What I find missing is how entrepreneur-social culture in Spain is, basically, the least funny joke you'll hear in all Europe. 23.3% of GDP are black market operations. The European country with highest quantity of 500€ banknotes per briefcase. 10% unemployment for workers with tertiary education. Esperanza Aguirre wanting to exile the poor from Madrid (it's a long story). Widespread, also not very covert, abuse from employers. That sort of thing.
Fortunately, the country is sort of duct-taped together, so it all works fairly well in the end. Not at all as gloomy as pictured here.
[1] Like a chav, but Spaniard.
I felt lucky since most people I knew there ( including other programmers ) earned around 1000€ per month. But I couldn't understand how the economy functioned when highly educated people working in Barcelona earned so little in comparison to living costs and still property prices kept on rising at double digit percentages.
Then I met a young guy who worked on building sites mixing cement and laying bricks. He said he loved to play videogames and he wanted to be a tester. When I told him how much I was paid he looked at me in disbelief and said he got 2500€/month and that I should man up and demand more or quit.
I guess in his trade at the time you could do that...
There is much talk about being worse than in the past. Of course, what they mean is being worse than what they expected from extrapolating past improvements.
One example is employment inequality: in the past it was taken for granted (you found a job first, it's your right to keep it). Now there is a growing sensitivity to the unfairness in that. Youth unemployment was always high, whereas now, while being even higher, it's also seen as calling for deep trouble. In that sense it is similar to the increased sensitivity to domestic violence.
Another example: In the olden days people would just moan about the disappearance of small shops when big supermarkets came to town. Now there are consumer groups (grassroots urban shopping cooperatives). Not the result of regulatory change, or of the dire economic situation (most advertise themselves as eco-friendly first, cheaper second) but of greater sensitivity.
TL;DR Jersey Shore (sometimes minus the tan).
I would say that the OP is one of the very serious reasons for the problems in Spain : that he considers 'a fucking cani' does not deserve 1200 euro's a month.
Socially inbred discrimination against other workers/classes in ones society are a key cause of economic disaster. Since there are whole classes of society who don't 'deserve' what they get all over the place ..
This is not the original etymology (see other replies) but I have heard it explained thus many times.
[1] Council House - A UK property owned by 'the council', a regional administrative and legislative body, and let to the disadvantaged.
From Michael Pettis [1]:
The strength of the German economy in recent years has largely to do with its export success. But for Germany to run a large current account surplus – the consequence I would argue of domestic policies aimed at suppressing consumption and subsidizing production – Spain and the other peripheral countries of Europe had to run large current account deficits. If they didn’t, the euro would have undoubtedly surged, and with it Germany’s export performance would have collapsed. Very low interest rates in the euro area (set largely by Germany) ensured that the peripheral countries would, indeed, run large trade deficits.
The funding by German banks of peripheral European borrowing, in other words, was a necessary part of deal, arrived at willingly or unwillingly, leading both to Germany’s export success and to the debt problems of the deficit countries.
[1] http://www.mpettis.com/2011/07/19/current-account-dilemma/
A higher Euro would INCREASE Spain's trade deficit. Spain needs a looser monetary policy than Germany is currently allowing. If the Euro were lower, they could export more and the real value of their debt would decrease.
Those who produce more than they consume export what they do not consume.
Its simple physics.
To produce more than you use is a virtue. Germans are hardly to blame for their virtues.
I guess their failure was in lending to those without the means to pay back.
> The strength of the German economy in recent years has largely to do with its export success.
I think, well, at least Germany actually makes something. I'm not familiar with any major products or services coming out of Spain or Greece. Maybe it's the American in me, living a life inundated with advertising and branding messages, but when an economy is not based on agriculture, natural resources, or tourism, it seems logical that it should be known for something - preferably making something.
Further, I don't know what you mean by "easy living", but Spain was more fiscally responsible than even Germany before the crisis. Spain's deficits are not the result of irresponsible borrowing and spending (as in Greece), but rather of a collapsed economy because the investment money (mostly German, etc) that flooded the country before the crisis evaporated just as quickly after the crisis.
The problem of most 'stimulus' spending is that this does not happen.
I'm not sure if the article's doom and gloom is actually reflected in reality though. Most people are averse to letting society collapse (especially when they've had a history of it standing upright and stable for a long time).
Spain doesn't "just" need stimulus, it needs well guided and allocated stimulus or it will accomplish nothing.
The last thing Spain needs is "stimulus". What they need to do is fix the labor market so it's possible to fire people. When employers can't fire people they only hire as an absolute last resort. That means companies can't exploit growth opportunities as easily and it means employers are unlikely to gamble on people who don't have a solid resume, i.e. young people.
http://www.tradingeconomics.com/germany/firing-cost-weeks-of...
Ireland is about 35 and it shows (little pale kiddies running around everywhere). That is the only one of the PIIGS I'm betting on.
Without structural changes, no amount of youth is going to dig them out.
