tag:blogger.com,1999:blog-25064447.post4572066075437370073..comments2013-09-12T06:30:06.298+02:00Comments on Spain Economy Watch: Whither Spain – Towards Finland or Argentina?Unknownnoreply@blogger.comBlogger12125tag:blogger.com,1999:blog-25064447.post-91974556133229771152010-07-08T11:20:38.066+02:002010-07-08T11:20:38.066+02:00Hello Markku,
You raise interesting points. Natur...Hello Markku,<br /><br />You raise interesting points. Naturally it was the devaluation which restored competitiveness. I agree there is no example of where internal devaluation has really worked, which makes you wonder why people were so optimistic in creating the Euro in the first place, given that it makes things so difficult to eliminate structural distortions once they have been created. <br /><br />The thing is, it is either internal devaluation or the end of the euro. The latter would simply cause massive havok (which may well now be unavoidable). The only other alternative I can see is that Germany leave the Euro, and let the thing float down, but that would still leave us with a lot of dollar related issues. No easy answers at this point I am afraid.<br /><br />On the other hand, I find it hard to swallow that Spain has really nothing to learn from Finland, even if things are not as good as the competitiveness indexes suggest.Edward Hughhttps://www.blogger.com/profile/10384039867580949531noreply@blogger.comtag:blogger.com,1999:blog-25064447.post-62704565620992867742010-06-28T09:29:03.082+02:002010-06-28T09:29:03.082+02:00Finnish government did relatively little to restor...Finnish government did relatively little to restore competitiveness of the economy, mainly they hurt it less for a while. The recovery began when markka was let to float freely, also Nokia's rise in the mid-90's helped. The government resisted floatation vehemently, blamed the unemployment, bankruptcies etc. on evil speculators and subsequently took the country to euro against the will of the people.<br /><br />If structural reforms are needed in Spain, I suggest to look elsewhere than Finland. We still have the old, uncompetitive structures left. <br /><br />Internal devaluation did not work for Finland, and I assume it would not work for Spain either. In fact, perhaps somebody could name a country & period where internal devaluation actually restored competitiveness? <br /><br />-MarkkuAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-55828703012454954212010-06-16T19:45:05.461+02:002010-06-16T19:45:05.461+02:00Oh, Spain can easily reduce salaries or even lose ...Oh, Spain can easily reduce salaries or even lose some 20% of its work force. Considering the number of fiestas, puentes, breakfast breaks, coffee breaks, cigarette breaks, etc., their productivity is pathetic anyway. Once they start working during their work hours, may be they will actually start producing something. Until then, they are on a sure one-way to the Tango-land.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-26187735995918287752010-06-11T16:33:32.951+02:002010-06-11T16:33:32.951+02:00Hi Edward,
I now think that a 20% reduction of wag...Hi Edward,<br />I now think that a 20% reduction of wages can be possible; not by reducing nominal wages, but by cutting down staff by 20%. Upcoming labour market reform should make this easier.<br />Ecco, I don't see why this would cause a 20% GDP contraction. Same output, less costs. Output would eventually decrease due to lower domestic demand / lower sales, but probably by much less than 20% (I think).<br />On the other hand, debt ratios are becoming useless, once you realize some sort of restructuring is inevitable. When you are trying to save a sinking company, first you have to focus in PnL in order to make it generate cash. Then, you can take on the nominal liabilities (knowing that you will have to ask your creditors for a deferment, suspension, or haircut).<br />Don't get me wrong, I know this is terrible. But we are in a terrible situation, and the longer we keep postponing hard decisions, the harder these decisions will become.lagartojnoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-62838077120997586782010-06-09T16:19:48.233+02:002010-06-09T16:19:48.233+02:00whoa! seeing you today on the front page of the in...whoa! seeing you today on the front page of the international herald tribune (my favorite paper btw) made my day big time,I've been reading your blog since 2007 non-stop, congrats mate, que no se te suba a la cabeza y por favor no pares de escribir, me alegro de que vayan reconociendo el valor tus ideas. Regards from a London reader.forero99noreply@blogger.comtag:blogger.com,1999:blog-25064447.post-25073006626035227532010-06-06T11:26:43.950+02:002010-06-06T11:26:43.950+02:00Ecco,
