I don't know why journalists, when writing about economics, invariably pick the least adequate people to be interviewed. Some time ago, there was a feature about unemployment for college graduates in the US... which talked about a woman with a dance degree. Now it's about a fucking cani [1] whose major accomplishment in life is pasting some rubber and metal together, earning 1200 undeserved euros a month. Before that, he did the same thing, earning 2500€ -- that ridiculous salary is the reason his Social Security benefits are so high. For comparison, many engineers here consider themselves lucky for earning 1000€/month.
What I find missing is how entrepreneur-social culture in Spain is, basically, the least funny joke you'll hear in all Europe. 23.3% of GDP are black market operations. The European country with highest quantity of 500€ banknotes per briefcase. 10% unemployment for workers with tertiary education. Esperanza Aguirre wanting to exile the poor from Madrid (it's a long story). Widespread, also not very covert, abuse from employers. That sort of thing.
Fortunately, the country is sort of duct-taped together, so it all works fairly well in the end. Not at all as gloomy as pictured here.
In 2007, at the peak of the property boom, I was working in Barcelona as video games programmer earning around 1700€/month after tax.
I felt lucky since most people I knew there ( including other programmers ) earned around 1000€ per month.
But I couldn't understand how the economy functioned when highly educated people working in Barcelona earned so little in comparison to living costs and still property prices kept on rising at double digit percentages.
Then I met a young guy who worked on building sites mixing cement and laying bricks. He said he loved to play videogames and he wanted to be a tester. When I told him how much I was paid he looked at me in disbelief and said he got 2500€/month and that I should man up and demand more or quit.
I guess in his trade at the time you could do that...
duct-taped together, so it all works fairly well in the end
There is much talk about being worse than in the past. Of course, what they mean is being worse than what they expected from extrapolating past improvements.
One example is employment inequality: in the past it was taken for granted (you found a job first, it's your right to keep it). Now there is a growing sensitivity to the unfairness in that. Youth unemployment was always high, whereas now, while being even higher, it's also seen as calling for deep trouble. In that sense it is similar to the increased sensitivity to domestic violence.
Another example: In the olden days people would just moan about the disappearance of small shops when big supermarkets came to town. Now there are consumer groups (grassroots urban shopping cooperatives). Not the result of regulatory change, or of the dire economic situation (most advertise themselves as eco-friendly first, cheaper second) but of greater sensitivity.
Politically-Okay discrimination against a cultural group not ones own.
I would say that the OP is one of the very serious reasons for the problems in Spain : that he considers 'a fucking cani' does not deserve 1200 euro's a month.
Socially inbred discrimination against other workers/classes in ones society are a key cause of economic disaster. Since there are whole classes of society who don't 'deserve' what they get all over the place ..
The problem with stimulus spending in a place like Spain is that someone will have to lend them the money to spend. They either have to charge pretty high interest (which exacerbates Spain's already high deficit) or give a discount on the interest, such that it no longer reflects the risk the lender is taking. Most anti-austerity calls seem to suggest the latter, which basically amounts to redistribution from those countries (Germany, Netherlands et.al.) that did not enjoy the easy living during the boom years that Spain did.
Germany isn't completely innocent here though either, even though it can look like they were frugal during the boom years.
From Michael Pettis [1]:
The strength of the German economy in recent years has largely to do with its export success. But for Germany to run a large current account surplus – the consequence I would argue of domestic policies aimed at suppressing consumption and subsidizing production – Spain and the other peripheral countries of Europe had to run large current account deficits. If they didn’t, the euro would have undoubtedly surged, and with it Germany’s export performance would have collapsed. Very low interest rates in the euro area (set largely by Germany) ensured that the peripheral countries would, indeed, run large trade deficits.
The funding by German banks of peripheral European borrowing, in other words, was a necessary part of deal, arrived at willingly or unwillingly, leading both to Germany’s export success and to the debt problems of the deficit countries.
It was certainly very convenient for the germans to have some takers for their cheap bonds, but the fact remains that nobody forced the peripheral countries to live beyond their means and to refrain from implementing necessary reforms.
The difference is that in the past, the peripheral countries were able to live beyond their means without such drastic consequences.
