Spain.

[TheDeadFlagBlues]

Maybe you haven't heard this yet in the 'Chinese province' of Taiwan, but generalizing glibly on other nationalities 'work ethic' is considered borderline racist in the American state of 'the West'.  Aside from this minor observation, even if we assume that your generalization is true, it is too much 'work ethic' which is the problem!  Germans, Chinese, Taiwanese, and Americans need to adopt Spanish lifestyle if we are to ever get out of this mess.

I am sorry that you feel this way or that my statements are taken as such.  Of course I was merely stating the same thing that businessweek observed from the lens of my relatives.  If both views (businessweek and my) are interpreted as racist then I am very sorry that it had that affect.  I guess the point I was making is that a change in incentives toward what Saint Peter said "Those who does not work does not eat" is the way out of this unemployment crisis and not more of the same old tired demand mangement.

That's just as ridiculous and baseless as your previous post. Let me get this straight: your cure for the Eurozone crisis is to destroy any sort of transfer payment system and let the chips fall where they may? You're either a sadist or delusional.

[Yelnoc]

Maybe you haven't heard this yet in the 'Chinese province' of Taiwan, but generalizing glibly on other nationalities 'work ethic' is considered borderline racist in the American state of 'the West'.  Aside from this minor observation, even if we assume that your generalization is true, it is too much 'work ethic' which is the problem!  Germans, Chinese, Taiwanese, and Americans need to adopt Spanish lifestyle if we are to ever get out of this mess.

I am sorry that you feel this way or that my statements are taken as such.  Of course I was merely stating the same thing that businessweek observed from the lens of my relatives.  If both views (businessweek and my) are interpreted as racist then I am very sorry that it had that affect.  I guess the point I was making is that a change in incentives toward what Saint Peter said "Those who does not work does not eat" is the way out of this unemployment crisis and not more of the same old tired demand mangement.

That's just as ridiculous and baseless as your previous post. Let me get this straight: your cure for the Eurozone crisis is to destroy any sort of transfer payment system and let the chips fall where they may? You're either a sadist or delusional.

It's a fairly logical position to hold if you value the nation state above supranational union.

[TheDeadFlagBlues]

Maybe you haven't heard this yet in the 'Chinese province' of Taiwan, but generalizing glibly on other nationalities 'work ethic' is considered borderline racist in the American state of 'the West'.  Aside from this minor observation, even if we assume that your generalization is true, it is too much 'work ethic' which is the problem!  Germans, Chinese, Taiwanese, and Americans need to adopt Spanish lifestyle if we are to ever get out of this mess.

I am sorry that you feel this way or that my statements are taken as such.  Of course I was merely stating the same thing that businessweek observed from the lens of my relatives.  If both views (businessweek and my) are interpreted as racist then I am very sorry that it had that affect.  I guess the point I was making is that a change in incentives toward what Saint Peter said "Those who does not work does not eat" is the way out of this unemployment crisis and not more of the same old tired demand mangement.

That's just as ridiculous and baseless as your previous post. Let me get this straight: your cure for the Eurozone crisis is to destroy any sort of transfer payment system and let the chips fall where they may? You're either a sadist or delusional.

It's a fairly logical position to hold if you value the nation state above supranational union.

There is nothing logical about it: it would cause a depression and revolution. Just as pleasure is not attained by whipping one's self, recovery isn't attained by cutting back on aid to the sectors of society that would die quick deaths without it.

[Yelnoc]

Maybe you haven't heard this yet in the 'Chinese province' of Taiwan, but generalizing glibly on other nationalities 'work ethic' is considered borderline racist in the American state of 'the West'.  Aside from this minor observation, even if we assume that your generalization is true, it is too much 'work ethic' which is the problem!  Germans, Chinese, Taiwanese, and Americans need to adopt Spanish lifestyle if we are to ever get out of this mess.

I am sorry that you feel this way or that my statements are taken as such.  Of course I was merely stating the same thing that businessweek observed from the lens of my relatives.  If both views (businessweek and my) are interpreted as racist then I am very sorry that it had that affect.  I guess the point I was making is that a change in incentives toward what Saint Peter said "Those who does not work does not eat" is the way out of this unemployment crisis and not more of the same old tired demand mangement.

That's just as ridiculous and baseless as your previous post. Let me get this straight: your cure for the Eurozone crisis is to destroy any sort of transfer payment system and let the chips fall where they may? You're either a sadist or delusional.

