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Edward Hugh Still Downbeat On Spain

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Edward Hugh blog

Certainly Spain's public debt to GDP ratio is low by European Union standards, and significantly below the EU average. But it is not the case that it is universally expected to peak below 70%. In fact the IMF (to name but one) expect Spanish government debt to GDP to hit 72.1% of GDP in 2014, rise to 74.13% in 2015, and stand at 75.94% in 2016 (according to their April 2011 World Economic Outlook forecast).

I won't quote everything, as it's quite a long blog. Certainly some interesting stuff towards the bottom as regards the oversupply of property..

Not sure that I agree with his view that Spain is uncompetitive. Exports and tourist numbers have surged ahead this year, not a sign of uncompetitive prices. Data centres (just one example) are cheaper to set up or maintain than in say the UK or Germany. Plus, wage levels remain low in much of Spain; I doubt Ford would have recently announced their further investment in their Valencia plant if they thought costs were going to make it uncompetitive.

But, one does wonder who is going to buy all that housing stock? I know there's the odd loaded idiot able to buy a beach hut for 100k, but where are the numbers coming from?

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Edward Hugh blog

I won't quote everything, as it's quite a long blog. Certainly some interesting stuff towards the bottom as regards the oversupply of property..

Not sure that I agree with his view that Spain is uncompetitive. Exports and tourist numbers have surged ahead this year, not a sign of uncompetitive prices. Data centres (just one example) are cheaper to set up or maintain than in say the UK or Germany. Plus, wage levels remain low in much of Spain; I doubt Ford would have recently announced their further investment in their Valencia plant if they thought costs were going to make it uncompetitive.

But, one does wonder who is going to buy all that housing stock? I know there's the odd loaded idiot able to buy a beach hut for 100k, but where are the numbers coming from?

Spain isnt as bad as everyone suggests, fact Britain is worse than Spain.

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Edward Hugh blog

Not sure that I agree with his view that Spain is uncompetitive.

Its a fact not an opinion. Having loads of tourists doesn't make the Spanish more productive. The problem is that almost all EU nations are less competitive and productive against Germany, sharing a currency builds up a balance of trade problem.

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Its a fact not an opinion. Having loads of tourists doesn't make the Spanish more productive. The problem is that almost all EU nations are less competitive and productive against Germany, sharing a currency builds up a balance of trade problem.

+1

Explained very clearly here

Although the euro was supposed to create efficiencies by removing the costs of multiple currencies, it has had a subtly pernicious disregard for the underlying efficiencies of each eurozone economy.

Though German wages are generous, the German government, industry and labor unions have kept a lid on production costs even as exports leaped. As a result, the cost of labor per unit of output -- the wages required to produce a widget -- rose a mere 5.8% in Germany in the 2000-09 period, while equivalent labor costs in Ireland, Greece, Spain and Italy rose by roughly 30%.

The consequences of these asymmetries in productivity, debt and deficit spending within the eurozone are subtle. In effect, the euro gave mercantilist, efficient Germany a structural competitive advantage by locking the importing nations into a currency that makes German goods cheaper than the importers' domestically produced goods.

Put another way: By holding down production costs and becoming more efficient than its eurozone neighbors, Germany engineered a de facto "devaluation" within the eurozone by lowering the labor-per-unit costs of its goods.

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Its a fact not an opinion. Having loads of tourists doesn't make the Spanish more productive. The problem is that almost all EU nations are less competitive and productive against Germany, sharing a currency builds up a balance of trade problem.

That's your opinion but the facts currently are against you

spanish exports drive 1st qtr growth

Spanish exports continued to drive economic growth in the first quarter, offsetting a slump in domestic demand caused by the deepest austerity measures in three decades.

Exports rose 5 percent from the previous three months, when they expanded 3.9 percent, and grew 11.2 percent from a year earlier, the National Statistics Institute in Madrid said today. Household spending was unchanged from the previous three months, when it increased 0.3 percent. The economy expanded 0.3 percent from the fourth quarter and 0.8 percent from a year earlier, INE said, confirming an initial estimate from May 13.

You don't increase exports at the height of a recession by being uncompetitive.

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More explanation here on how spanish exports have held up well

Telegraph

The result was a 30pc rise in labour costs compared to Germany, though this oft-cited number is misleading: Spain joined EMU at a greatly undervalued rate – unlike Portugal, which locked in too high.

But the Devil is in the details. A study by Natacha Valla at Goldman Sachs found that Spain had the eurozone’s highest skew towards "price inelastic" exports with a score of 60, compared to 59 for Germany, 55 for France, 53 for Italy, 50 for Greece, and 48 for Portugal. This is a complex stuff – Balassa theory to anoraks – but it broadly means that Spain’s exports are high enough up the technology ladder to let quality trump price.

Economy Secretary Jose Manuel Campa said Spain had lost 15pc in competitiveness against euroland by the peak in 2008 but has since clawed back a third through wage restraint and a blast of labour reform. Much of that loss was in reality "convergence," he said. If so, the claim that Spain has priced itself out of monetary union falls apart.

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Its a fact not an opinion. Having loads of tourists doesn't make the Spanish more productive. The problem is that almost all EU nations are less competitive and productive against Germany, sharing a currency builds up a balance of trade problem.

and yet Spain's exports continue to surge ahead ahead in April. You think that's a sign of being uncompetitive?????

Spanish exports surge in April

MADRID — Spain's trade deficit shrank by 20.8 percent in April to 3.96 billion euros ($5.7 billion dollars), the strongest fall since February 2010, as exports jumped, government data showed on Wednesday.

Spanish exports rose 18.6 percent in April over the same time last year to 17.34 billion euros ($24.89 billion), while imports increased 8.5 percent to 21.31 billion euros, the industry ministry said in a statement.

Exports were up in virtually all sectors with the auto sector posting growth in sales abroad of 24 percent and food product sales up 8.9 percent.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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