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Post Spanish and Greek Economies
Created by John Eipper on 07/04/15 12:15 PM

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Spanish and Greek Economies (José Ignacio Soler, Venezuela, 07/04/15 12:15 pm)

Regarding Anthony Candil's post of 2 July, in which he compares the Spanish and Greek economies based only on the debt, unemployment rate and average salary, and he concludes that "if all that doesn't look like Greece, tell me what it is"!

I am not an expert in economics, but common sense suggests to me that one should take a closer look into the complex aspects and structure of any country´s economy to be able to asses it and to be able to compare it to any other. For that reason I am not going to enter into that debate. However, I append a list of some important general indexes, found everywhere if you look carefully, where, I believe, the differences are clearly shown between both economies and how well are they suited to confront a crisis the size Greece is experiencing now. Judge by yourselves and, please, do not misjudge my naïve assessment, because I am not saying that Spain has fully overcome its crisis yet.

By the way, my impressions on Spain are not only based on "how nice the country" looks when visiting it from the perspective of a regular tourist, if the idea were perhaps to discredit my perceptions; I am from Spain and actually live there part of the time. I enjoy having many relatives, friends, acquaintances, colleagues and business-related contacts.

Going back to the numbers, these indexes are from 2014 end year. The differences today, in July 2015, are even greater: for example on the DGP, GDP growth, unemployment, fiscal deficit, industrial production, and several others.


Index

Spain

Greece

 

 

2014

comment

GDP Thousand millions Euros

    1.031.196

       174.466

 

GDP per capita Euros

          22.193

          15.871

 

World Ranking Size of the economy

                  14

                  46

 

Debt

 

 

 

Public Debt  Thousand millions Euros

    1.007.220

       316.438

 

Public debt % /GDP

97,7%

181,4%

 

Public debt per capita Euros

          21.677

          28.603

 

Debt ranking

 BBB+

 CCC

According to Standars and Poor, Finch, etc.

Fiscal Deficit % GDP

-5,58%

-2,57%

 

Prime risk  public debt

                117

            1.300

Lower the better

Trade

 

 

 

Exports Millions Euros

       335.599

          58.415

 

Imports Millions Euros

       309.329

          64.143

 

Trade Balance millions Euros

          26.270

           -5.728

 

Export Increment  2014-2013

2,60%

-3%

 

Unemployment %

25,00%

26,00%

 

Internal consumption increment

2%

-0,50%

 

Foreign investment Thousand millions Euros

15.500

1000

 

Production Industrial Index %

2,7%

0,7%

 

Other social Indexes

 

 

 

Corruption index

60

43

Higher the better

Corruption ranking

37

69

Lower the better

Competitivity  index

4,55

4

Higher the better

Competitivity  ranking

35

81

Lower the better

Human developing Index

26

28

Lower the better

Life expectancy Years

                  84

                  80

Higher the better

 

JE comments:  Spain appears to be "ahead" in every category.  For example, I see that Spain has a significant trade surplus, which is always a good thing.


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  • Greek and Spanish Economies (Anthony J Candil, USA 07/05/15 1:17 PM)
    A warm thanks to José Ignacio Soler for his very detailed post of 4 July.

    I'm glad to know that Spain doesn't look like Greece, and therefore there is nothing to for the Spaniards to worry about.


    Why then are they blaming the current government for many failed policies?


    I've read some reports prepared by a professor of economics at the U of Madrid who is saying almost the opposite and blaming the authorities for lying to the country. His name is Roberto Centeno.


    Anyway, I can see José Ignacio is Spanish and, no offense intended, his attitude reminds me of Colonel Moscardo, when reporting to Franco in September, 1936.  He said: "Sin novedad en el Alcázar" (nothing to report), when the Alcázar was actually totally destroyed.


    Anyway, I'm glad to know I'm wrong.


