Growth is due to turn back this quarter after a full year recession. But it is likely to remain sluggish as exports stand as the sole driver. A major overhaul has indeed been accomplished in the external balance. Ridden with the 10% deficit before the crisis, Spain can boast having filled the gap in a short span of time. Plummeting imports are much contributing to such an outstanding performance following the free fall in domestic demand. But sales to external markets are also playing a key role, as the economy Minister eagerly underlines. Exports are growing at 8% rate, helping to save jobs and keep the economy running.
Real adjustment to recover the competitiveness pilfered during the bonanza years seems firmly on track. But so long as internal demand fails to recover, growth and employment will follow a wavering path. A sheer need to survive amidst an extremely unfavourable environment has led most enterprises going abroad to make business. Trimming down labour costs through massive layouts and lower salaries has decisively underpinned this move. Yet, for all the short term benefits such a strategy reaps, in the medium and long term it could amount to a self-defeating stance.
Ill paid temporary jobs cannot possibly provide the basis for prosperity. Nor a blatant mismatch between the skills needed in any advanced economy and a skimpy vocational training system. Huge disinvestment over the last years doesn’t help either. Lasting productivity can only rest on a sizeable effort to update and enhance capital resources. As exports still represent a small share in overall demand, they prove unable on their own to reverse this dismal state of play.
At the end of the day, one wonders if it really suits a country like Spain, in bad need to develop itself, to finance the rest of the world. Squaring the external balance should not be hailed as a success even if it certainly works as a useful short term remedy when your home is in shambles.