU sorpasso over recent
months looks more meaningful than it really is, yet it is inevitably
creating confusion and will colour Brexit talks at a crucial
juncture.
We can all agree that
the UK economy has long been mismanaged. It needs a radical shift
from consumption to investment if it is to avoid falling further
behind the US and the rising powers of Asia. But one problem that it
does not face is being left behind by the eurozone in any lasting
sense.
OECD analysts think the
region’s economic speed limit is around 1%. The eurozone has been
able to grow at well over twice that rate in recent quarters without
running into trouble only because it has had a legacy output gap to
cover. The UK is far ahead in the cycle.
The European Central
Bank has turbo-charged recovery by running an extreme liquidity
experiment, with interest rates at minus 0.4%, or minus 2% in
real terms.
It has been buying
€60bn (£53bn) of bonds – down to €30bn this month –
pushing its balance sheet to 41% of GDP, much further than the US
Federal Reserve ever dared to go. It has bought €130bn of corporate
debt in a direct intervention in the credit markets.
Fiscal austerity has
given way to net stimulus. Spain, Italy and France have all been
flouting EU spending rules. If this heady cocktail cannot produce a
catch-up boom, nothing can.
Yet this burst of
growth is ephemeral unless the eurozone uses the opportunity to
grapple with its own dysfunctional pathologies – rigid labour and
product markets, non-performing loans, zombie companies, warped
welfare incentives – and to reestablish the currency union on
workable foundations before the next crisis hits. Little of this has
happened.
The IMF’s Article
IV report on the eurozone for 2017 is one long indictment of
structural paralysis. “Unresolved legacy problems are holding back
a stronger medium-term outlook. Risks are large and policy buffers
remain thin,” it said.
Poul Thomsen, the IMF’s
Europe chief, says the fundamental picture is getting worse.
Intra-EMU divergences are becoming more extreme. Those countries that
had the poorest productivity growth at the launch of the euro are
falling even further behind. “The gaps in real per capita income
levels have widened rather than narrowed,” he said.
Germany’s real GDP is
14% higher than its pre-Lehman peak, while Italy’s GDP is still 6%
below and will not recover its previous output until the “mid-2020s”
– amounting to two Lost Decades. What is extraordinary is that
these two countries are still trying to share a currency union,
given their starkly contrasting fates, and the lack of any sign
that this is will ever self-correct.
Brussels admits that
the eurozone’s slump from 2008-2015 was so deep that it crossed
into hysteresis, the point where "cyclical unemployment becomes
structural" and causes lasting damage to job skills and economic
dynamism. Hysteresis is why austerity policies become inherently
self-defeating if pushed beyond the therapeutic dose. They lower
trend growth rates decades ahead, making it even harder to bring debt
ratios back under control.
Youth jobless rates
peaked at 56% in Spain, and are still 38% today. The shock was so
profound – and went on so long – that a whole cohort of Spanish
youth went through their twenties without ever holding a durable job,
with subtle macro-economic effects. Variants of this occurred in
Italy, Greece, Portugal, and to some extent in France.
There have been
episodic bursts of reform in southern Europe and France – usually
less than advertised – but the OECD still thinks the currency
bloc is so sclerotic that it will hit capacity constraints long
before it has reached what would be considered full employment in
Anglo-Saxon states. In economic parlance, the "Nairu" floor
for unemployment is 8.8%, exactly where the jobless rate is today.
The output gap has essentially closed, and in Germany it is long past
closing.
The eurozone boom
therefore contains the seeds of its own demise. The stronger the
recovery now, the sooner it hits the buffers, and the sooner QE will
have to end. ECB board member Yves Mersch warned this week that
Frankfurt must be “very careful not to act too timidly and too
late, and to fall behind the curve”.
This brings Italy into
uncomfortable focus. ECB has bought €319bn of Italian debt and is
essentially covering the Italian budget deficit. This has compressed
bond yields sufficiently to head off a debt compound spiral. It has
been a life-saver but it has not restored self-sustaining viability.
The public debt ratio remains stuck above 130% of GDP, at the outer
limits for a country with no sovereign currency.
Italy must refinance
debt worth 17% of GDP next year without obvious buyers. Italian banks
and foreign funds have been systematic sellers, rotating the proceeds
into accounts in Germany or Luxembourg in what amounts to slow
capital flight.
“The end of QE does
not frighten us,” says the defiant Italian finance minister Pier
Carlo Padoa. Yet it will certainly frighten bondholders if it
coincides with the election of a radical anti-euro government in
March. The Five Star movement of Beppe Grillo leads the polls at 29%,
while the ruling Democrats are in slow collapse. Five Star is no
longer calling for the restoration of the lira but its manifesto
flouts the basic rules of monetary union.
Spain is in better
economic shape, to the extent that it has clawed back competitiveness
by slashing relative wages in an "internal devaluation". But
this should not be mistaken for good health. Productivity has not
recovered. “Much of the post-crisis growth has been in lower-skill,
lower-productivity sectors,” said the IMF.
My guess is that bond
yields in both countries will spike high enough by mid-2018 to cause
heartburn, and this time Germany will be in a less accomodating mood
with the anti-euro Alternative fur Deutschland commanding 94 seats in
the Bundestag, and snapping at chancellor Angela Merkel’s heels.
The ECB’s policies
are becoming more intolerable for Germany by the month. Negative
rates are destroying the business models of the local savings banks
that fund the Mittelstand backbone of the industrial economy. QE has
pushed the Bundesbank’s net credits through the ECB’s
internal Target2 payments system to €880bn. It is
becoming a backdoor "transfer union" without
democratic consent.
The economy is
overheating. The IFO confidence index has reached the highest level
since 1969. The Bundesbank expects 2.5% growth next year, twice the
German speed limit, describing it as “clearly above the production
potential”.
“It is very clear
that monetary policy is too expansionary for Germany by any rule you
care to use. The lesson of the past is that the longer this momentum
goes on, the more dangerous it becomes, and I see a lot of dangers,”
said Professor Clemens Fuest, head of the IFO Institute.
The ECB’s Mario
Draghi can push Germany only so far. If he tries to stretch QE even
longer to buy time for Italy and Spain, he risks further eroding
– and ultimately losing – German political consent for
monetary union. Yet what Germany needs is incompatible with what the
Latin bloc needs.
IMF officials fear that
sooner or later one country (Italy) or region will be hit by an
asymmetric shock, revealing that the EMU system is as unworkable as
ever. There is still no fiscal union, and Germany is unlikely to
offer Mr Macron much beyond the symbolism of a eurozone finance
minister with no budget. The banking union lacks the genuine
backstop needed to avert a repeat of sovereign/bank "doom-loop"
that almost engulfed EMU in 2012.
Such a brutal
denouement is a story for the next global downturn, not a looming
threat for this year. What is likely to become clear in 2018,
however, is that boom conditions are much harder to handle than the
sluggish Goldilocks growth of early recovery. Deep rifts within
monetary union are becoming visible again. The removal of the ECB
shield may prove very painful for high debtors.
So if you think Britain
looks like the crisis child of Europe right now, just wait a few
months. Rivals abound.
No comments:
Post a Comment