It's a fairly logical position to hold if you value the nation state above supranational union.

There is nothing logical about it: it would cause a depression and revolution. Just as pleasure is not attained by whipping one's self, recovery isn't attained by cutting back on aid to the sectors of society that would die quick deaths without it.

You miss my point.  It is logical for a nationalist invested in the supremacy of their country (regardless of the actual state of affairs) to refuse to hand over sovereignty to supranational entities.  Perhaps that course of action would have calamitous economic ramifications both within that nation and the rest of the world, but that is irrelevant because sovereignty has been maintained and that was the goal of the nationalist.

[Velasco]

It's a pity, this thread is traiwrecking. The situation in my country is pretty bad and sincerely, most of the times I prefer to think in another things. Anyway...

23% unemployment?  And we think we have bad on this side of the pond...

Yeah. O/c, in Europe, long term unemployment isn't the personal/financial/social/psychological/career death sentence that it is over here, but still...

The unemployement isn't a death sentence if you have the safety net of your family but it´s devastating in the long term. It's being said that there is a "lost generation": 50% of young people have no work.

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This is essentially true, the deficit is only a consequence and not the origin. I don't think that budgetary stringency alone will help us to be more competitive. A country needs investment in education, research and development.

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Many times I've heard that a complete bailout of Spain's economy is impossible because its size it's too big and there's simply no money. To restore competitiveness it's obvious that certain reforms must be done. The problem is the nature of them: when Brussels or the current Govermnent in Madrid talk about reforms usually are talking about savage cuts and hardening working conditions. Nothing has been said about reform our banking system until it was too late. In my opinion the business culture in Spain must be reformed too, despite some succesful examples many of our entrepeneurs have a wrong mentality and are far away of being competitive.

See
http://www.businessweek.com/articles/2012-02-23/for-spain-an-economic-lifeline-from-china

I can also testify, being from the Chinese Province of Taiwan, that relatives and their friends that are in business have indicated that in their view, unit labor costs are much higher in Spain than in Germany.  Many of them have invested in busineses across Europe and have indicated that work ethic in Spain is a good deal worse than in places like Germany.  It does not come down to the number of hours worked but the overall attitude toward work.  They were not able to comment on Greece given they have not done business there but based on what they have heard it is even worse over there.  Of course the work ethic in USA is significantly better than all of Europe including Germany.

In my opinion the difference of competitiveness between Germany and Spain can't be explained with the "work ethics". It's more a question of professional training (in Germany is excellent), investment in research and development (even in the worst years, Germany never did cuts in this area), business culture and so on. To my little experience I see that most of the people around me work hard, I suppose that is the same in other countries. Without going into more details about unit labor costs (in Germany are high but this is balanced with the high competitiveness) I'd say that Germany is a country that works much better than the USA in social and economic terms. Needless to say that far better than us.



 

[opebo]

I guess the point I was making is that a change in incentives toward what Saint Peter said "Those who does not work does not eat" is the way out of this unemployment crisis

So you mean you want to eliminate the incomes of the wealthy? 

[Tetro Kornbluth]

Maybe you haven't heard this yet in the 'Chinese province' of Taiwan, but generalizing glibly on other nationalities 'work ethic' is considered borderline racist in the American state of 'the West'.  Aside from this minor observation, even if we assume that your generalization is true, it is too much 'work ethic' which is the problem!  Germans, Chinese, Taiwanese, and Americans need to adopt Spanish lifestyle if we are to ever get out of this mess.

I am sorry that you feel this way or that my statements are taken as such.  Of course I was merely stating the same thing that businessweek observed from the lens of my relatives.  If both views (businessweek and my) are interpreted as racist then I am very sorry that it had that affect.  I guess the point I was making is that a change in incentives toward what Saint Peter said "Those who does not work does not eat" is the way out of this unemployment crisis and not more of the same old tired demand mangement.

I see you know pretty much next to nothing about Spain.

Also having lived a year in Madrid I can say from my experience that all Chinese that I bumped into (and there were a lot) were either street vendors or the guys that ran the alimentaciónes (like grocery shops, like newsagents for those from the British Isles except they didn't sell newspapers but sold all kinds of other, often very cheap and badly made, crap instead). Most of them spoke little Spanish, and if they did it was heavily accented (this was especially true of the men, the older ones knowing nothing beyond numbers and "hola" and "gracias". Their ownership of such shops was so ubiquitous that they are often referred to now as "chinos"). Their shops were open for at least 12/hrs a day for at least 6 days a week but lived in poor accomodation concentrated in "white flight" areas of the city, it is very unlikely that they know well any Spaniards. This clearly is a model we can all follow.

