An unlikely Helen, Spain's deputy prime minister, Maria Teresa Fernandez de la Vega, that's for sure. Yet outside a few thousand years difference in timing the two seem to have been cut out for one and the same the same historical role: urging the boats to go back. Indeed the only thing which really separates them might be the magnitude of the problem to hand, since Coalición Canaria president Paulino Rivero suggested this weekend that what might be involved were not a mere 1,000 ships, but anything between 10,000 and 15,000 currently being built along the Mauritanian and Senegalese coastlines.
Joking aside this post is about tragedy, a human tragedy. According to the NGOs who are involved some 3,000 people have already died in attempting to make the hazardous crossing, a crossing which was actually completed over this weekend by a record 1,200 people in 36 hours.
As well as tragedy the post is also about folly, the folly of those economists who think low fertility isn't an important economic issue. This opinion was recently expressed by respected US economist Greg Mankiw, (on his blog) who described the very idea that it might be as 'wrong headed' and, to boot, suggested that a poll of the world's top ten economists would draw a blank on names who thought that low fertility was among Europe's major economic problems. I am sure Mankiw is right about the poll, and this is why I use the expression 'folly'. So what do I mean?
Well lets look at some of the facts. Firstly Paulino Rivero is almost certainly exaggerating, even sensationally so, but this aside, a lot of boats are in preparation. Spanish TV crews spent last week vising a number of makeshift shipyards in Mauritania, and one of the curious economic details you could notice was how the process was in fact exhibiting an increasing returns type feature, in that the incresed demand for boats incresingly meant that a number of would-be migrants were actually not sailing but staying since they could make a reasonable living in the newly developing artisanal shipyard industry, with the consequence that more boats were being built as knowledge and experience (human capital) was being accumulated. So the movement is growing, and whatsmore, feeding on itself. This thriving little industry is now being reflected in the numbers arriving, with more migrants reaching the Canaries in the month of August than in the whole of 2005.
The migrants in fact come from Senegal, and not from Mauritania itself, a fact which makes it virtually impossible to return them to a 'country of origin', since neither Morocco nor Mauritania want to get involved in accommodating long-term would be migrants. An attempt was made by Spain back in May to reach agreement with the Senegalese government to accept repatriation, but this failed at the first hurdle when the first group of 91 refused to disembark on arrival alleging 'ill treatment' by the Spanish authorities, and thus the issue became politically unsustainable for the Senegalese government who had to renounce the agreement. Since that time no-one can be repatriated from Spain to Senegal.
The issue is also about networking, since the recent rise in the number of crossings is more about the fact that a significant Senegalese community has established itself in Spain than about anything else. In order to move migrants need two things: money and information. Both of these they obtain by having famility members and relatives at the other end of the chain. These relatives send money and they also send, via mobile phones, information. Typically the first thing a migrant wants to do on landing is phone relative to let them know they have arrived safely.
So once they have arrived what happens to them? Well since they cannot be repatriated anywhere, and since the Canaries is a small place, they are normally flown in a matter of days across to the mainland where they are served with an expulsion order and then released. Since there is effectively nowhere to send them, and the Spanish authorities are reluctant to invest resources in building long term accommodation centres, they are really faced with very little alternative. On release the migrants normally go directly to the home of a relative, and very quickly they start to work in Spain's very fluid and extensive informal labour market, from whence they send more money home, so, of course, more can come.
The importance of the network component here can be seen in the fact that while in 1999 a mere 2% of maritime interceptions involved Senegalese, by 2004 Senegalese constituted 55% of those intercepted. Meantime the flow of migrants from Morocco has reduced itself to a trickle, and this despite the fact that Morocco is much nearer, and access accordingly easier. I shall return to this decline in Moroccan migration later.
Now, as I have indicated, as far as I am concerned this IS all about fertility, and it does have an economic substrate. Spain, as is by now well known, has long had below replacement (lowest low) fertility (currently in the 1.3 TFR range). Senegal, on the other hand, has high fertility which is stuck in or around the 5.1 range (ie it has barely started its demographic transition). This differential creates what could be called a 'fertility gradient' which, unlike its electro-mechanical equivalents, produces not a flow of protons or electrons, but rather a flow of people. In any event the end result is the same: work gets done which otherwise would not be.
Fertility in Morocco, in contrast, has been reducing rapidly (I have a post about this today on Demography Matters), and is now approaching replacement level. As such the steepness of the fertility gradient between Spain and Morocco has reduced sharply (Morocco is about to enter the demographic dividend growth stage) and the flow of people has accordingly declined significantly.
