Mr Bubble
Madmaxista
- Desde
- 19 Jun 2006
- Mensajes
- 135
- Reputación
- 4
Dado el nivel de estudios del foro, y quemuchos son expats, creo que no hace falta traducción, y los comentarios os les dejo para vosotros, es de hace unos meses, pero viendo que hay mucha gente nueva, creo que es interesante recuperarlo...A los que critican..no lo hemos escrito en este foro, remitiros al autor que tiene pinta de saber de lo que habla.
Por cierto semos cojonudos, nos comparan con los EEUU...
Spain has more reason to quit the euro than Italy
By Wolfgang Munchau (Financial Times)
There was a revealing incident at the World Economic Forum in Davos this year. Nouriel Roubini, the New York-based international economist, took part in a panel discussion during which he raised questions about Italy's future in the eurozone. A fellow panellist was Giulio Tremonti, the Italian finance minister. Professor Roubini wrote in his web log* that his presentation "caused a stir with Minister Tremonti who interrupted me in the middle of my remarks, went into a temper tantrum and shouted: 'Go back to Turkey!' I happen to have been born in Istanbul."
Perhaps one should not conclude too much from this incident, but it does show one thing: European officials are getting nervous about the future of the euro. A few years ago, no one would have raised an eyebrow.
Italy is often mentioned as the country most likely to leave the euro. I disagree. Leaving the euro would not solve any of Italy's problems. Since Italy's debt is mostly euro-denominated, Italy would be facing an Argentinian-style debt crisis. A wise Italian politician told me recently that Italy was more likely to disintegrate as a nation state than to leave the euro.
If any country ever decided to quit, unlikely as this may be, that country would be Spain, not Italy. Over the past seven years, Spain has lost even more competitiveness against the eurozone than Italy. At the same time, Spain is also in a better position to quit. With a debt-to-gross-domestic- product ratio of just over 40 per cent, Spain would have no problem servicing its debts.
Unlike Italy, Spain enjoys the reputation of a European success story. But its economic success rests on shaky ground. It was driven by a housing bubble, during which average property prices have increased almost threefold since 1997. The US and UK housing markets have been well behaved by comparison.
The Spanish housing bubble was caused by a combination of financial deregulation, rising domestic incomes and strong demand from foreign investors. Deregulation has a one-off effect. The contribution of the other two will fade over time. Spain is no doubt an attractive country to live in. But northern Europeans will not continue to invest in a skyrocketing Spanish property market for ever. There is a lot of cheap real estate around the Mediterranean, for example, in Croatia and Turkey.
The house-price bubble has kept the Spanish economy ticking over - and overshadowed Spain's underlying problem of falling competitiveness. Successive Spanish governments have failed to put in place the one condition essential for a country to prosper in the eurozone in the long run - a sufficient degree of wage and price flexibility. Since the beginning of monetary union in 1999, Spain gradually lost competitiveness against the rest of the eurozone, as its inflation rate exceeded the eurozone's by an average of more than 1 percentage point each year. Last year, the gap widened to 1.5 percentage points. If this were to go on for another seven years, there would hardly be a Spanish export industry left.
The country's current account deficit for the first 11 months of 2005 reached 7.3 per cent of GDP. In its latest autumn forecast, the European Commission put the current account deficit at 8.3 per cent this year, and 9.1 per cent in 2007. These are unsustainable levels.
There are some parallels - and one fundamental difference - between Spain and the US. Both countries have a housing bubble - and plenty of economists in denial over it. In both countries, consumers are spending as if there is no tomorrow. And both have lost global competitiveness.
The difference is that Spain is a member of a monetary union. The only way for Spain to regain lost competitiveness is through a long period of wage moderation. The eventual adjustment in the US economy will almost certainly be eased through a weaker dollar.
In Spain, the ratio of average house prices to average incomes is much higher than in other countries with property bubbles. Daniel Gros, director of the Centre for European Policy Studies in Brussels, noted that construction makes up an incredible 17 per cent of Spain's GDP -which is higher than in Germany right after unification**. He predicts that north and south European economies will eventually trade places. German economic growth will gradually improve, while Spain is about to experience a German-style economic stagnation, or worse.
