As can be seen from the chart below, confidence while up, is not exceptional by historic standards, which is hardly surprising given the deep recession which Spain is in.
What is really striking - nay astonishing - is that when you come to look at the breakdown of the index into its components (see chart below) you find that the bulk of the work is being done by the expectations indicator, which at 108.5 is now showing its second highest reading ever, and only just below the all time series high of 109.7 which was hit back in the heady days of January 2005! (The indicator series only goes back to September 2004).
This is not only incredible, it is extraordinarily hard to understand. Even those who doubt that the situation is quite as bleak as people like me argue it is must surely admit that Spain now faces a difficult and testing time. My contention is not that there is anything wrong with this finding, but rather that this is how Spanish people actually think at the present time. They have no idea of the actual economic reality, or of what the future has in store for them. They are virtually being kept in the dark. This is the worrying part, and I fear that all this may well now end badly, very very badly.
Guess next month number?
ReplyDeleteSince the january poll was conducted spaniards have
1.-Seen their wages deflated at the end of January by the expiration of a tax deduction.
2.-Seen the stock market plunge almost 10% since the end of January.
3.-Heard that the gov is going to delay the age of retirement by two years.
4-Seen the unemployment soar over 4 million.
5-Read in the papers that the country risk is hitting new highs, and many pundits are predicting Spain is following Greece in their Road to Ruin.
Dear Sir,
ReplyDeleteWhen you write "very, very badly", do you refer to...? because with an unemployment rate in a twenty per cent, and a private debt ratio in 180% of GDP, it is not easy to imagine a worst situation...by the other hand don´t you believe that Spain could decide to leave the eurozone to recover its own cuurency in the future, and devaluate a twenty five per cent against the old euro.
The expectations number is indeed astonishing. I wonder how this is being measured.
ReplyDeleteI have a somewhat different question though: A acquaintance of mine got a mortgage in 2007 of €700k (100% of the sales price). 2 years later he lost his job and is not able to make any mortgage payment anymore. Therefore he wanted to hand over his keys to the bank, which the bank did not accept. The house has most probably a current market value of €350k - €400k. My acquaintance hasn't heard anything from the bank, is not paying his mortgage, but is living in the house.
My question is not who is to blame for such a ridiculous mortgage, but I would like to know if and how the banks in Spain are dealing with these kind of write-offs?
That doesnt suprise me. I have been working in Spain the last couple of years or trying to as the system seem to do everything possible to avoid me contributing to society.
ReplyDeleteI predicted this coming... but am still being branded an alarmist. The psycology is completely the reverse from that of the British, who tend to complain, even when all is going well.
The Spanish prefer put their fingers in their ears and go "la la la" or however that translates.
The fact is they just dont believe, or really dont want to believe that prices can drop more, that the local, regional and national governments just CANT carry on with their horrific wastage and inefficiency. The private sector empresario is seen as the source of all ills, and not as the only possible motor that can rescue the country...
So if its a choice of staring into the abyss or contuing with blind optimismo... well... no prizes
Dear Edward,
ReplyDeletethank you for always providing so much information and data about the reality in Spain. You are right to say that Spaniards have no idea of what they are doing, not just talking about their useless Government, but the whole society of ignorants. Your charts show that ignorance in a clear way. "Spain is a serious country".
Though astonishing a dat as you can imagine, I want to think thta it was elaborated with polls carried out before the last week of January and the first of february. in these two weeks, the set of data published plus the disconcerting bluffs of the government (about oensions) may have hammered the confidence. Let´s see in February.
ReplyDeleteIn any case, I agree with you in that a realistic point of view about spanish prospects in any average conversation is dismissed if not utterly ignored or scowl at.
JH
Hello there,
ReplyDeleteWhat's the meaning of a consumer confidence index exactly?. does that mean that spaniards are spending more? or it is just the result of a poll about what they do plan to buy?
Edward, You might be on to a new Economic Survey here! How about a monthly Economic Denial Survey. Spain would certainly get top marks. Spain itself is a parody of the young lazy teenager that lives at home with parents, contributes nothing,parties and smokes pot and moans about 'it's all so unfair'. Well the big bad parent (read EU) is going to have to kick the ungrateful brat into reality for its own sake.
ReplyDeleteHi there. I've been living in Spain for many years now (I' Dutch) and I can tell you that I am amazed about the way the Spanish are handling this situation. A lot of people are complaining but nobody is doing anything. The syndicates are quiet (when the right (PP) was at power they where on the streets every week complaining about everything)and it realy looks like people prefer not to watch and hope I all just goes away (just like the government is doing). It is a realy scaring situation which is not going to end well. The only solution is for the left (PSOE) to anounce elections and step aside. Someting I am afraid is not going to happen.