Now in one sense - aside from the human suffering involved - all this is well and good, since Spain's economy is booming, and the pensions system certainly looks a lot healthier than it did 5 years ago. This 'community of interest argument' has been being made for some time by US economist David Bloom (who is obviously not one of the top ten on Mankiw's list, since he does think that fertility is important to economics, and he is quoted to this very effect in this recent and relevant article by Malcolm Gladwell):
David Bloom, the Harvard economist, once did a calculation in which he combined the dependency ratios of Africa and Western Europe. He found that they fit together almost perfectly; that is, Africa has plenty of young people and not a lot of older people and Western Europe has plenty of old people and not a lot of young people, and if you combine the two you have an even distribution of old and young. “It makes you think that if there is more international migration, that could smooth things out,” Bloom said.
So in a way this process can work for Spain, and it could work for other parts of Europe who eventually will be on the receiving end, but what about Senegal? Well this isn't so clear, since this flow of people may serve to produce what economists call a 'bad equilibrium'. As I have said Senegal has yet to go through its full demographic transition, and allowing the outlet of remunerative migration (remember the remittances) might well serve to reduce pressure for change ( a semi corrupt government being able to maintain its popularity without doing too much) as well as pressure for fertility reduction, since the 'patriarchs' now have even more interest in keeping having those children as they will go abroad and send money back.
But why so much fuss, you might say, since Senegal is a relatively small country (some 11 million or so), and at the end of the day the numbers are never likely to become that massive. Well quite, but here I think it is the process more than the immediate product that matters. Today the flow is from Senegal since the initial network has been created from Senegal, but tomorrow it could be Mali, or Niger, and the day after, well who knows where. So this issue is likely to become more, not less, important with time, and it is an issue to which we need a coherent and rational response, and a response on an EU level (and here we return to Maria Teresa Fernandez de la Vega, who is undoubtedly right in this). What we need is to face the realities of our demographic situation with a response which resolves existing problems rather than simply creating fresh ones. And meantime, even as I write, for sure the next boat is now being built.
Spain Real Time Data Charts
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Spain related comment. He also maintains a collection of constantly updated Spain charts with short updates on a Storify dedicated page Spain's Economic Recovery - Glass Half Full or Glass Half Empty?
Sunday, September 10, 2006
Tuesday, June 20, 2006
The Catalan Statute
Well here in sunny Catalonia we don't have a fooball team of our own right now, so maybe that's why we chose this precise moment to hold a referendum about our future.
Now the first thing to get straight is that despite all the direst predictions, Spain is still here the morning after the big vote, and in one piece, I just touched the floor to prove it. Indeed 11 footballers (some of them Catalan) will also come to earth on German turf tonight just to graphically illustrate the point. So it does seem that some of the concerns raised in the coments to this post were well wide of the mark.
Some issues do, however, remain.
"Catalonians vote for sweeping new powers", reads the AP headline. Well this is not entirely the case. Most of the powers in the new statute are not in fact new. What the statute is, more than anything, is a consolidation of previously existing powers which had been accumulated in a ragbag fashion (in pacts with both PP and PSOE governments) during the 25 years since the last statute was introduced, and their elaboration in one single, symbolic, text. Nothing is going to change dramatically as a result of yesterday's vote.
Two changes seem to be being treated as having some importance:
a) A larger share of taxes raised in Catalonia will now be retained and administered locally.
b) Reference in the preamble to the statute to the fact that "many Catalans *feel* themselves to have a national identity".
On the 'national question' the wording is important, as is the fact that it appears in the preamble and not in the actual body of the text. The wording is framed in this way to offer some recognition to the fact that many Catalans feel themselves to belong to a nation (just like the Welsh and the Scottish do), but to do so without giving explicit nation status to Catalonia (this is likely to be a question which simply isn't going to go away). In this sense the text is perfectly compatible with the Spanish constitution which refers to the existence of three 'historic nationalities' (the Basque, the Galician, and the Catalan ones) without exactly clarifying what this expression actually means. In this sense the precise meaning has traditionally been left to interpretative decisions by the Spanish Constitutional Court.
On the taxes issue it should be borne in mind that some 33% of national income taxes are already retained in Catalonia (this was decided by the PP government of Aznar when it needed support in the Madrid parliament from the Catalan nationalist party CiU) and this figure will now be increased to 50%.
