versus forecasts for 2010 November 2nd On Monday we held our annual meeting with ESEUNE renowned economist D. Ramon Tamames, during this time of the opening ceremony of the 2009-2010 academic promotions and Global Executive MBA MBA Business School ESEUNE.
Tamames A year ago we talked about the crisis and its effects, yesterday tried to discern among all the hypothetical recovery. Twelve
months ago were on the verge of collapse (after the bankruptcy of Lehman Brothers on September 17, 2008). But the measures taken prevented the catastrophe: the central banks have injected liquidity into the system, governments reacted by raising deposit guarantees (preventing millions of people did queue at banks to withdraw their savings), have created funds dubious acquisition of financial assets to improve the health of banks and plans have materialized damping of the crisis (of the Plan E).
Today we talk about the recovery of the U.S. economy in the third quarter of 2009 grew by 3.5% (versus the third quarter 2008). But it is interesting to see how this news has excited more in Spain than American citizens themselves, many of which cast doubt on the recovery. First we must note that this growth is generated in comparison with a quarter black, as was the third in 2008 in the United States. It should also be aware that much of this growth is due to strong government support (such as Superplan to save the old car industry in Detroit), and all accompanied by a weak dollar favors U.S. exports. Hence, some economists like Paul Samuelson (first Nobel Prize in Economics in 1970) warn of the possibility a "W".
Spain 2010 But to return to Spain. The situation for 2010 looks very negative, but the situation in 2009. It is true that GDP will not bleed (but we note that the fall in 2009 was so important, that simply is not growing and highly disturbing in itself). The "shadows" of the English economy in 2010 will come from the hand of its banking system, which is already being challenged by an increasing number of international analysts. There are several reports that English banks hide their real rate of default (the debt of English banks is 800,000 million euros and 25% of the total, about 200,000 million-asset may correspond to "doubtful"), on the other side says that the stock of unsold homes is much greater than officially recognized, and it is certainly true that credit flows to businesses, freelancers and families.
buffer plans designed by the Government (8,000 million E Plan, the 5,000 million Ea Plan, aid to purchase cars ...) have a material effect (and thousands of miles of new sidewalks) positive ( containing the evolution of unemployment, active keeping hundreds of small businesses), but plans are very weak, with no real power to boost our economy and start taking advantage of this inertia.
Unemployment is our main problem. A few months ago when President Zapatero was asked if he feared for social unrest in Spain, with an unemployment rate that walks resolutely towards 20% of the population. His response to the journalist was to come to Spain and walked through the streets to see for himself that in Spain people lived very well.
Maybe that's where you're walking and the President. In cities such as Madrid, where they concentrate a large volume of public employees (civil servants at no time threatened their incomes, do not fear losing their jobs at all) the consumption level is still acceptable, the money flows, breathe shops, services work. But in other cities, towns and regions the outlook is really bleak. The people have not taken to the streets and crime has not fired for two reasons: we have a social system that allows people to continue living (unemployment benefits, free healthcare, free education ...), the families can pay their power and children can continue going to school.
On the other hand, the economy is still operating: the 600,000 checks help of 400 euros that the government had prepared were collected only 30,000. Many people not willing to do a training every day to receive that help .... it continues to make their money charging chapucitas B, lending a hand to the brother in the workshop, the brother in the bar ....
The economy acts as a buffer against the crisis but will aggravate the second big problem of Spain: the fall in government revenues endangers our welfare state (health and education will deteriorate, the Pension are threatened by the time ... but if they are a threat: the commitments that must be addressed in the next ten years if the economy remains stagnant, going to suck much of the already weak if revenue.
Within a year we have gone from 11,000 million budgeted to pay unemployment benefits to 35,000 million (or whatever it is, as stated Tamames, a half dozen's Madrid-Sevilla AVE.) An unemployment rate as high constrains the ability of a country to develop new infrastructure, modernize, invest in R & D, strengthening their universities, improve the health ... ..