Too much debt? Devalue the peseta and drachma. Exports increase, imports decrease, unemployment adjusts. Lenders knows that they must charge higher interest rates to those countries.
That process can't happen anymore. So the same behavior that was mildly damaging before suddenly became very, very damaging. Neither Southern nor Northern European leaders fully recognized this problem when they created a single currency.
I think they fully realized the problem, but did not think it's consequences through enough; there were (and are) fairly stringent rules for entry to the euro zone (http://en.wikipedia.org/wiki/Euro_convergence_criteria), but were lax in enforcing those rules. There are several reasons for that. Let's say the economy of X is down because it is inherently weak. Do you fine them because of it? Do you think that would help their economy? Also, if half the economies are breaking the rules, how are you going to get a majority in the EU parliament for bringing those fines?
Nor did anyone force countries like Germany to share a common currency with them.
I've never really gotten why one country would want to share only a currency with another country, while leaving their social and economic policies independent. But now that that's happened, the combination gets to stand or fall as a whole.
The plan was "harmonization" of tax and spending policies. It's not really any secret the people actually running Europe were trying to cobble a United States of Europe together, first by sharing a currency and then by moving all the decision making to Brussels over time.
Of course Italians and Spaniards don't have any desire to become Germans, and vice-versa. The currency part was easy - the "harmonization" part will take generations if it happens at all.
Indeed. It's hard to "harmonize" countries or regions that don't speak the same language. Workers can't easily move from country to country to take advantage of job opportunities (and thus spread culture through direct interaction), and there's little shared media.
Language is a doable barrier to overcome, and so is harmonizing various regions on a regulation level. Remember that in Europe those cultural differences exist within countries and have for centuries. Hell, Brussels itself symbolize that.
If you think they don't easily move from country to country, I suggest you visit London, Amsterdam or Berlin.
Harmonization is a political issue, and what hampers it is selfish and corrupt politicians.
Making it a cultural issue is dangerous nonsense. An average Greek would be quite happy to live under German style regulations, if he could trusts the authorities to play by the rules. Ordinary people and their cultural differences are not the problem.
I think you're underestimating the culture problem here. The average Greek probably would be happy to live under German style regulations. But would he stop cheating on his taxes? I have my doubts.
Except lots of workers are doing that right now. And there's a reverse movement of retirees. Maybe the crisis will after all end up faciliarting that harmonazation whose lack caused it...
Germany struck a deal with the big counties after the liberation of east Germany that allowed them to reunited. The common currency was meant as a way to tie Germany to the rest of europe and prevent them for going Nazi again.
Germany agreed because reunification had been a dream for decades.
You will find that "collapse of the East German state (DDR) after the wall was brought down" is more inline with history.
... and prevent them for going Nazi again ..... ?
Sorry but this is wrong on at least two level:
1. Nazism is a political movement (regardless of your political inclination). And thus not directly impacted by having a currency or another.
2. Nazism is way too present, still, in the memories for it to make a come back in Germany as a legitimate political endeavour.
The creation and adoption of the Euro currency was a natural political continuation of the ECSC (see http://en.wikipedia.org/wiki/European_Coal_and_Steel_Communi...) and extension of the European Union. Now yes the initial intend is to prevent future Pan European war through economical cooperation, but not solely to prevent Germany "to go Nazi again" (despite the comment one can read about French President Mitterrand and British Prime Minister Thatcher regarding the future of Germany in Europe, neither of which should be regarded as anything but power hungry political leaders).
> nobody forced the peripheral countries to live beyond their means and to refrain from implementing necessary reforms
Actually, to "force members to stop such ways" was the plan for the EUR/ECB/Maastricht from the beginning. But it's either not working out as planned, or taking way longer than planned.....
This seems backwards. I think Germany is to blame, but for keeping interest rates too HIGH.
A higher Euro would INCREASE Spain's trade deficit. Spain needs a looser monetary policy than Germany is currently allowing. If the Euro were lower, they could export more and the real value of their debt would decrease.
Economics is not a morality play, and from a global perspective, net exports (that is, exporting more than you import) are not a virtue.
Where there is a country that exports more than it imports, there must necessarily be a country that imports more than it exports. That's just simple math.