    JE comments: Well, the results are in, and Greece has overwhelmingly voted "no" on the latest bailout/austerity program. Is a Grexit now inevitable? That is my understanding.  Eugenio Battaglia has sent a note of congratulations to the Greek people.

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    • A Note on Civility (Henry Levin, USA 07/07/15 12:00 PM)
      The "gracious" response of Anthony Candil (5 July) was insulting to José Ignacio Soler, who in his highly respectful response to Anthony's assertation that "Spain will follow Greece" did not claim that Spain lacks challenges. What José Ignacio said was that its challenges will not lead to its falling as the second domino after Greece, as Anthony flatly asserted. Soler proceeded to demonstrate this reality with an objective comparison of economic data. Perhaps Sr. Candil has his own privileged access to the statistical Alcázar. If this is so, he might wish to explain that more clearly rather than using an insulting analogy for characterizing the data that José Ignacio presented.

      I am at my home in Catalunya at this time, and can suggest from direct experience that Spain is far from Nirvana. But, neither is it Greece. The OECD expects that the Spanish growth rate for GDP will exceed 3% this year, the highest in the EU. There are plenty of political and economic challenges here and differences of opinion, but tonterías about el Caudillo and the Alcázar are not substitutes for hechos (facts).


      JE comments: This is the second trip to the woodshed today in WAISworld. Please, colleagues: let's be civil!


      Getting ready to board the plane in San José. Next posts will be from LAX, where I have a two-hour layover.

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      • A Note on Civility (José Ignacio Soler, Venezuela 07/09/15 6:57 AM)
        Regarding the post of Antonio Candil, in response to my arguments about the economies of Greece and Spain, and later the comments by Henry Levin and most recently by Eugenio Battaglia, I must say that I did not feel any offense, although I was somewhat disappointed.

        The problem is not to be offended by historical figures, whether Franco or Moscardó, or even the situations, which are purposely metaphoric, but to use such references to discredit a solid argument by means of sarcasm. Anyway if this was the case, this strikes me as a very poor argument.



        Perhaps Col. Moscardó wanted to be ironic or Franco wanted to be sarcastic, overlooking the reality of the destroyed Alcázar; or perhaps Antonio used the metaphor to suggest I was being ignorant and denying the reality of Spain. Maybe he was just trying to be sarcastic about the subject discussed. As a philosopher once said, "irony and sarcasm are used frequently to disguise ignorance."



        And the end, no offense was taken.


        JE comments: Civility in WAISworld = one happy editor. Anthony Candil has sent a comment on this same topic. His post is next.

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      • Spain and Greece, Revisited (Anthony J Candil, USA 07/09/15 9:04 AM)
        I'm not going to feel offended by Henry Levin's commentary of 8 July. My understanding from the beginning is that here at WAIS we respect each other, no matter how different we can think or even feel.  I never tried to offend or insult anyone, and if that's been the case I apologize.

        Nevertheless on the issue we're talking about, of course Greece and Spain are different, but that doesn't mean that Spain is not next after Greece, no matter how distant apart they are.


        Both Spain and Greece have far-left anti-establishment parties, born out of the indignation caused by many years of austerity and endemic corruption, which set the goal of toppling established parties in both countries.  In Greece's case, this was on 25 January when a snap general election was held and in Spain, on May 24, when Podemos triumphed in many towns and local elections.


        Greece's Syriza and Spain's Podemos, part of the same bloc in the European Parliament, want an end to austerity and a major restructuring of their countries' debt. Syriza is pressing for debt forgiveness, the consequences of which could include Greece's exit from the eurozone.  This week's referendum in Greece has shown overwhelming support for the present government no matter what.


        A Greek exit from the euro zone is considered unlikely, although Germany appears to be more sanguine about a Grexit. Finland has already emerged as a major hurdle to negotiating a new bailout deal with the Greek government.


        Spanish Prime Minister Mariano Rajoy's attitude and fears has cast a spotlight on the similarities between the two countries. They certainly exist, but so do differences--and to a greater extent.


