Spain and The Owl Of Minerva
The Trader has written extensively over the past year about the Spanish Economy. The politicians are still behind the curve, not doing the proper adjustments. People on the other hand, are suffering as the high unemployment still makes the misery high. At least one thing is true, prces of properties have come off , and buyers from countries with “hard currencies” are the relative winners, as the sun and the sea is still the same. Some more insight on the Spanish economy, by Edward Hugh.
Last week was the fifth anniversary of the outbreak of the global financial crisis. Not uncoincidentally it was also the fifth anniversary of continually rising unemployment in Spain , since it was in early summer 2007 that seasonally adjusted Spanish unemployment embarked on its steady upward path. And after it started climbing, naturally it hasn’t stopped since. Indeed we seem to have at least another year of growing unemployment before us, maybe more.
Anyway, as if to celebrate this uncanny anniversary the Spanish government has decided to take the bold step of officially requesting an EU loan to recapitalise the country’s banking system. In addition, part of the money will be used to set up some form of bad bank with the objective of cleaning up some of the toxic property and other assets off the bank balance sheets. Smart moves both of them. Pity the people responsible weren’t prepared to accept the need to do this five years ago, when unemployment was only running at 8%, and when the economy and Spain’s citizens were better placed to accept the kind of burdens that are now about to be imposed upon them.
Just to round the commemorations off, in the August edition of their monthly bulletinthe ECB finally let out that dirty little secret than every insider in the know has already discounted. The Bank have finally accepted that the much heralded Spanish labour reform isn’t going to work. At least not as planned. As the Financial Times put it, the Spanish labour market reform approved in February was “far-reaching and comprehensive” but came too late, the ECB implied, saying it “could have proved very beneficial” in avoiding job cuts if the measure had been passed some years ago.
Full article here.