Skip to comments.EU: Doubts remain over Spain's austerity miracle
Posted on 12/20/2012 11:31:18 PM PST by bruinbirdman
Fresh data from the OECD show that Spain has narrowed the gap in unit labour costs with Germany by 5.5pc over the past year alone. It has clawed back 4.6pc against France and 6.6pc against Austria since late 2011, as it slashes pay and pursues a scorched-earth policy of internal devaluation.
Luis Maria Linde, the Bank of Spains governor, says that within two years the country will have recovered almost all the ground lost during the first disastrous years of euro membership. The total gain in competitiveness against the EMU bloc since 2008 has been 10pc.
Yet economists say it is far from clear whether Spain is chasing the right target or even whether it can recover within EMU. Deflation has pushed the numbers out of work to 26.2pc, with 55.9pc youth unemployment.
This has come at a massive cost. If you put a whole generation out of work, you damage your trend growth rate for a long time, said Marchel Alexandrovich from Jefferies Fixed Income.
There will be more and more calls for drastic solutions if this drags on, with people asking whether the euro is fundamentally the right currency for Spain.
Professor Charles Wyplosz from Geneva University said the strategy imposed by Germany and Brussels is misguided. There is a pervasive view that lack of competitiveness in the South is the cause of the crisis, but these imbalances are just a symptom, he said.
Spains real problem was a housing bubble but it is an enormous waste of peoples talent and a waste of money to bring this to an end so brutally.
Prof Wyplosz said the contractionary policies across the eurozone are making the task much harder. There may be a miracle but it is more likely that Europes recession will continue through 2013 and
(Excerpt) Read more at telegraph.co.uk ...
Zappy did a good job of screwing up this country. Just goes to show you how socialists use emotion to get elected. Too many believe Spain is a homogeneous country rather than composed of regions like Basque and Catalan. Be interesting to see what is going on in those regions.