[opebo]

Gully Foile, I think we can assume that jeichind's relatives are wealthy industrialists.

[Beet]

Here is another article on Spain with a more positive take than Edward Hugh's "nothing has been done."

http://www.bloomberg.com/news/2012-05-09/spain-s-stealth-devaluation-goes-unrewarded-by-investors.html

The kicker (for me): "Spain has a trade surplus with France and exports as much as it imports from the euro region, government data for 2011 show. Spanish car imports fell 35 percent from 2007 to 2011 and new registrations slumped 50 percent. Still, auto production declined just 17 percent as exports replaced domestic buyers.

Exports of textiles, machinery and food are the highest on record, government data show. Unit labor costs, which rose 4.8 percent in 2008 even as the economy went into a recession, fell 2.6 percent in 2010 and another 1.9 percent last year, Eurostat data show.
...
After Germany, Spain is the country whose contribution to exports to non-EU countries increased the most from 2007 to 2011, according to World Trade Organization data."

The problem for Spain is that it will take at minimum one to two years of a stable external environment to stabilize its current account, at which point it should in theory not be dependent on external capital to finance its ongoing needs. But the current liquidity crisis is now occurring on a week-to-week basis. If only the northern European countries could see that some degree of fiscal union does not have to mean it will be paying for these countries forever...

[Beet]

To restore competitiveness it's obvious that certain reforms must be done. The problem is the nature of them: when Brussels or the current Govermnent in Madrid talk about reforms usually are talking about savage cuts and hardening working conditions. Nothing has been said about reform our banking system until it was too late. In my opinion the business culture in Spain must be reformed too, despite some succesful examples many of our entrepeneurs have a wrong mentality and are far away of being competitive.

Yes, the banking system's problem is that it caught itself up in a big real estate bubble. But hardening working conditions is pretty much necessary. In a market economy this should happen naturally as unemployment goes up, as those who are desperate to find work will accept harder conditions in exchange for pay. But that Spain's unemployment is 24% and rising suggests the labor market mechanism is broken. Those who are already working are too comfortable, while those who have no work are shut out. Labor market flexibility seems to be the key reform.

In Latvia's successful adjustment, the "real" unit labor cost fell 6.7 pct in 2009, 7.7 pct in 2010, and 3.2 pct in 2011, a total of about 15.6 pct in three years. In contrast, Spain was +1.2 (2009), -3.0 (2010) and -3.2 (2011), so far only adjusted 5 percent. Spain will not need an adjustment as much as Latvia, but compensation as a share of productivity will have to fall to restore competitiveness.

[Gustaf]

To restore competitiveness it's obvious that certain reforms must be done. The problem is the nature of them: when Brussels or the current Govermnent in Madrid talk about reforms usually are talking about savage cuts and hardening working conditions. Nothing has been said about reform our banking system until it was too late. In my opinion the business culture in Spain must be reformed too, despite some succesful examples many of our entrepeneurs have a wrong mentality and are far away of being competitive.

Yes, the banking system's problem is that it caught itself up in a big real estate bubble. But hardening working conditions is pretty much necessary. In a market economy this should happen naturally as unemployment goes up, as those who are desperate to find work will accept harder conditions in exchange for pay. But that Spain's unemployment is 24% and rising suggests the labor market mechanism is broken. Those who are already working are too comfortable, while those who have no work are shut out. Labor market flexibility seems to be the key reform.

In Latvia's successful adjustment, the "real" unit labor cost fell 6.7 pct in 2009, 7.7 pct in 2010, and 3.2 pct in 2011, a total of about 15.6 pct in three years. In contrast, Spain was +1.2 (2009), -3.0 (2010) and -3.2 (2011), so far only adjusted 5 percent. Spain will not need an adjustment as much as Latvia, but compensation as a share of productivity will have to fall to restore competitiveness.

Beet, wouldn't you agree that there is a problem that there is this kind of unwillingness to reform in countries like Spain (as showcased in that post)? You're usually taking the Krugman stance on the crisis (and I'm not necessarily disagreeing - I'm far from a hardline austerity guy) but can you understand the wariness of Germany et al to pay for countries that might be very unwilling to actually reform?