But before you run away with the idea that all this money will be something extra, it is worth pointing out that what the money is to be spent on is determined by the additional devolved responsibilities which also come with the statute, like more control of logistical infrastructure, train services and highways etc, and the administration of work permits for immigrants.
It is worth noting at this point that the original Basque statute effectively gives the Basque government 100% control over income taxes collected in their community and that Zapatero has already said he will offer other Spanish regions the same tax arrangement that Catalonia has just obtained. So in many ways, instead of representing a first step to break-up, all of this could be seen as a step on the road to a less centralised, more federal Spain, and one which offers complete recognition to it's national minorities.
But, as I said, there are remaining issues (like the football team). Interestingly, in many ways the statute could be interpreted as representing the first stage in a process, and not the end of a road.
As is well known, Zapatero is also battling it out with the PP on another front: his proposal to have 'talks' with Eta.
Now, in my humble opinion, the talks with Eta question is a side issue. What is really important is the ending of terrorist violence in Spain. This ending of violence will also have another aspect, since it will bring the 'Basque question' back onto the front page of the political agenda, thus rescuing it from the limbo where it has effectively been kept by 25 years of persisitent violence. So the real talks, the important ones, won't be with Eta, but with the Basque political parties, in an attempt to find a final and definitive end to the issue.
And guess what, any final settlement to the Basque issue will almost certainly involve changes to the Spanish constitution. Re-enter Esquerra Republicana (ERC) by the side door.
Essentially this statute has become such a watered-down document due to the real problem of making it fit within the present terms of the constitution at a time when the PP vehemently refuses to play ball, and makes any constitutional change to accommodate the 'new Spanish realities' virtually impossible.
But again, guess what, things do sometimes change. Zapatero has Rajoy 'arinconado' (cornered), like the triumphant matador he looks gleefully in the direction of Manuel Marin (the speaker in the Spanish parliament) during their regular debates to see if he gets to cut the ear now or later.
On their present course the PP is headed for almost certain electoral defeat, and Zapatero is leveraging this for all he's worth, steering them continuously straight back onto their present course. So he is spinning this one out. The talks with Eta will be minimal until after the next election, keeping his groggy opponent well contained against the ropes, and my guess is that little progress will be made towards a Basque political solution during this time.
But after the elections, well, after the elections..... things will almost certainly change. Rajoy will almost certainly go for one, and the PP will alter its disastrous course. Which means of course that it will be possible to talk, and even talk about constitutional changes. What most Spanish voters want is the Basque issue solving definitively, and the PP won't be able to stand in the way of this forever. So, one more time, enter ERC through sidedoor.
Now what am I talking about? Well I imagine that the recent behaviour of ERC has left many external observers feeling a little perplexed. They propose a new statute, get it through the Madrid parliament, then effectively resign from the Catalan government and urge people to vote against. My own view is that all this is a bit tongue in cheek. Most ERC voters support the new statute pragmatically, as being better than the last one, and most ERC members share that view. The thing is, the party, as a party, has been simply reserving its position, reserving it for what comes next, the second course.
Basically there will now be elections soon here in Catalonia, probably in September as the current socialist government doesn't have anything approaching a working majority. And after the elections will come the inevitable negotiating and pacts (Catalonia is above all a country of pacts). Now the most probable outcome of these negotiations, as far as I can see, is a repeat of the earlier 'tripartit', that is the socialists will once more need to share the government with ERC. So the thing is, ERC had to vote no to this statute to be in any credible position to demand yet more changes (as I say this time in all probability constitutional ones), and they will be doing this in a climate which, after the next Spanish national elections, may make such changes possible.
So who knows, maybe next time we have a world cup there actually will be a Catalan squad participating, come'on Cesc, come'on Puyol, come'on Iniesta, come'on Xavi.
Now the first thing to get straight is that despite all the direst predictions, Spain is still here the morning after the big vote, and in one piece, I just touched the floor to prove it. Indeed 11 footballers (some of them Catalan) will also come to earth on German turf tonight just to graphically illustrate the point. So it does seem that some of the concerns raised in the coments to this post were well wide of the mark.
Some issues do, however, remain.
"Catalonians vote for sweeping new powers", reads the AP headline. Well this is not entirely the case. Most of the powers in the new statute are not in fact new. What the statute is, more than anything, is a consolidation of previously existing powers which had been accumulated in a ragbag fashion (in pacts with both PP and PSOE governments) during the 25 years since the last statute was introduced, and their elaboration in one single, symbolic, text. Nothing is going to change dramatically as a result of yesterday's vote.
