Why those smug investors are wrong about Spain
February 6th, 2010 by
bleungberg
Investors, magalomaniacs and economic brains gathered at the Swiss ski resort of Davos last week to warn us that Greece, Portugal and Greece are pretty much fucked, and will drag the rest of Europe down with their economic collapse.
Whilst Bleungberg won’t dispute Greece or Portugal’s economic woes - they were always the weak links due to a lack of proper system in place safeguarding their economies, weak central banks and an economy reliant on very few sources of capital like tourism and minimal fisheries - Spain is nowhere near as bad as the other two.
Yes, Spain’s unemployment is at an all-time high of just over 4m, or 17.4%, and its national debt is huge. But, unemployment has always - always - been high in Spain, particularly amongst the young.
Its national debt has now ballooned to such a scale that is unacceptable to the EU - but what about the United Kingdom’s astronomical debt?!
Spain is in a massive economic black-hole because it chose to invest its billions in renewable-energy research and constructions abroad which do not return profits quickly.
Its banks were left largely unscathed by the credit problems experienced by its rivals in Britain, Germany, Belgium, Ireland, Iceland, the US, Hong Kong and Japan.
Instead, they were undone by the property boom which grossly distorted the housing-market, and then failed to be sold off, thus leading to idle new homes and many lay-offs at construction sites.
This came about partly because the frivolous Spanish population started holding onto their capital rather than spending it, coupled with a massive retreat by those poor British expats along the Costa del Sol, causing a property crash.
Yet, somehow, Spain has been lumped in the same sentence as economic basket cases such as Greece and Portugal.
This is grossly unfair.
Yes, Spain’s been a little reckless in the last two decades in letting in immigrants, placing a huge burden on social costs to an ever-increasing and ageing population, but to compare them to the likes of the other two is not fair on the Spaniards.
Their economy is not going to go under; it’s too big to.
Greedy investors love bad-mouthing peripheral economies in the EU in the hope of making a quick buck from their predictions.
If Spain’s debt is to be defaulted, then it’ll be strictly down to malicious gossiping on the investors’ part.
They tried to do the same with Turkey and Latvia last year, and haven’t yet been proved right.
Yes, Latvia is still in trouble but its economy is of little significance to the wider world, whilst Turkey’s economy has posted strong growth over the last year.
So, when investors predict apocolypse is about to envelop the Iberian peninsular, they are right - but only in the extreme western section: from Porto all the way down to Faro.
Britain, meanwhile, here comes the double-dip…
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