While Spain is more likely to leave the eurozone than Italy, the odds of either country quitting are still small. If faced with a straight choice of a long economic depression and an even longer period of political isolation within the EU, both countries would opt for the former. The real danger for the eurozone is not a break-up, but continued failure. As the boom-bust cycle turns ugly, we should expect to see more irascible finance ministers in southern Europe.
Spain unlikely even to contemplate leaving the euro By Paul Isbell Published: February 21 2006 Sir, I agree with Wolfgang Munchau that it is unlikely that Italy would ever abandon the euro ("Spain has reason to quit euro", February 20). To do so would likely provoke the most severe financial crisis that Italy has experienced since the interwar period. Mr Munchau's reflections on Spain, however, deserve some comment.
It is true that Spain has accumulated intense disequilibria during the past decade, as the pattern of Spanish growth has become increasingly Anglo-Saxon, powered by strong consumer demand and underpinned by low interest rates, rising private debt and skyrocketing housing prices. Ironically, as Mr Munchau points out, Spain's short-term economic fate is linked inversely to Germany's: the longer Germany stagnates and the more slowly interest rates rise, the better chance Spain has of extending its bubble economy. But should Germany rise - and European Central Bank rates along with it - Spain will be increasingly vulnerable.
Spain's growth model suffers from one big difference with the US: a lack of productivity growth. This is even more important than nominal wage growth (which in fact has been moderate in Spain) in undermining Spanish competitiveness and represents the single biggest long-term threat to an otherwise successful Spanish economic transition. It is also the most difficult kind of economic weakness to remedy.
True, Spain lacks the capacity to regain competitiveness through currency devaluation. However, this is not the great unbearable vulnerability that Mr Munchau suggests but rather Spain's mighty shield against contagion from Latin America, where Spain is highly exposed. While Spain's national debt in absolute and relative terms is smaller than that of Italy's, its exposure to the "Latam effect" is much higher. Had Spain not been a member of the Economic and Monetary Union during the Argentine crisis and the near-default in Brazil, it would have long ago suffered from devaluation, stock market weakness, a decline in the housing market and, likely, a recession. In that scenario, the Spanish Socialist Workers' party victory in 2004 would not have come as a surprise.
But Spain will be the last man holding the euro flag. While the country faces a correction sooner or later, such an adjustment - and all future ones - would certainly be much more severe should Spain ever even contemplate the possibility of exiting the euro.
Paul Isbell,
Senior Analyst for International Economy,
Elcano Royal Institute for International and Strategic Studies
Por cierto semos cojonudos, nos comparan con los EEUU...
Spain has more reason to quit the euro than Italy
By Wolfgang Munchau (Financial Times)
There was a revealing incident at the World Economic Forum in Davos this year. Nouriel Roubini, the New York-based international economist, took part in a panel discussion during which he raised questions about Italy's future in the eurozone. A fellow panellist was Giulio Tremonti, the Italian finance minister. Professor Roubini wrote in his web log* that his presentation "caused a stir with Minister Tremonti who interrupted me in the middle of my remarks, went into a temper tantrum and shouted: 'Go back to Turkey!' I happen to have been born in Istanbul."
Perhaps one should not conclude too much from this incident, but it does show one thing: European officials are getting nervous about the future of the euro. A few years ago, no one would have raised an eyebrow.
Italy is often mentioned as the country most likely to leave the euro. I disagree. Leaving the euro would not solve any of Italy's problems. Since Italy's debt is mostly euro-denominated, Italy would be facing an Argentinian-style debt crisis. A wise Italian politician told me recently that Italy was more likely to disintegrate as a nation state than to leave the euro.
If any country ever decided to quit, unlikely as this may be, that country would be Spain, not Italy. Over the past seven years, Spain has lost even more competitiveness against the eurozone than Italy. At the same time, Spain is also in a better position to quit. With a debt-to-gross-domestic- product ratio of just over 40 per cent, Spain would have no problem servicing its debts.
Unlike Italy, Spain enjoys the reputation of a European success story. But its economic success rests on shaky ground. It was driven by a housing bubble, during which average property prices have increased almost threefold since 1997. The US and UK housing markets have been well behaved by comparison.
The Spanish housing bubble was caused by a combination of financial deregulation, rising domestic incomes and strong demand from foreign investors. Deregulation has a one-off effect. The contribution of the other two will fade over time. Spain is no doubt an attractive country to live in. But northern Europeans will not continue to invest in a skyrocketing Spanish property market for ever. There is a lot of cheap real estate around the Mediterranean, for example, in Croatia and Turkey.