Two changes seem to be being treated as having some importance:
a) A larger share of taxes raised in Catalonia will now be retained and administered locally.
b) Reference in the preamble to the statute to the fact that "many Catalans *feel* themselves to have a national identity".
On the 'national question' the wording is important, as is the fact that it appears in the preamble and not in the actual body of the text. The wording is framed in this way to offer some recognition to the fact that many Catalans feel themselves to belong to a nation (just like the Welsh and the Scottish do), but to do so without giving explicit nation status to Catalonia (this is likely to be a question which simply isn't going to go away). In this sense the text is perfectly compatible with the Spanish constitution which refers to the existence of three 'historic nationalities' (the Basque, the Galician, and the Catalan ones) without exactly clarifying what this expression actually means. In this sense the precise meaning has traditionally been left to interpretative decisions by the Spanish Constitutional Court.
On the taxes issue it should be borne in mind that some 33% of national income taxes are already retained in Catalonia (this was decided by the PP government of Aznar when it needed support in the Madrid parliament from the Catalan nationalist party CiU) and this figure will now be increased to 50%.
But before you run away with the idea that all this money will be something extra, it is worth pointing out that what the money is to be spent on is determined by the additional devolved responsibilities which also come with the statute, like more control of logistical infrastructure, train services and highways etc, and the administration of work permits for immigrants.
It is worth noting at this point that the original Basque statute effectively gives the Basque government 100% control over income taxes collected in their community and that Zapatero has already said he will offer other Spanish regions the same tax arrangement that Catalonia has just obtained. So in many ways, instead of representing a first step to break-up, all of this could be seen as a step on the road to a less centralised, more federal Spain, and one which offers complete recognition to it's national minorities.
But, as I said, there are remaining issues (like the football team). Interestingly, in many ways the statute could be interpreted as representing the first stage in a process, and not the end of a road.
As is well known, Zapatero is also battling it out with the PP on another front: his proposal to have 'talks' with Eta.
Now, in my humble opinion, the talks with Eta question is a side issue. What is really important is the ending of terrorist violence in Spain. This ending of violence will also have another aspect, since it will bring the 'Basque question' back onto the front page of the political agenda, thus rescuing it from the limbo where it has effectively been kept by 25 years of persisitent violence. So the real talks, the important ones, won't be with Eta, but with the Basque political parties, in an attempt to find a final and definitive end to the issue.
And guess what, any final settlement to the Basque issue will almost certainly involve changes to the Spanish constitution. Re-enter Esquerra Republicana (ERC) by the side door.
Essentially this statute has become such a watered-down document due to the real problem of making it fit within the present terms of the constitution at a time when the PP vehemently refuses to play ball, and makes any constitutional change to accommodate the 'new Spanish realities' virtually impossible.
But again, guess what, things do sometimes change. Zapatero has Rajoy 'arinconado' (cornered), like the triumphant matador he looks gleefully in the direction of Manuel Marin (the speaker in the Spanish parliament) during their regular debates to see if he gets to cut the ear now or later.
On their present course the PP is headed for almost certain electoral defeat, and Zapatero is leveraging this for all he's worth, steering them continuously straight back onto their present course. So he is spinning this one out. The talks with Eta will be minimal until after the next election, keeping his groggy opponent well contained against the ropes, and my guess is that little progress will be made towards a Basque political solution during this time.
But after the elections, well, after the elections..... things will almost certainly change. Rajoy will almost certainly go for one, and the PP will alter its disastrous course. Which means of course that it will be possible to talk, and even talk about constitutional changes. What most Spanish voters want is the Basque issue solving definitively, and the PP won't be able to stand in the way of this forever. So, one more time, enter ERC through sidedoor.
Now what am I talking about? Well I imagine that the recent behaviour of ERC has left many external observers feeling a little perplexed. They propose a new statute, get it through the Madrid parliament, then effectively resign from the Catalan government and urge people to vote against. My own view is that all this is a bit tongue in cheek. Most ERC voters support the new statute pragmatically, as being better than the last one, and most ERC members share that view. The thing is, the party, as a party, has been simply reserving its position, reserving it for what comes next, the second course.
