How To Grope On A Train

Oil - Spain Need a Rescue?

Small ideas

almost a couple of months since I wrote in economics, perhaps overwhelmed (and chastened) for all lived in this past 2010, perhaps also because every day I am more convinced that economic forecasts are based on models for very complete as they are, are increasingly exposed to everyday imponderables. Torrential rains in Rio de Janeiro or exile of President of Tunisia are a good example.

Yeah, there is a "country risk" in which sizing is all or Most of these avatars that could threaten the economy of a state, but the truth is that in the global scenario which we live are so-called global uncertainties, which reduces the possibilities of success. I also recognize that in a moment in which I am inclined to the skeptical rationalism, or what is, in I think in states of panic like this, people act more guided by their emotions than by the analysis, which further hampers any predictability. I clarify this because what I will describe below are not intended to be more than some small ideas that point to some signs, trends that could be reversed or attenuated depending on the circumstances. Let's see how it goes.

Spain Need a Rescue? So Expansion newspaper headline today an interesting article accompanied by a pair of grandstand views. If I had to bet I'd say no, but if anything this has shown us crisis, is that when you think that the worst has passed, most unexpected events occur. However it is true that there are two differential conditions for Greece and Ireland, in my view essential, which should rule out the involvement of our country. One, Spain has no liability position of Greece, two, Spain does not have a banking system that collects 300% of its GDP, which is also bankrupt and whose bankruptcy has been endorsed by the government, which does occur in Ireland. There is also a third point which is not negligible aspect: debt, both public and private hands of Spain in European banking is 476,000 million euros. This otherwise, we are too big to fail, because the consequences would be terrible, not only for Spain but for the whole EU. We think that our GDP addition, approximately 10% of total EU GDP Why then the current mistrust?

First, markets are wary of our government. The adjustment plan was announced several months ago which postulated a series of reforms to reduce the government deficit of 6% in late 2011, is still elusive in many key respects. Not completed the reform of pensions, for example, nor has it become clear how labor market reform behind the dithering of the government in recent weeks. A reform which, incidentally, does not deal with almost none of the key aspects (collective bargaining, labor market flexibility through a single contract adaptable to the circumstances of each sector and youth access to employment among others) and it seems that has not gone much beyond a lowering of dismissal under certain circumstances, which is a stellar distance of fixing our real problem: the constant and increasing loss of competitiveness since 2000. Our lineup of doors away, at least the people who govern us, is bad and that we are penalized.

Secondly, our growth prospects are bleak for the coming years and that causes fear. Spain needs to grow above 2% to generate employment. If we had an unemployment rate of around 8%, the problem would be minor. With 20% the situation is critical. Why our growth prospects are so negative? Basically because to retrieve the track needed to be given four basic circumstances: one, that is desapalanquen families, two businesses that desapalanquen, three, I reordered the banking sector and four, they clear the real estate sector and construction. When that happens, it will resume lending, consumption will and re-create jobs.

families, thanks to the current mortgage system we have in Spain, are deleveraging at top speed. There is no other. When you buy a house until you can garnish wages from your parents where appropriate. The VAT hike, even a worse evil for good, the inflation data yesterday and the electricity and fuel hikes do not help or encourage consumption and reduce fear of English walk.

companies now go mostly by digesting the debt binge of English banks. It is time to restructure, remove from exposure to short to pass the long, and to find gaps that allow companies to adapt to a new cycle fraught with uncertainty. Put another way, companies are on track, but have not been deleveraging much less than they should and potential revenue increases should come from a firm commitment by the foreign sector, largoplacista aspect, which requires investment and a process concentration in almost all sectors in the absence of critical mass (ie, volume and size to go out and export) of our companies with few exceptions known to all.

The banks and real estate sector, the solution of the two go hand in hand. The English financial sector has not done their homework, at least with respect to the boxes, the reform has not yet been completed, and that far from calming the markets, put more fear and pressure. The real estate sector, meanwhile, should start its final adjustment from this year as pressure from the Bank of Spain for banks to begin to recognize that their houses are worth what they were saying they were worth, and have given their fruit. Put another way, have signed up already part of the loss, so they could sell them cheaper than a year ago. In the capital Madrid, for example, there are several voices who say that it is time to buy. For other places need a bit more, but I sincerely believe that the road has already started, but we take several years to finish it.

Third and last is our public sector, which you need to do, neither more nor less, if you want to reassure the markets, is to comply with what he has planned for what will undertake deep reforms that go far beyond the kind words. We are probably some bad years, but a rescue would be much more dramatic for our country. If it was missing something percale is that Aznar into play as it did today, warning that we are indeed living intervention and the state autonomy is not viable. His remarks, inappropriate, they also have some truth. Autonomy as they are understood today are difficult to sustain from an economic standpoint, but who will be brave to put you bell the cat? As I said today the expansion, now more than ever the future of our economy depends on the political will to make profound changes.