        First, yes, the Greek crisis has been much deeper than Spain's: its GDP has fallen by around 25% compared with 7% for Spain. Greece, unlike Spain, was forced to accept a sovereign bailout by the "troika" (the European Commission, the European Central Bank and the IMF). Some of Spain's banks, however, had to be rescued. Madrid exited this programme a year ago, whereas Greece is still beholden to the "troika."  But that doesn't make the Spanish situation much better in the end.


        The unemployment rates in both countries are similarly massive (see Figure 1). Spain lost 3.8 million jobs between 2007 and the third quarter of 2014, according to Eurostat, and Greece's much smaller economy (2% of euro-zone GDP compared with Spain's more than 10%) 1.1 million. While Spain generated 553,400 jobs during this period (representing 14.5% of those shed), Greece created 107,000 (9.2%), but certainly Spain is far bigger than Greece in every aspect.







        As well as a weaker labor market, Greece's general-government gross debt is not much higher than Spain's (175% of GDP as against almost 145%, according to the Bank of Spain; this is considered unsustainable and not just by the radical left).  This explains Syriza's determined push for debt forgiveness that is frightening Europe's leaders. Greece began its crisis with a debt load of more than 100%, while Spain's level was under 40%. Both countries are running current-account surpluses in GDP terms (an estimated 1.5% for Greece last year and 0.2% for Spain).


        More than any other European leader, Rajoy stands to lose the most if Syriza wins the struggle against its creditors and the ECB, as his government's austerity measures, more than Greece's, are producing a glimmer of light in what has been a long tunnel of recession. Rajoy's dogged sticking to orthodox reforms and spending cuts has made him something of a poster boy for the fiscally conservative German Chancellor Angela Merkel, but at almost two-thirds of Spaniards are now furious and against him.


        The recovery in Spain as announced by the government is something yet to be seen. Foreign investment is to be scrutinized and analyzed before coming to happy conclusions in a hurry.


        Bond yields show there has been a decoupling between Greece and the rest of southern Europe, including Spain. The risk premium (spread) on Spain's 10-year government bonds over the benchmark German bunds has come down from 3.54 percentage points in October 2011, one month before the general election which swept the Popular Party back into power, to just over one point, while Greece's has declined from 23 % to 9.


        Among the crisis-hit countries, Spain has been apparently the most reform-minded. The labor market is less dysfunctional, as a result of reforms in 2012 that reduced severance payments for unfair dismissals and given companies greater flexibility to set wages and working conditions themselves, rather than through sector-wide bargaining.


        Spain is now however creating jobs at lower rates of GDP growth than before. In previous cycles, employment rose when growth hit 2%. Jobs were created last year with growth of around 1.4%, though many of them are temporary and precarious, Careful with this! GDP growth this year is put at more than 2%, but maybe this is too optimistic.


        Both Spain and Greece, like it or not, however, still rank at the bottom of the World Bank's latest classification of countries by the number of weeks of indemnity pay for termination of a contract after 10 years' employment in the same company--26 in the case of Greece and almost 29 for Spain.


        A Syriza victory now against its creditors and the ECB could boost Podemos' electoral prospects, though this could easily change if Syriza's policies fail to make any headway or if they deepen Greece's crisis.


        However an unraveling of the conservative Popular Party's reforms seems unlikely, as it is becoming clear that the party won't do well in Spain's election likely due to be held by December this year if not earlier.


        Some of the latest voter-intention poll by Metroscopia, gives Podemos 28.2% of the vote, the Socialists 23.5% and the Popular Party only 19.2%.


        However the color of the next Spanish government is far from certain, and most probably Podemos would not be able to govern on its own. It would need to form a coalition with the Socialists.


        The real test of the extent to which Spain is not bracketed in the same "basket case" category as Greece will come if, as expected, Syriza wins over the ECB and its victory contaminates Spain.


        No one is sticking their neck out and saying the contagion for Spain would be minimal, and my view is that it looks like Mr Rajoy is appearing increasingly nervous. Why?