This trade automatically is reflected in a flow of monetary assets from the importer to the exporter; in this case, a (partially indirect) flow of monetary assets from Spain to e.g. Germany. That's also just simple math.
Speaking as a German, it is incredibly frustrating that this simple insight is almost never acknowledged in public discussion here. There is simply no way the Euro can survive while Germany insists on being a net exporter forever.
What is even more frustrating is that the German elite successfully plays a divide-and-conquer strategy. Most people perceive the Euro crisis as "Germans against the South", whereas in reality, it is the German elite against the German and the Southern people, considering that the German net export "success" has largely been managed by keeping German wages low (when measured against the appropriate benchmark, i.e. productivity).
Germany seems to be getting blamed for the economic problems in Spain and Greece, but when I read a line like this:
> The strength of the German economy in recent years has largely to do with its export success.
I think, well, at least Germany actually makes something. I'm not familiar with any major products or services coming out of Spain or Greece. Maybe it's the American in me, living a life inundated with advertising and branding messages, but when an economy is not based on agriculture, natural resources, or tourism, it seems logical that it should be known for something - preferably making something.
It is the American in you; both Spain and Greece are known for agriculture and tourism. You won't see them advertise in the USA because they have plenty of people closer by to sell to.
Spain exports plenty of citrus fruits, wine, and olive oil and also somewhat is the Florida of the EU in that elderly people move there after retirement.
Greece is a bit similar. It has plenty of tourism, and exports wine and olive oil. It also has attractive rules for merchant shipping (Wikipedia claims the Greek merchant shipping fleet is the largest in the world).
Have we totally forgotten Keynes? My spending is your income. The resources of an economy (in this case, many of Spain's workers) are lying idle. The entire country would be wealthier if they were put to work.
Further, I don't know what you mean by "easy living", but Spain was more fiscally responsible than even Germany before the crisis. Spain's deficits are not the result of irresponsible borrowing and spending (as in Greece), but rather of a collapsed economy because the investment money (mostly German, etc) that flooded the country before the crisis evaporated just as quickly after the crisis.
Te entire country would be wealthier if they were put to work...doing something productive, in which the investment of their labor were to return future benefits.
The problem of most 'stimulus' spending is that this does not happen.
They spent the last ten years building houses no one wants now and creating a property bubble. It wasn't deficit spending it was just excess borrowing. Sure it created jobs for a bit but then they went away just leaving a lot of debt. Somehow you need to actually build a sustainable economy.
No argument from me, private borrowing to spend on unproductive assets is just as bad as public borrowing to dig holes in the ground and fill,them in again.
The key is productive work- work that people are willing to pay for without incentives or coercion.
Except he was wrong and well managed austerity does work. When it's actually employed. Cutting government 1%, or holding spending the same, is not austerity.
The ideas of Keynes are responsible for the last decade of economic disaster around the planet.
Austerity has been proven to work over and over again.
Just ask Sweden, they're a proof case that managed austerity works exceptionally well.
However, Latvia employed REAL austerity. They cut deep. Not the slow motion - we don't really want to cut anything - train wreck that people like Krugman are claiming is austerity (see: Greece or Spain).
Over the last 30 years China has radically reduced its public to private spending ratio. It has been one long managed austerity process. No surprise it has boomed accordingly as private capital was left free to be invested to actually grow the economy, which is not something consumption based Keynesian policies can accomplish.
Most government spending doesn't create wealth, sustainable jobs, and it doesn't produce anything. It's consumption paid for by production. The more you tip the balance toward government consumption, the more disastrous the consequences. Greece, Italy, France, the US, Portugal, Spain, Japan, Britain, etc. are all obvious examples of following Keynes policies the last few decades. It has led to destruction.
The thing about Keynesisnm that everybody conveniently forget is that you need to cut spending and tighten up during boom-years, so you have a lean, effective economy that might actually respond to stimulus spending when the bust comes around.