Then if internal devaluation wouldn't w...Ecco,<br /><br />Then if internal devaluation wouldn't work (which I doubt, but frankly I don't see it happening given the resistance) then Germany should go back to the Mark, and as soon as possible.Edward Hughhttps://www.blogger.com/profile/10384039867580949531noreply@blogger.comtag:blogger.com,1999:blog-25064447.post-83229546978699805532010-06-06T11:20:20.199+02:002010-06-06T11:20:20.199+02:00Przemek,
2010 contraction? Well, we could still s...Przemek,<br /><br />2010 contraction? Well, we could still see a touch more growth during the second quarter, although this is not clear at this point, since confidence has evidently taken a hit in recent days and consumption in June could be down. The second half will be very different, as all the government measures start to kick in and fiscal consolidation across Europe affects the external environment. So I guess something between minus 0.8% and minus 1% across the year. But let's see.Edward Hughhttps://www.blogger.com/profile/10384039867580949531noreply@blogger.comtag:blogger.com,1999:blog-25064447.post-67137446612298608612010-06-01T08:05:42.209+02:002010-06-01T08:05:42.209+02:00Actually, the Argentine path is not that bad. Afte...Actually, the Argentine path is not that bad. After the default and a short painful recession, Argentina has been growing at a very fast pace. The Argentine government has missed several chances for significant reform, but the country has done well, considering that virtually nobody will lend to them (deservingly). If the Kirchners were a bit more pro-market, like Chile, the country would have grown even faster.<br />I visited Buenos Aires several times in the past decade and have been pleasantly surprised by the development and growth of the city.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-61315239265770699512010-05-31T13:21:52.112+02:002010-05-31T13:21:52.112+02:00As usual, a succinct analysis of the problem with ...As usual, a succinct analysis of the problem with the suggestion of a solution. But is there anyone listening who has the b#lls to do it?Davidhttp://www.holidayfinca.comnoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-70360346050656731722010-05-30T08:16:51.900+02:002010-05-30T08:16:51.900+02:00Part 1:
I very well understand what a 20% devalua...Part 1:<br /><br />I very well understand what a 20% devaluation in prices and wages would mean. But it makes no sense. With a debt load of in excess of 260%, cutting wages down by 20% would push the debt load to 325% of GDP. Unless of course you can get the creditors to cut off 20% of the debt obligation, which I doubt very much. <br /><br />This idea of yours would work if endogenous factors were largely the reasons for prices and wages, however, that is not the case, Spain's wages and prices are largely controlled by exogenous factors. All you end up in doing is the following, the poor will become desperately poor, the middle class will be the new poor class, and the rich will become incredibly rich and powerful. This sort of thing has been tried many times throughout history and has failed, with nightmarish results, usually ending up in war.Ecconoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-14009315648302822562010-05-29T20:39:57.600+02:002010-05-29T20:39:57.600+02:00Edward, congratulations you are finally getting th...Edward, congratulations you are finally getting the recognition you deserve.I have followed your blog for 18 months and agreed with you forcasts, in fact I think it could end up being worse due to the lack of fiscal action earlier on. I could not agree more as to where "Zappy" expects this "growth" to come from too.<br />JemAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-31315576932365295242010-05-29T20:28:47.656+02:002010-05-29T20:28:47.656+02:00Hi Edward,
I gather your insistence on need for i...Hi Edward,<br /><br />I gather your insistence on need for internal devaluation steems from disapointment in unchanged prices in your local coffee-shop :-) ? <br /><br />And seriously, you wrote you expect contraction of between 1-2% for 2011. How about 2010? And how speedy any recovery would be after 2011? <br /><br />Best555https://www.blogger.com/profile/11619546540212043147noreply@blogger.com