Basically there will now be elections soon here in Catalonia, probably in September as the current socialist government doesn't have anything approaching a working majority. And after the elections will come the inevitable negotiating and pacts (Catalonia is above all a country of pacts). Now the most probable outcome of these negotiations, as far as I can see, is a repeat of the earlier 'tripartit', that is the socialists will once more need to share the government with ERC. So the thing is, ERC had to vote no to this statute to be in any credible position to demand yet more changes (as I say this time in all probability constitutional ones), and they will be doing this in a climate which, after the next Spanish national elections, may make such changes possible.
So who knows, maybe next time we have a world cup there actually will be a Catalan squad participating, come'on Cesc, come'on Puyol, come'on Iniesta, come'on Xavi.
Tuesday, April 11, 2006
This Is One To Keep An Eye On
2003 was a good year for the Spanish banks, with interest rates at historic lows, lending boomed. News has it today that net profits at Santander Central Hispano, Spain's largest bank, rose 29.6 per cent in the fourth quarter to ?681m ($857m) mainly on strong mortgage lending in Spain and growth in its consumer finance business in Germany and Portugal. Net profits totalled ?2.61bn for the full year, a 16 per cent increase over 2002 and the best year on record, while credit inside Spain was up 16.2 per cent as the housing boom continued on its relentless path hence generating strong demand for mortgages.
So good luck to the bank, and that's it. Well again, not exactly. Why is there a boom in consumer credit and mortgage lending right now in Spain? That really should be the question.
Well the prime suspect here has to be the rate of interest. Spain as a member of the eurozone has been having the luxury of enjoying a rate of interest lower than the rate of inflation for some years now. In this situation the real rate of interest (that obtained by subtrating the inflation rate from the actual interest rate) is clearly negative. The consequence of this is that no-one wants to leave money lying idly around in the bank, and since opportunities for profitable investment have reduced substantially (here in Catalonia we are currently living through a wave of factory closures as industry - unable to work in the new high cost Spain - moves out). Incidentally whilst people are talking extensively of the way the job creation machine is moving down the value chain in the US, little comment is being passed on this in the European context: yet a staggering 91% of all new contracts in Spain last year were temporary ones. And the people entering employment are now earning significantly less than those they replace, as companies in all sectors struggle hard to maintain profitablility.
Now normally running an economy in this way would be regarded as extremely bad practice, but in the context of the euro 'experiment', what was once deemed to be undesireable may now be seen as a virtue. However does it occur to no-one that the impact of a systematically lower than optimum interest rate (and a correspondingly artificially over-valued currency) might not have been having serious detrimental effects on economies like Spains?
Let's put it this way: you need to divide the Eurozone countries into two camps, those who - broadly speaking - need a higher, and those who need a lower, rate of interest. (In fact virtually none of the economies needs the rate you actually have).
Now the latter group have certainly experienced a loss in GDP in relation to what might have been achieved with an appropriate rate of interest, and Germany is obviously the principle casualty here. They could have run more efficiently, although they have perhaps been able to sell more to the former group, so this offsets the loss somewhat.
The second group, which of course includes Greece, Spain and Portugal appear at first sight to have gained GDP, since they have run a lot hotter than would otherwise have been possible. It is here the biggest problem lies in my opinion. Because this short term growth has only been obtained at the price of longer term problems, being achieved as it is by borrowing more than would otherwise have been advisable.
The consequences of this folly are sometimes extraordinarily clear. Again speaking of Spain, which is the country I know best, we have the most horrendous housing boom. Property prices have risen at around 20% per annum during the last three years. 40% of all residential property built in the eurozone was built in Spain last year. Now put bluntly with an ageing and mid-term declining population, Spain simply doesn't need all those homes. But since they are assumed to be rising in value for ever, and since the interest rate makes them seem so attractive, the typical middle class investor has gone on a shopping spree, just like when they open the doors on 1 January. Here in Barcelona I don't know anyone in this category who has not bought at least one extra property, and normally it's two, three or more.
Has nobody else seen this? Well the IMF, the Commission and the Bank of Spain have been repeatedly warning, but of course, what can anybody do. It is a by-product of the euro. Interestingly enough, the UK which has had its own housing bubble in recent years considered this disadvantage decisive in the recent 'tests' exercise.
So what will happen when this finally bursts? I dread to think. Certainly we will leave a generation of young Spanish people horribly indebted - and even more so if the global environment turns deflationary. In addition two large questions also loom in the background. Most industrial enterprises have seen themselves inexorably converted into what are effectively property companies as the balance sheet impacts of the upward spiral have made themselves felt. So what will be the consequence of the deindustrialisation process here in Spain's industrial heartland, in Catalonia.