I take your "facts" with a heaping pile of salt, considering that Sweden has one of the highest tax rates in the Western world, Latvia's economy is smaller than most U.S. states and is smaller than the economies of NY, LA, Chicago, or Atlanta, and China's government has spent more in the past decade to rev up its economy and keep it going than the rest of the world combined. China spent billions on the Olympic facilities alone, not including the hundreds of billions they spent on other infrastructure projects of the past decade, or the subsidized loans to factories, farms, bio-tech companies, and real estate developers that would generally be considered illegal under various WTO pacts and accords if China was considered a 1st-world nation. (Most major Chinese corporations are government-owned; in some industries, all of the major Chinese corporations are government-owned.) China's recent (within the past 6 months) reduction in government spending has virtually killed it's construction and real estate sectors, and it has a huge debt bubble which is on the verge of collapsing.
put to work by who? Stimulus has not worked very well for the US after 2008, has it? And Spain does not have trillions of dollars to spend in stimulus anyway. Stop dreaming.
We haven't had that much fiscal stimulus in the US releative to the size of the economy. It's a missed opportunity considering money is basically free right now and T-bills return a fixed coupon (so even if interest rates were 5% in 5 years' time it would have no effect on the cost of servicing debt issued today).
The EU has trillions to spend. This is a federal problem, but some countries in Europe don't want to admit because they want to cling to the illusion that monetary union can exist indepedently of fiscal union.
> that much fiscal stimulus in the US releative to the size of the economy.
I knew this was coming. "The stimulus didnt work because it was not big enough". Always the same excuse coming from Keynesians. "Aspirin did not cure my Cancer because I didnt take enough". Sure, when you attack the wrong causes in the first place you get very poor results, unless you get lucky.
The labor disparity between senior workers and young ones will lead to a lot more trouble. Irrational people take out their frustrations on the easiest target; irrational young people even more so.
I'm not sure if the article's doom and gloom is actually reflected in reality though. Most people are averse to letting society collapse (especially when they've had a history of it standing upright and stable for a long time).
Spain doesn't "just" need stimulus, it needs well guided and allocated stimulus or it will accomplish nothing.
>Spain doesn't "just" need stimulus, it needs well guided and allocated stimulus or it will accomplish nothing.
The last thing Spain needs is "stimulus". What they need to do is fix the labor market so it's possible to fire people. When employers can't fire people they only hire as an absolute last resort. That means companies can't exploit growth opportunities as easily and it means employers are unlikely to gamble on people who don't have a solid resume, i.e. young people.
Nope. all those "reforms" were cosmetics. As long as public workers cannot be fired -which they cannot be, de facto (show me one)- there is NO reform in Spain. Really.
And firing people is as expensive as it used to be, more or less. This govt has done really nothing relevant in this area.
Spain's youth unemployment is astronomical (55%+). Young people with useful skills are increasing choosing to emigrate -- With lots of encouragement too. e.g. Germany is actively recruiting Spanish Engineers to fill labour gaps there.
Without structural changes, no amount of youth is going to dig them out.
Yes, and in recent years Spaniards have been immigrating to South America to take incredible cuts in pay to do jobs (Often regardless of legal status) that require few of the qualifications, if any, they had earned in Spain.
As long as we are wildly off topic, a lot of young people in Japan are "encouraged" to move to Bangkok to do Japanese customer service jobs, where they can be paid less.
Was any part of the above comment offensive? I'm a little perplexed as to why I've been (I assume) banned...
I personally don't find my observation about Ireland's large population of pale children particularly offensive. I happen to be pale and half-Irish myself (mom from Cork), as well as married to a pale Irish girl.
As for statistics to back up my claim that Ireland is a good bet relative to the remaining PIIGS, here is the % of population under 18 (from 2007, http://childrensdatabase.ie/sonc2008/part1/):
Ireland: 24.4
Italy: 17.1
Spain: 17.5
Greece: 17.4
Portugal: 18.7
Regardless, if I offended anyone, I apologize.
I still think youth is a strong sign of a resilient economy. True, Germany doesn't seem to be effected...I'd argue there are other issues there (a phenomenal capital market, for a start).
That might be the long-term solution to the nation's problems. But on an individual level, it would be disastrous for an unemployed person or someone worried about losing their job to increase their financial responsibilities by having kids.
That only works because of the lack of child labor laws and the lack of an advanced economy in which education is required in order to get a well-paying job in countries where extreme poverty is commonplace.
You didn't read parent right: the child will be an adult when the parents are older. The more kids you have, the more likely at least one will be successful enough as an adult to take care of you.