I personally don't find my observation about Ireland's large population of pale children particularly offensive. I happen to be pale and half-Irish myself (mom from Cork), as well as married to a pale Irish girl.
As for statistics to back up my claim that Ireland is a good bet relative to the remaining PIIGS, here is the % of population under 18 (from 2007, http://childrensdatabase.ie/sonc2008/part1/): Ireland: 24.4 Italy: 17.1 Spain: 17.5 Greece: 17.4 Portugal: 18.7
Regardless, if I offended anyone, I apologize.
I still think youth is a strong sign of a resilient economy. True, Germany doesn't seem to be effected...I'd argue there are other issues there (a phenomenal capital market, for a start).
Theyd need something like germanies dual education system that has classic University/College Education plus on the Job apprenticeships were companies train young People for several years. These companies get some Financial benefits and the young get excellent job training plus a low income during that time. Afterwards they are qualified to tackle the more senior jobs. Of course this is a long term process as well, seems already too late.
1) Hiring is unbelievably costly due to Social Security. 2) Hence you tend to pay "in black". 3) People HAVE TO pay for the Soc Sec even though they do not earn enough for a living. At the very leas, 250 bucks per month whatever your earnings are. 4) We are spectacular liars at polls. Nobody in the black market will say he has a job.
So a grain of salt is required.
EDIT: although the outlook is really really bleak, there is no denying it.
It is very easy for them to make business.
Also, lot of people here are in "paro" subsidy earning 400euros a month and working in the black, 600 or 700 euros. There are also lots of other subsidies like PER witch is part of the "social net" that make Social Security so expensive(a millennial is earning more than 2000euros before taxes make it 1000).
If they report they are working, they lose the subsidy.
nasty secret - all those unemployed? work anyhow, "black" as we say in austria - unofficial, tax free. 50% youth unemployment? if all that were real, there would be open war. yet bars, stadiums, beaches are full.
the official economy is getting smaller, the unofficial one is growing.
as long as there are illegal immigrants from africa working the fields in spain and not spanish people, the economy is not that bad.
lies, damn lies and statistics.
Why is Spain not able to do the same? I'm guessing it's because they are part of the EU and do not have their own currency?
They'd basically have to leave the Euro to do what Iceland did. And that would be complicated.
Iceland is also a lot smaller than Spain.
http://blogs.ft.com/beyond-brics/2012/12/13/estonia-path-to-...
http://www.cnbc.com/id/100558455 http://www.guardian.co.uk/world/2012/jun/08/estonia-latvia-e... https://danieljmitchell.wordpress.com/2012/06/07/estonia-and...
(Of course there's debate over the particulars..)
To have enough money left behind to pay the bills.
What countries have used it successfully to get out of recession and improve unemployment?
This worked in the (now seemingly ancient) past. Governments were a much smaller portion of the economy and taxes were much lower to begin with. These days, up to 50% of people can be employed by the government. When governments get that large, there is no possibility nor space for a recovery:
Stimulus: add more debt to an unpayable debt? increase taxes and chase out people who pay the largest sum of taxes?
Austerity: cut gov't pay and jobs? that leads to less tax revenue and higher unemployment... nevermind the fact that the party won't ever be elected again.
The only way to win at this is to not have an economy that depends so heavily on indebted government nor one that removes risks for the banking system. If a country is already at that point there is no moving forward. Declare bankruptcy, destroy your credit ratings and start over.
From an admittedly fairly uninformed position it appears to me that cutting spending is only going to further erode businesses positions and tax revenue, leading to an even worse position.
macroeconomics != microeconomics.
<100% tax on in-country activity can't really drive anyone away, because leaving the country would mean leaving money on the table.
I do define it as living under your possibilities.
Having deficit is not austerity. Having to pay enormous debt and interest of malinvestments of the past bubbles is not austerity(you become debt slave not austere).
The Economy is only taking a 'siesta' (nap)..
These 'uptight' anglo-saxon coutries only think about work... (sarcasm)
Unemployment in the US is near 15% including U6, or near 23% if using pre-1994 counting methods: http://www.shadowstats.com/alternate_data/unemployment-chart...
(On that subject, I'm looking for work in the north SF bay area, Sonoma/Marin region)
The most sensible employment measure is U4 (official unemployment + people who have searched for a job in the last year). U5 and U6 are far too sensitive to demographic changes to serve as a good basis for comparison. E.g. since the 1950's the work force has added a lot of female part-time workers that are counted in U6, but would have been stay-at-home wives in the 1950's and thus not counted as unemployed at all. Also, older people have always been over-represented among the marginally-attached, part-time work force, and as the population ages there are naturally more of this demographic. Both trends inflate U6, but neither are a negative indicator for the economy per se.
Why not put a CV/homepage link in your profile?
In this case, it's particularly confusing, since Spain is one of Krugman's "look, austerity is bad" poster children.
And..
http://blogs.ft.com/beyond-brics/2012/12/13/estonia-path-to-...