Secondly, just around the corner lies another headache. The centres of Spain's big cities have been converted into zones packed with high value office premisses, where again the projected rise in the property value may, paradoxically, have been an incentive for the location decision, and even a prime motive force in the final decision to set up the business in the first place. However out there in front lies another big social transformation: home working. Most vulnerable to this is every kind of office work as employers look for ways to reduce costs as an alternative to outsourcing in India or Argentina. And the 24 billion dollar question is: what happens to city centre property prices when the offices are no longer required as offices?
So good luck to the bank, and that's it. Well again, not exactly. Why is there a boom in consumer credit and mortgage lending right now in Spain? That really should be the question.
Well the prime suspect here has to be the rate of interest. Spain as a member of the eurozone has been having the luxury of enjoying a rate of interest lower than the rate of inflation for some years now. In this situation the real rate of interest (that obtained by subtrating the inflation rate from the actual interest rate) is clearly negative. The consequence of this is that no-one wants to leave money lying idly around in the bank, and since opportunities for profitable investment have reduced substantially (here in Catalonia we are currently living through a wave of factory closures as industry - unable to work in the new high cost Spain - moves out). Incidentally whilst people are talking extensively of the way the job creation machine is moving down the value chain in the US, little comment is being passed on this in the European context: yet a staggering 91% of all new contracts in Spain last year were temporary ones. And the people entering employment are now earning significantly less than those they replace, as companies in all sectors struggle hard to maintain profitablility.
Now normally running an economy in this way would be regarded as extremely bad practice, but in the context of the euro 'experiment', what was once deemed to be undesireable may now be seen as a virtue. However does it occur to no-one that the impact of a systematically lower than optimum interest rate (and a correspondingly artificially over-valued currency) might not have been having serious detrimental effects on economies like Spains?
Let's put it this way: you need to divide the Eurozone countries into two camps, those who - broadly speaking - need a higher, and those who need a lower, rate of interest. (In fact virtually none of the economies needs the rate you actually have).
Now the latter group have certainly experienced a loss in GDP in relation to what might have been achieved with an appropriate rate of interest, and Germany is obviously the principle casualty here. They could have run more efficiently, although they have perhaps been able to sell more to the former group, so this offsets the loss somewhat.
The second group, which of course includes Greece, Spain and Portugal appear at first sight to have gained GDP, since they have run a lot hotter than would otherwise have been possible. It is here the biggest problem lies in my opinion. Because this short term growth has only been obtained at the price of longer term problems, being achieved as it is by borrowing more than would otherwise have been advisable.
The consequences of this folly are sometimes extraordinarily clear. Again speaking of Spain, which is the country I know best, we have the most horrendous housing boom. Property prices have risen at around 20% per annum during the last three years. 40% of all residential property built in the eurozone was built in Spain last year. Now put bluntly with an ageing and mid-term declining population, Spain simply doesn't need all those homes. But since they are assumed to be rising in value for ever, and since the interest rate makes them seem so attractive, the typical middle class investor has gone on a shopping spree, just like when they open the doors on 1 January. Here in Barcelona I don't know anyone in this category who has not bought at least one extra property, and normally it's two, three or more.
Has nobody else seen this? Well the IMF, the Commission and the Bank of Spain have been repeatedly warning, but of course, what can anybody do. It is a by-product of the euro. Interestingly enough, the UK which has had its own housing bubble in recent years considered this disadvantage decisive in the recent 'tests' exercise.
So what will happen when this finally bursts? I dread to think. Certainly we will leave a generation of young Spanish people horribly indebted - and even more so if the global environment turns deflationary. In addition two large questions also loom in the background. Most industrial enterprises have seen themselves inexorably converted into what are effectively property companies as the balance sheet impacts of the upward spiral have made themselves felt. So what will be the consequence of the deindustrialisation process here in Spain's industrial heartland, in Catalonia.
Secondly, just around the corner lies another headache. The centres of Spain's big cities have been converted into zones packed with high value office premisses, where again the projected rise in the property value may, paradoxically, have been an incentive for the location decision, and even a prime motive force in the final decision to set up the business in the first place. However out there in front lies another big social transformation: home working. Most vulnerable to this is every kind of office work as employers look for ways to reduce costs as an alternative to outsourcing in India or Argentina. And the 24 billion dollar question is: what happens to city centre property prices when the offices are no longer required as offices?
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