No, I read the parent just fine. The child may be an adult when the parents are older, but that means nothing when the adults are bankrupted trying to give the child an education so that he/she can support the parents, and the child can't work until he's an adult anyway.
Of course the probability will be higher with more children, but the cost of having more children in a developed country far outweighs the benefits.
There's a huge difference in the results when you do it in a developing country and when you do it in Spain.
Just to make it clear: Spain, and the rest of Southern Europe are developed countries with high standards of living; extreme poverty is not even a prospect now.
Germanys is 42 and they are doing fine, its a longterm issue though.
Theyd need something like germanies dual education system that has classic University/College Education plus on the Job apprenticeships were companies train young People for several years. These companies get some Financial benefits and the young get excellent job training plus a low income during that time. Afterwards they are qualified to tackle the more senior jobs. Of course this is a long term process as well, seems already too late.
There already is a dual education system. It's called Formación Profesional. Includes on the job apprenticeships, plus a "senior" track, or qualification to college.
I -Spaniard here living in Spain- tend not to believe those figures. Also:
1) Hiring is unbelievably costly due to Social Security.
2) Hence you tend to pay "in black".
3) People HAVE TO pay for the Soc Sec even though they do not earn enough for a living. At the very leas, 250 bucks per month whatever your earnings are.
4) We are spectacular liars at polls. Nobody in the black market will say he has a job.
So a grain of salt is required.
EDIT: although the outlook is really really bleak, there is no denying it.
True. Americans can't understand it without traveling and living abroad.
It is very easy for them to make business.
Also, lot of people here are in "paro" subsidy earning 400euros a month and working in the black, 600 or 700 euros. There are also lots of other subsidies like PER witch is part of the "social net" that make Social Security so expensive(a millennial is earning more than 2000euros before taxes make it 1000).
If they report they are working, they lose the subsidy.
It's called bankruptcy. I'd get on it. Austerity is going to start civil wars at this rate. Oh yeah, and next time, don't bail out banks run by sociopaths.
This week the Irish government who now unwillingly own a huge chunk of bank of Ireland said it could do nothing about the chief executive's generous salary. This despite further losses at the bank. Meanwhile further cuts in the rest of the economy.
The executive compensation thing is a red herring. People keep talking about it because of the manifest unfairness of allowing these people to wreck the economy and still take home 100 times what their victims do, but reducing their compensation wouldn't bring back any jobs. The problem is that a million dollars is a huge amount of money for an individual and a drop in the ocean for a government or a bank. Taking the money from them to try to undo what they've done wouldn't make the slightest dent, so all it would do is to punish them. And if that's what you're after then stop with pussyfooting around and just put them in prison already.
There's a perception amongst the 'ordinary' people that those at the top scratch one anothers backs. The government spin is that we're all in this together but the reality seems to be different. It's not surprising when you see how politicians when they retire often go on to get directorships at banks. Or how in the case of our most toxic bank, the chief executive apparently used to personally handle loans to politicians and other influential people.
Politicians have talked the talk but when it has come to punishing those responsible nothing happens. Constitutional property rights are cited. They'd love to do something but their hands are tied or it would spook the markets or to paraphrase you the effect would be negligible so let's not bother. Much more would be raised by milking the masses some more.
"stop with pussyfooting around and just put them in prison already."
I'd love to work on this but they either broke the law or didn't. However, it might make a bankster think twice when they understand that illicit behavior could cause all their ill-gotten gains to evaporate. It's not ideal but it's a start.
but if you actually go to spain, it does not look like somalia.
nasty secret - all those unemployed? work anyhow, "black" as we say in austria - unofficial, tax free. 50% youth unemployment? if all that were real, there would be open war. yet bars, stadiums, beaches are full.
the official economy is getting smaller, the unofficial one is growing.
as long as there are illegal immigrants from africa working the fields in spain and not spanish people, the economy is not that bad.
It seems Iceland was in worse shape than Spain but they have managed to resolve their issues by revaluing their currency (similar to declaring bankruptcy?).
Why is Spain not able to do the same? I'm guessing it's because they are part of the EU and do not have their own currency?