ReplyDeleteAs a spaniard, I can tell you there are many many people that know and foresaw this catastrophe of the home bubble coming, even desiring to come.
ReplyDeleteAbout the data of confidence, the only two things I can say is that government lies to people (it's been lying for at least 3 years now), and media and common spaniards do not want to recon is being lied to, because not many of us spaniards are so educated.
Well, there are 3 possible explanations for the results in this Consumer Confidence Index:
ReplyDelete1. The economy is improving.
2. Spaniards think the economy is improving.
3. The results are false, based on an erroneous random sample for example.
I categorically rule out option 1 and have no evidence for believing option 3. So the explanation is that people have been falling for the government's media-backed hyperbole - well at least enough of them to push the consumer confidence rating in an upwards direction.
I believe it's only a question of time before the truth dawns on the Spanish people and it seems that things are gathering pace now. The government's honeymoon with the Trade Unions seems about to end as their members contemplate working until their 70th birthday. Unemployment took an anticipated leap in January but the reduction in the number of Social Security contributors was far more frightening, falling by a staggering 257,000, which I think paints the real picture about where this economy is going.
To be continued.
Chris.
Hi Edwards,
ReplyDeleteThanks for this additionnal great entry.
This attitude - the result of a sucessful economic and political pattern that originates back into Franco times - will of course only stops when the money will stop.
à la Grecque.
Just let us hope that our European financial heads - not talking Spain finance minister or premier or BBVA/SANTANDER - will have the time to learn between the crises that will blow up.
The sooner Greece crashes. And for goddam real no just CDS wargame ... The better for Spain. The worse would be a financial bowling strike among Eurozone countries with no time for adjustment.
Said that on that blog earlier. And this is of course just a repeat.
Hello everyone,
ReplyDeleteI am sorry I am so tardy in replying to comments here. I really can't stress how interesting you might find it to come into my facebook. I have a very lively and active community with links posted on my wall daily, and plenty of debate.
Blogspot blogs now attract horrible quantities of spam, which is why I have to use moderated comments.
Sorry about all this, but I simply can't be in all places at once.
Also, I am opening a blog on Expansion (in Spanish) today.
Edward
I just spent 1.5 years in Spain living with my partner (she is Spanish).
ReplyDeleteMy partner has always stated that she struggles with the mindset of the people. After living there, I could not agree more.
The consumer confidence index is of no surprise to me, it reflects the delusional mindset of the Spanish people.
Some issues that I noted -
The labour sector needs serious law reforms, it is very hard and expensive to fire employees. So companies have a complacent and stagnant work force that lacks, competent, aggressive, forward thinking and motivated new blood. Change is very hard to usher in under these conditions.
The government tells the people that it is all ok and blows off the whole crisis as being over despite the increasing unemployment rate. It seems as long as the people have sol, siestas, fiestas and beer then they don't think they are doing too badly.
The Spanish unemployment benefit system means that an individual can work 12 months and have 6 months unemployment benefits in credit at almost 100% of their original pay. Many Spanish think of this as a holiday that they are owed. I knew a Spanish guy that got laid off after 15 years with the one company. When we met he had been unemployed for 3 months. When I asked "Are you going crazy? Aren't you bored not working?". His reply was "I have a total of 2 years of unemployment payments. I am in no hurry to find work, as I don't need to worry".
Another major issue is that Spain does NOT measures itself by other member states in the EU, but against Latin American countries. So in this light the Spanish people, who are poorly traveled think they are doing pretty well.
Spain's socialist president has strong ties with Latin America instead of forging ties with more beneficial countries/economies. Among his best political buddies are the communists Chavez and Morales.
An example of the mindset in Spain - I witnessed the government paying a worker to hand out a piece of paper with the new address of the relocated government office, instead of updating the address on the web page - THIS WAS ONE YEAR AFTER THE OFFICE RELOCATED - So when you look at it in those terms what can you expect from such a moronic mindset?
In the Western World, I have never seen a more complacent, lazy, inefficient system/people in my life. I was appalled that a member of the EU could be so backward.
Spain's productivity lacking. The mindset is stagnant and extremely subjective. Overall Spain still reeks of the 50 odd years of fascist rule.
I could write for hours on this. But I will end now stating that after seeing what I have seen, my conclusion is like everyone else (that is not Spanish) - That Spain has some pretty hard times ahead.