[Beet]

To restore competitiveness it's obvious that certain reforms must be done. The problem is the nature of them: when Brussels or the current Govermnent in Madrid talk about reforms usually are talking about savage cuts and hardening working conditions. Nothing has been said about reform our banking system until it was too late. In my opinion the business culture in Spain must be reformed too, despite some succesful examples many of our entrepeneurs have a wrong mentality and are far away of being competitive.

Yes, the banking system's problem is that it caught itself up in a big real estate bubble. But hardening working conditions is pretty much necessary. In a market economy this should happen naturally as unemployment goes up, as those who are desperate to find work will accept harder conditions in exchange for pay. But that Spain's unemployment is 24% and rising suggests the labor market mechanism is broken. Those who are already working are too comfortable, while those who have no work are shut out. Labor market flexibility seems to be the key reform.

In Latvia's successful adjustment, the "real" unit labor cost fell 6.7 pct in 2009, 7.7 pct in 2010, and 3.2 pct in 2011, a total of about 15.6 pct in three years. In contrast, Spain was +1.2 (2009), -3.0 (2010) and -3.2 (2011), so far only adjusted 5 percent. Spain will not need an adjustment as much as Latvia, but compensation as a share of productivity will have to fall to restore competitiveness.

Beet, wouldn't you agree that there is a problem that there is this kind of unwillingness to reform in countries like Spain (as showcased in that post)? You're usually taking the Krugman stance on the crisis (and I'm not necessarily disagreeing - I'm far from a hardline austerity guy) but can you understand the wariness of Germany et al to pay for countries that might be very unwilling to actually reform?

Yes, absolutely... there is not enough scrutiny on these matters. "Reform" can mean many things, it is more about micro economics than macro economics, and that is more difficult for me to speak to, because I haven't been able to find data as easily. Further, there is implementation risk- you pass a law that looks like good reform, but what is actually happening on the ground? So I agree in principle that it's unfair for Germany et al to pay without reform, but I'd like to see more information on precisely what reforms are needed. It is better to talk about specific changes rather than generalities.

I guess, here is a "specific" article on Spanish labor market reform.

http://blogs.lse.ac.uk/europpblog/2012/04/23/the-reform-of-the-spanish-labour-market-is-politically-costly-and-will-only-bring-minor-economic-changes/

It concludes that passed reforms under PP "heads in the right direction on some aspects but ignores, or only partially deals with, many needed changes." How does it head in the right direction? Well, it "reduce(s) the employment protection of permanent contracts" and "gives individual firms the right to refuse industry-wide wage agreements and allows for new provisions that increase flexibility of the roles and working conditions of workers within the firm."

These are the kind of generalities in micro economic analysis that don't shine enough light, IMO. For an outsider like reading this, who does not understand the Spanish labor market, what exactly is meant by "reduce(s) the employment protection of permanent contracts"? How does it reduce it? The reform will not eliminate Spain's two-tiered employment (permanent versus temp) system, so it cannot be a total reduction. It is difficult to infer from this statement, what precisely the effect would be.

[Velasco]

To restore competitiveness it's obvious that certain reforms must be done. The problem is the nature of them: when Brussels or the current Govermnent in Madrid talk about reforms usually are talking about savage cuts and hardening working conditions. Nothing has been said about reform our banking system until it was too late. In my opinion the business culture in Spain must be reformed too, despite some succesful examples many of our entrepeneurs have a wrong mentality and are far away of being competitive.

Yes, the banking system's problem is that it caught itself up in a big real estate bubble. But hardening working conditions is pretty much necessary. In a market economy this should happen naturally as unemployment goes up, as those who are desperate to find work will accept harder conditions in exchange for pay. But that Spain's unemployment is 24% and rising suggests the labor market mechanism is broken. Those who are already working are too comfortable, while those who have no work are shut out. Labor market flexibility seems to be the key reform.