The crisis has many ballots to worsen, the Government's ability to continue to act is limited, although Brussels authorize us to continue to have high deficits or continue to issue debt, the shock absorbers in the form of government stimulus for the economy will not be strong enough to revive the patient. In addition, if debt continued firing, we are not aware of one thing: one day will be paid. How?
Throughout the history of Spain as we have seen Mendizabal confiscations or the most recent privatization of large public companies that have allowed the state to reduce its debt. But now, what's left? How are we going to return in ten or twenty years, our debt? A government they have nothing left to sell to raise cash ... except, as I said Tamames, the savings banks. Will we see the seizure of the boxes? The political complexity that accompanies these curious entities (whose are? how much they cost? Who controls them?) situated in a very distant horizon this possibility.
The truth is that while we as government revenues shrink, we are witnessing a significant increase in budgetary allocations to pay unemployment benefits and debt repayment.
It's too late for reforms, but tomorrow will be even later are few, and increasingly, those who question the urgent need for major reforms.
The first labor reform: the only way to recover apace part of the job losses (and relieve the state budget allowing further enhance the research, development, education, innovation ...). Stable job, permanent, temporary, precarious .... Anything but work. This is no time for discussion of the quality, but to talk about quantity. It takes a few million new jobs.
The second reform is in parallel: the reform of productivity. Change the production model is needed (to replace the brick and paella by the Biotechnology and renewable energy). But that change is almost a generation. While we changed the production model we can begin to change the mode of production: English companies inefficiency are well we are not competitive and we hampers productivity. We must improve the training of the lathe and CEO. And it is absolutely necessary to redefine the role of trade unions and the negotiation of agreements (geared towards productivity, competitiveness, etc.).. In short, a new production model is necessary, but a new way of producing is urgent (a new business model "e-volution")
The third thought that the country has to address is the role of the public. In recent years the English population has grown 20% and the number of staff by 100%. In some communities Regions (such as Andalusia and Extremadura) 30% of the working population is official. Need to Spain this high percentage? And above all, we can afford that luxury? Improving the efficiency of management is as important as improving the productivity of enterprises.
And finally, we have to think about market fragmentation. We are just over 40 million consumers ... in 17 micro-markets. Wall-Mart has said it does not come to Spain because it is a market, but 17. An American colleague hallucinated a few months ago when I had problems to manage a waste as simple as the oil industry: if you and your vans in Pamplona responsible for transportation of waste are occupied, while those of Vitoria are idle ... you can not make a phone call to come and support you: do not serve the licenses, the staff is not authorized, probably unaware of the processes to follow ....
After all, many of the things I commented on my post of March.
The European Commission sees no clear Earlier today we met the EC forecasts for Spain: the English economy will shrink by 3.7% in 2009 and will continue to fall another 0.8% in 2010. Thereafter, in 2011, a negligible recovery of 1% (negligible after two years drop). According to Brussels in 2011 exceeded 20% unemployment: 1 in 5 people of working age can not. The recession will be with us several more quarters and only advanced economies like the Latvian, Lithuanian and Bulgarian as well as Spain take to leave the crisis.
The budget deficit will soar to 11.2% of GDP this year and remain at around 10% in 2010 due to falling tax revenues, increased unemployment benefits and anti-crisis measures, while debt increased from 39.7% in 2008 to 74% in 2011. This spectacular rise threatens the long-term sustainability public finances.
Brussels also warns against some of the tax measures have been taken. The elimination of tax returns (a reference to 400 euros) and the VAT increase may also have a negative impact on private consumption.
And again doubts come from outside our financial system: Brussels warns of an imminent rise in mortgage defaults that could jeopardize the correctness of the balances of banks heavily exposed to construction, which could have a negative impact on the real economy.
The Commission notes that Spain has continued to lose competitiveness in the crisis because wages have grown faster than productivity because the review clauses. Inadequate conventions to which we referred above may, depending on the EC, as in the past, a significant increase in long-term unemployment and reduce the potential growth potential of the English economy.
In short, get ready for a year very, very difficult.