The house-price bubble has kept the Spanish economy ticking over - and overshadowed Spain's underlying problem of falling competitiveness. Successive Spanish governments have failed to put in place the one condition essential for a country to prosper in the eurozone in the long run - a sufficient degree of wage and price flexibility. Since the beginning of monetary union in 1999, Spain gradually lost competitiveness against the rest of the eurozone, as its inflation rate exceeded the eurozone's by an average of more than 1 percentage point each year. Last year, the gap widened to 1.5 percentage points. If this were to go on for another seven years, there would hardly be a Spanish export industry left.
The country's current account deficit for the first 11 months of 2005 reached 7.3 per cent of GDP. In its latest autumn forecast, the European Commission put the current account deficit at 8.3 per cent this year, and 9.1 per cent in 2007. These are unsustainable levels.
There are some parallels - and one fundamental difference - between Spain and the US. Both countries have a housing bubble - and plenty of economists in denial over it. In both countries, consumers are spending as if there is no tomorrow. And both have lost global competitiveness.
The difference is that Spain is a member of a monetary union. The only way for Spain to regain lost competitiveness is through a long period of wage moderation. The eventual adjustment in the US economy will almost certainly be eased through a weaker dollar.
In Spain, the ratio of average house prices to average incomes is much higher than in other countries with property bubbles. Daniel Gros, director of the Centre for European Policy Studies in Brussels, noted that construction makes up an incredible 17 per cent of Spain's GDP -which is higher than in Germany right after unification**. He predicts that north and south European economies will eventually trade places. German economic growth will gradually improve, while Spain is about to experience a German-style economic stagnation, or worse.
While Spain is more likely to leave the eurozone than Italy, the odds of either country quitting are still small. If faced with a straight choice of a long economic depression and an even longer period of political isolation within the EU, both countries would opt for the former. The real danger for the eurozone is not a break-up, but continued failure. As the boom-bust cycle turns ugly, we should expect to see more irascible finance ministers in southern Europe.
Spain unlikely even to contemplate leaving the euro By Paul Isbell Published: February 21 2006 Sir, I agree with Wolfgang Munchau that it is unlikely that Italy would ever abandon the euro ("Spain has reason to quit euro", February 20). To do so would likely provoke the most severe financial crisis that Italy has experienced since the interwar period. Mr Munchau's reflections on Spain, however, deserve some comment.
It is true that Spain has accumulated intense disequilibria during the past decade, as the pattern of Spanish growth has become increasingly Anglo-Saxon, powered by strong consumer demand and underpinned by low interest rates, rising private debt and skyrocketing housing prices. Ironically, as Mr Munchau points out, Spain's short-term economic fate is linked inversely to Germany's: the longer Germany stagnates and the more slowly interest rates rise, the better chance Spain has of extending its bubble economy. But should Germany rise - and European Central Bank rates along with it - Spain will be increasingly vulnerable.
Spain's growth model suffers from one big difference with the US: a lack of productivity growth. This is even more important than nominal wage growth (which in fact has been moderate in Spain) in undermining Spanish competitiveness and represents the single biggest long-term threat to an otherwise successful Spanish economic transition. It is also the most difficult kind of economic weakness to remedy.
True, Spain lacks the capacity to regain competitiveness through currency devaluation. However, this is not the great unbearable vulnerability that Mr Munchau suggests but rather Spain's mighty shield against contagion from Latin America, where Spain is highly exposed. While Spain's national debt in absolute and relative terms is smaller than that of Italy's, its exposure to the "Latam effect" is much higher. Had Spain not been a member of the Economic and Monetary Union during the Argentine crisis and the near-default in Brazil, it would have long ago suffered from devaluation, stock market weakness, a decline in the housing market and, likely, a recession. In that scenario, the Spanish Socialist Workers' party victory in 2004 would not have come as a surprise.
But Spain will be the last man holding the euro flag. While the country faces a correction sooner or later, such an adjustment - and all future ones - would certainly be much more severe should Spain ever even contemplate the possibility of exiting the euro.
Paul Isbell,
Senior Analyst for International Economy,
Elcano Royal Institute for International and Strategic Studies