I'm not an expert in economics, but I'd say that the main problem of the Spanish economy is not the lacking of flexibility in the labour market but the economy's structure. Of course I'm not against flexibility per se, it's only that I understand that "flexibility" and "hard conditions" are not exactly the same thing. The problem that I see is that structural reforms must attack the root of the problem. Why we have historically a high structural unemployement? Even on the top of the real state bubble we had an 8%, more of less the unemployement rate in USA nowadays. The only answer that I can find are the structural deficiencies of the economy: excessive dependance on building and tourism, lack of an adequate industrial sector and of investment in strategic areas (education, development and research, tecnologies). Also, the budget cuts are ruining the recently made progresses in renewable energies, and Spain has a lot of potential in this area. So, well, our dual labour market (permanent employees vs. temporary) and the comparative privileges can be a part of the problem but not the only one. I think that the whole economic model needs to be changed if this country wants to have a future. I can tell you that public employees, for example, have seen their retributions diminished and they weren't highly retributed before. Their privileges were only stable and secure jobs and this is going to dissapear if the trend continues.  

[TheDeadFlagBlues]

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http://www.reuters.com/article/2012/07/11/us-spain-economy-cuts-idUSBRE86A0CP20120711

[Velasco]

Yes, absolutely... there is not enough scrutiny on these matters. "Reform" can mean many things, it is more about micro economics than macro economics, and that is more difficult for me to speak to, because I haven't been able to find data as easily. Further, there is implementation risk- you pass a law that looks like good reform, but what is actually happening on the ground? So I agree in principle that it's unfair for Germany et al to pay without reform, but I'd like to see more information on precisely what reforms are needed. It is better to talk about specific changes rather than generalities.

I guess, here is a "specific" article on Spanish labor market reform.

http://blogs.lse.ac.uk/europpblog/2012/04/23/the-reform-of-the-spanish-labour-market-is-politically-costly-and-will-only-bring-minor-economic-changes/

It concludes that passed reforms under PP "heads in the right direction on some aspects but ignores, or only partially deals with, many needed changes." How does it head in the right direction? Well, it "reduce(s) the employment protection of permanent contracts" and "gives individual firms the right to refuse industry-wide wage agreements and allows for new provisions that increase flexibility of the roles and working conditions of workers within the firm."

The article is interesting but perhaps it's too condensed and doesn't explain very well the concrete details of the reforms. I don't understand very well which is the "right direction" leaving aside the generic definition of the "inelasticity" and "excesive protection"  of the permanent contracts and the huge contrast with the precarious labour conditions of the temporary contracts. It's difficult to disagree with the idea that a middle term would be desirable. About the industry-wide wage agreements, they are a custom adopted in the late 70's as a part of a wider agreement known as "Pactos de la Moncloa". They instituted a consensual relation between trade unions and the corporate representantives that the reforms destroy according to the main critics. They also talk about a complete deregulation of the labour market that the reforms institutionalise. As the paragraph below points to, there is a wide perception about the one-sided nature of the new labour laws in Spain. Many people say that the measures adopted are exactly the old demands of the more radical sectors of the business community in Spain.

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[Beet]

Good mackarole- yields are through the roof. The 2 year yield today exceeded the previous high of Nov. 25, 2011. It looks like Spain will need a full bailout very soon.

[Velasco]

Spanish regions are in troubles too. Yesterday in El País (English version): "Catalonia joins Valencia and Murcia in seeking help from central governmment".

http://elpais.com/elpais/2012/07/24/inenglish/1343141101_884127.html

Every day the news are worse than the precedent day. Yesterday there was a parliamentary debate. Too boring to comment.

[Beet]

FXstreet.com (Barcelona) - From a €-1.7B deficit in the April current account, the Spanish data for May points to a €0.7547B surplus.

Read more: http://community.nasdaq.com/News/2012-07/correction-spain-current-account-at-07547b-surplus-in-may.aspx?storyid=159959#ixzz22bE69jhc

The current account deficit narrowed dramatically in May from a year earlier, to EUR754.7 million as the trade deficit fell by about half and the services surplus increased, the Bank of Spain also said Tuesday.

Spain's current account deficit narrowed from EUR3.4 billion in May 2011. The current account deficit for the first five months also narrowed from a year earlier, to EUR16.9 billion from EUR23.2 billion.

The trade deficit in May narrowed to EUR1.5 billion from EUR3 billion in May 2011, with imports decreasing and exports climbing.

http://online.wsj.com/article/BT-CO-20120731-704629.html

So either a 750 million surplus or deficit, Nasdaq & the WSJ disagree. Either way it is huge news, compared to April's 1,700 million deficit and last May's 3,400 million deficit.

The real adjustments here are definitely happening. Spain just needs to be given time...