“Indeed, the worst is over in Spain…but still”

Spanish Economy Minister Luis de Guindos was right when saying that trend in 2013 would be gradually improving. Most of indexes assure that. The risk premium has fallen under 200 basis points and 10 years Spanish bond decreased by 4%. The Ibex beat 10,000 benchmark just the same day King Juan Carlos’ daughter was charged. Spaniards’ confidence in companies has also grown in spite of institutional erosion.

Furthermore, the stock exchange rebounded by a surprising 71% at the end of 2014’s first week against the record low of July 2012 (after Rajoy took office), although it is still a far from the maximum of 15,900 points in November 2007. Internal policies have had something to do but the most important question is that world recovery is confirmed and Draghi’s policy in the ECB  has decreased market worries about a possible euro breaking.

Good news not only occur in financial markets. Spanish GDP gained a minimum quarterly growth in summer, putting nine months of recession to an end, with the trend maintaining until the end of year. The only European country, alongside with UK, in which car sales have grown has been Spain after three years of strong decreasing numbers, of course not ignoring government helps. They grew by 3% in Spain compared to UK’s 10% increase.

Regarding real economy, the most relevant achievement is that unemployment reduced by 140,000 people in 2013 after last five years average was an increase of 440,000. It is truth that this unemployment cut is due to a workforce reduction (those discouraged population who stop searching for a job or registering in the Employment Service, immigrants who go back to their countries or young people fleeing abroad), but signs that point to lower job destruction are also a reality. December’s figures are the most encouraging: 107,000 unemployed less, and 65,000 social security affiliations more. It is not a time for great celebrations yet, but one can not question past year change of direction. Will Spain be able to create net employment in 2014? Some months age it would have been considered some unrealistic desire or even pure government propaganda, today it is a feasible option.

Indomitable public costs

The last positive indicator is Markit’s PMI which are based on comprehensive surveys to companies in all Europe. In December, Spain’s PMI stood at 53,9, the highest value in last 77 months. It seems unbelieveble, nothing less than 77 months! Over euro zone average (52,1) and far from France (47). Furthermore, Markit chief economist, Chris Wiliamson, stated to Financial Times that Spanish recovery grounds on exports growth to markets such as the German one and that salary cuts have brought more competitivity: “labour costs has decreased widely as well as extended  to all sectors”.

Painful and unpopular budgetary cuts and the internal devaluation recommended by Brussels, started by ex president Zapatero in 2010 and followed currently by Rajoy with the labour reform are bearing fruit- and with no social conflicts. It was not easy. It is a shame that neither Zapatero nor Rajoy have been able to explain Spaniards that internal devaluation. To stand the cold without overcoat, without understanding there is no other option because those governing only explains one part of the reality, is very uncomfortable. It does not help to construct a country but to undermine.

Furthermore, to ignore that crisis is at its bottom and a timid rebound has started would be very stupid since expectations mean an essential component of economic decisions, but to exaggerate those facts could prove counterproductive. We still have a long time ahead to remain economic and psychologically ill: the productive model is just starting;  job market recovery will be very slow- it includes to redeploy 1.5 million people unemployed after housing bubble-, credit will not  flow like it did before; budgetary policy has the double restriction of taxes and investment costs, the public deficit goal is not be achieved; all the matters related to electricity tariffs are giving a sad external image of Spain; the confusing lack of an Economy vice-president;  an ultra-conservative abortion law; the unresolved and untouched troubles in Catalonia… We have gone out from hell, now it is time for purgatory.

Be the first to comment on "“Indeed, the worst is over in Spain…but still”"

Leave a comment