        He shouldn't be if Spain and Greece are really so apart and so different.


        Pax and Lux!


        JE comments:  My apologies to Anthony Candil.  This post has been stuck in the queue since yesterday afternoon.  I sometimes encounter delays with formatting charts and tables.


        Spain's unemployment has always been difficult to explain.  Historically, the figure has been extraordinarily high even in boom times.

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        • More on the Spain-Greece Comparison (José Ignacio Soler, Venezuela 07/14/15 7:00 AM)
          I am very surprised by the statistics mentioned by Antonio Candil in his 9 July post comparing Greece and Spain. It was not my intention to drag on this particular debate, but the quotations and figures Antonio mentions to support his position are once again a little imprecise or at least biased.

          Particularly, Anthony quotes "some of the latest voter-intention poll by Metroscopia, [which give] Podemos 28.2% of the vote, the Socialists 23.5% and the Popular Party only 19.2%."


          Well, according to the last voter-intention poll by Metroscopia, from July 4th, the results are: 23% PP, 22.5% PSOE, 21.5% Podemos and 15% Ciudadanos. Let´s take into account that Metroscopia is a company regularly quoted by the newspaper El País, well known for its traditional opposition to the PP and its sympathies for the socialist PSOE. Additionally there are some other polls which show greater voter-intention support for PP. In fact the PP was the traditional party most voted for in the May 2015 municipal elections.





          http://elpais.com/elpais/2015/07/04/media/1436027130_315840.html



          Antonio also wrote: "Spain is now however creating jobs at lower rates of GDP growth than before. In previous cycles, employment rose when growth hit 2%. Jobs were created last year with growth of around 1.4%, though many of them are temporary and precarious.  Careful with this! GDP growth this year is put at more than 2%, but maybe this is too optimistic."


          According to the International Monetary Fund and the OCDE (Employment International Organization)'s official public statements of July:


          1) Spain is the driving force in Europe, for the GDP growth and employment creation.


          2) It will have a GDP growth from 2.1% to 3.1%.


          3) It will create more than 600,000 jobs this year at a 2.9% rate.



          http://kioskoymas.abc.es/noticias/economia/20150710/sevp-espana-pais-crecera-empleo-20150710.html






          http://www.larazon.es/economia/espana-crecera-un-3-1-en-2015-y-un-2-5-en-2016-segun-el-fmi-NA10230836



          http://www.larazon.es/economia/espana-liderara-la-creacion-de-empleo-en-la-ocde-entre-2015-y-2016-PB10229402


          Again, I must stress my opinion that Spain is not free of crisis, but it may be on the right path to overcome it and it is very much better prepared now to confront a possible contagion from Greece than it was 3 or 4 years ago. In short, it is very doubtful Spain will follow the Greece path.


          JE comments:  So Spain's problems may not be as desperate as we thought--especially the statistic about 600,000 new jobs.  Granted, ABC (first link above) a PP-leaning newspaper.  I'm not sure about La Razón


          It's been too long since we've heard from Jordi Molins in Barcelona.  Jordi, care to weigh in?

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    • Colonel Moscardo and the Alcazar (Eugenio Battaglia, Italy 07/08/15 5:03 AM)
      Regarding the recent exchange between Anthony Candil and Henry Levin, I am still asking to myself what can be insulting about the Toledo Alcázar and Col. Moscardó. Regardless of the side on which they were fighting, Moscardó and the defenders of Alcázar were heroes.

      I will always consider the defenders of Leningrad as enemies, but they defended their city as great heroes. Is this so difficult to understand? My father fought until the last artillery shell at Cape Bon, but when he had a British officer prisoner, he always invited him to his table for dinner.


      The enemy shall be fought but not hated.


      JE comments: But is the chivalric warrior code alive anywhere today? What about 50 years ago? World War II was probably its last bastion, and also the conflict that guaranteed its demise.

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