tag:blogger.com,1999:blog-25064447.post5193584087931752896..comments2013-09-12T06:30:06.298+02:00Comments on Spain Economy Watch: The ECB "Buys Into" Spanish PropertyUnknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-25064447.post-18861372238550605282009-05-17T09:38:00.000+02:002009-05-17T09:38:00.000+02:00Edward,
As usual another informative writeup on t...Edward,<br /><br />As usual another informative writeup on the state of the economy in Spain.<br /><br />I have a somewhat tangental question that comes from the question of trying to quantify housing assets during these shifting times. Here in Spain it has been the custom for a person buying a house to have a black money deposit on top of the mortgaged price that is announced to the government. I know the government is fighting against this practice but the last time I talked to a bank (Mallorca a bit more than a year ago) it was still in practice. So when we see the value of houses dropping do you think this ratio is also applied to the black deposit or do you think these "informal" deposits are in fact wiped out and peoples' wealth has taken a further blow?<br /><br />I understand this is an unquantifiable question but would like to hear your opinion.<br /><br />I am in agreement with Hynek, at what price are these bonds going to be bought is another long term problem for the taxpayers. On top of that looking at the diminishing population base ( http://www.ine.es/jaxi/menu.do?type=pcaxis&file=pcaxis&path=%2Ft20%2Fe245%2Fp04%2F%2Fa2008 and selecting option 1.3) it does look like the problem will be around for quite a while.<br /><br />Thank-you,<br />TimAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-30148034508948182372009-05-14T15:50:00.000+02:002009-05-14T15:50:00.000+02:00Edward, please write shorter posts, this one is ok...Edward, please write shorter posts, this one is ok, but so long that even I did at one point go directly to the conclusions section :). <br /><br />I quite understand your points, they make a fairly good sense to me. <br /><br />What I do not get at all is Mr Trichets comments re "eliminating fears about future inflation". As far as I can see, it is inflation and only inflation that can eventually eliminate the incredible mountains of debt accumulated in the eurozone economy.<br /><br />Can he not see that by transferring the Spanish/Irish/Greek etc. debt onto the eurozone balance sheet the debt will not disappear? That there will be about the same heap of debt, still miles high, but reassuringly called "EU debt"? And that this pile of debt, owed to the Sheiks, the Chinese and all other "emerging" economies will need to be serviced?<br /><br />How will the EU service such debt without the help of inflation, when so many of its member states economies are either broke or going down like an express train?<br /><br />Let us see: within the EU 27, we already have two countries completely dependent on outside (IMF/EU) support, that is, flat broke (Latvia and Hungary). Further, we have three countries that are receiving substantial outside support (in my book, such countries are broke as well). These are Romania, Poland and now apparently freshly added Spain. Then you have at least four countries suffering from such massive gdp declines and budget deficits that they are inevitably going to end up in one of the above categories by end of 2010. These are Ireland, Estonia, Lithuania and Bulgaria. Then you have at least nine countries that will just hang on, not needing help but not being able to help others either (Italy, Greece, Slovenia, Slovakia, Cyprus, Malta, the Czech Republic, Portugal, Austria). <br /><br />Then comes the rest, whose financial strength is at times doubtful (viz the ballooning UK budget deficit or Sweden and its exposure to the Baltics).<br /><br />So let us wildly speculate that the debt issued by the Association of Over-Indebted Countries (aka EU) will indeed be bought by investors (and not by the ECB). What yields will such investors demand? The answer is "high". How high, nobody can really say, but high they will be for sure. <br /><br />And here comes the Italian story: a huge and growing chunk of budget paid to creditors, little or no money to invest, rising taxes, shadow economy, slow but sure decline.Hynek Filipnoreply@blogger.comtag:blogger.com,1999:blog-25064447.post-31146448406843665302009-05-14T15:32:00.000+02:002009-05-14T15:32:00.000+02:00Also,
"The good news for Spain is that a total me...Also,<br /><br />"The good news for Spain is that a total meltdown will be avoided."<br /><br />Remember, this is like football and Barça, one day the news is good, the next it is bad, but after all the suffering (patiment) maybe one day we will all be able to sing "Copa, Liga, Chapions".<br /><br />What I mean is, this won't move in a straight line. There will be days of celebration, like today, and days of sadness. But in the end we - the Europeans - will do it, and get there.<br /><br />We have to.<br /><br />EdwardEdward Hughhttps://www.blogger.com/profile/10384039867580949531noreply@blogger.comtag:blogger.com,1999:blog-25064447.post-90155344845476922642009-05-14T15:30:00.000+02:002009-05-14T15:30:00.000+02:00Hi again JSA,
"The good news for Spain is that a ...Hi again JSA,<br /><br />"The good news for Spain is that a total meltdown will be avoided."<br /><br />I think so, or at least there is s stronger chance of it being avoided. The cédulas are now one less thing on the "to do" list. But the list is, of course, still rather long. Basically, the ECB can shoulder these and leave the Spanish state to address other issues. The depressing thing is that those who are running the show don't appear to have a clue what they are into. <br /><br />"Provided sterling avoids a meltdown, can we now say that the UK was wise not to have joined?"<br /><br />I honestly think it would be better to put off this debate till a bit later. There are so many "unknowables" at this point. Let's just hope the UK too avoid meltdown, and when we see the extent of all the damage we can have a psot mortem. At the moment everything is still on "battle stations".<br /><br />"There's is no easy way out for Spain and most of the "fictional" gains made on its European rivals will now surely be lost."<br /><br />Yep. Fraid so.<br /><br />"The country will trundle into high long term unemployment and mediocricy within the Eurozone."<br /><br />Well not necessarily. Or at least it depends what you mean by "long term". The next five years are definitely going to be extraordinarily difficult. But the shock is going to be extraordinarily sharp. So I am not so pessimistic that Spain cannot emerge in 2015 or so, a lot leaner and meaner.<br /><br />Certainly I would still be a lot more positive over this horizon about Spain than I would be about Italy. Reform is difficult here, but not impossible.<br /><br />"Is there another way?"<br /><br />Well only what I spell out at the end of the post, and what will be to come in thre great debate over the years ahead. Spain does have its language which is a global one, and it has cultural ties with Latin America, Philipinnes etc. It can act as an intermediary with North Africa. So the export potential is there if we get the structure right. I repeat: I am not pessimistic, but we face five very hard years.Edward Hughhttps://www.blogger.com/profile/10384039867580949531noreply@blogger.comtag:blogger.com,1999:blog-25064447.post-61737021642168681072009-05-14T14:56:00.000+02:002009-05-14T14:56:00.000+02:00Great post Edward.
The good news for Spain is t...Great post Edward. <br /><br />The good news for Spain is that a total meltdown will be avoided.<br /><br />But this is a famous victory for federalist Europe and Spanish governments will now be at the beck and call of the ECB for (decades?). (Provided sterling avoids a meltdown, can we now say that the UK was wise not to have joined?) There's is no easy way out for Spain and most of the "fictional" gains made on its European rivals will now surely be lost. The country will trundle into high long term unemployment and mediocricy within the Eurozone. Its demographic and pension issues remain unanswered (perhaps the good weather will atract millions of bright young things from colder parts of Euorope!) There doesn't seem to be the political capacity to change anything. <br /><br />Is there another way?<br /><br />JSAAnonymousnoreply@blogger.com