Concern about Italy is the order of the day and the situation in that coutry will continue to grab investors’ attention. To such an extent that a photograph of what’s going on there is required, starting with this key question: we are facing a problem of public, not private debt.
Lukas Daalder (Robeco) | Investors are making the mistake of focusing on 3%, believing the returns on US fixed income securities augur a decline in equities
For a long time, Spain has had a “debt pending” in terms of budgetary stability. And, for the time being, the current scenario leads us to think that balancing the public finances is a difficult objective to achieve in the medium-term. Added to that problem is the high level of government debt.
It’s almost certain that the Catalan crisis will prevent the Spanish budget from being approved, which will be a blow to political stability and the duration of the current legislature.
Francesco Saraceno | The crisis is supposedly over, as the European economy started growing again. But this matters little to those who, as soon as things got slightly better, turned to their old obsession: Debt. Bear in mind, not private debt, that seems to have disappeared from the radars. No, what seems to keep policy makers and pundits awake at night is ugly public debt, the source of all troubles (past, present and future).
With regard to Spain’s debt, there has been a Keynesian policy in place, of ECB monetary expansion and the expansion of government debt, call it what you like. And this policy has allowed Spain to grow at an annual rate of 3% in three years.
Bankia Estudios | At end-2016, the emerging economies’ public debt rose to 11.7 trillion dollars, double the level of 2007, reaching 51% of GDP, according to a report from the Bank for International Settlements (BIS). But the composition of that debt is improving and has reduced the risk fuelled by market volatility in uncertain times.
Top economists and heads of UK institutions and companies are demanding a clear strategy from Downing Street on how the government will collaborate to weather the Brexit storm. Many are sceptical about the overly-optimistic picture painted by Theresa May and Philip Hammond about the economic future.
The European Commission has published its evaluation of the progress made by different countries towards their economic and social priorities. The report highlights that the Spanish economy is growing at a good pace and is gradually correcting its weaknesses. But there continue to be huge imbalances, like still high unemployment and the high levels of both public and private debt.
We have seen how the public debt figures are being manipulated downward, and now we’re going to see how there are also manipulations in Spanish GDP, but this time they are upward. From this we can infer that the ratio of debt/GDP, which is a crucial figure for the health of any economy, is seriously undervalued.