What's happening now is actually more complicated. The economies of the south are never going to take off with measures that are planned by a committee of 3 world institutions. The more the south sticks to the euro, the more complicated it's going to get. There is a good chance that a 'southern euro' might actually work, as the southern economies are all in similarly bad shape and in need of stimulus.
Pretty much. Iceland is about the same size as Stockton, CA, which is currently in Chapter 9 (IIRC). Iceland isn't all that much more important than a smallish US city.
I'd purposely avoid drawing any lessons from Iceland. We have the world's smallest independent currency and devaluation cut our purchasing power in half.
Those countries also have seen huge emigration. Reducing your unemployment rate is probably not that difficult when your labor force shrinks drastically...
To have enough money left behind to pay the bills.
What countries have used it successfully to get out of recession and improve unemployment?
This worked in the (now seemingly ancient) past. Governments were a much smaller portion of the economy and taxes were much lower to begin with. These days, up to 50% of people can be employed by the government. When governments get that large, there is no possibility nor space for a recovery:
Stimulus: add more debt to an unpayable debt? increase taxes and chase out people who pay the largest sum of taxes?
Austerity: cut gov't pay and jobs? that leads to less tax revenue and higher unemployment... nevermind the fact that the party won't ever be elected again.
The only way to win at this is to not have an economy that depends so heavily on indebted government nor one that removes risks for the banking system. If a country is already at that point there is no moving forward. Declare bankruptcy, destroy your credit ratings and start over.
How does declaring bankruptcy help creating more jobs? (Honest Question) Would seem to me that it would been even harder to get credit flowing once all your previous creditors have been wiped out.
From an admittedly fairly uninformed position it appears to me that cutting spending is only going to further erode businesses positions and tax revenue, leading to an even worse position.
"How does declaring bankruptcy help creating more jobs?"
Iceland is the answer. Jobs are recovering superfast after they declared bankruptcy.
You start over again. You face your problems, instead of delaying it. There is a sense of relief when the storm is over and you survived. When all lies are clear by the (horrible)truth, when fraudsters are on everybody's eyes.
Credit is harder to get, and this IS GOOD, when you came from an over indebted economy. Interest rates grow, and savers are fairy compensated from their work.
"From an admittedly fairly uninformed position it appears to me that cutting spending is only going to further erode businesses positions and tax revenue, leading to an even worse position."
Cutting spending is going to erode government position, not business position. On the contrary, when governments prints money the Gov gets free money, and big business get free money, but small business and tax payers are taxed to death.
Inflation over the official levels is the biggest tax on society. If declared inflaction is 2% but real one is 10%, they are taxing 8% of the society's wealth. And you will have to pay taxes to the gobertment in the 8% of "benefit" you have if you manage to not lose your wealth.
Money is better spent by small business and people that by big governments and big corporations. We are lending those entities so they can get money at 0.2% interest rate while I have to pay 17%.
They have 5 bullet points, and I think only 4 really applies. But even then, Canadians weren't getting heavily leveraged, especially since the BoC had a single mandate of keeping inflation in check which means high interest rates (and no mandate to respond to labor market conditions, which usually results in more leveraging and higher inflation)
This austerity something most hated Chretien for, but people didn't make too much of a fuss. 10% expenditure reduction? grumble grumble... Today's reaction: sacrificing a 2.4% increase in the federal budget for a 1.8% increase? BRUTAL AUSTERITY DON'T YOU REMEMBER NAZIS???
Ontarians all hate Mike Harris. After he was done the deficit was gone and debts reduced, schools and medical care resumed as before and everyone had jobs. We brought in automotive emissions tests, many new provincial parks, many new lands for natives and the environment was much cleaner than when he showed up. He was hated because he made everyone do what they were supposed to do. As far as I've seen, people only like the politician that promises the moon and loads on debt that "someone else" will pay for. :(
From an admittedly fairly uninformed position it appears to me that cutting spending is only going to further erode businesses positions and tax revenue, leading to an even worse position.
Many people use their gut to voice their opinions on these things, and that's not to say that they're wrong. People often extend the concept of household finances to the economy.
Simple analogy might help explain where that notion might come from: Your parents are heavily indebted seniors that do some chores for you in order to live with you. You are working to support yourself and them, financially. Your company is having money issues and decides you are working 30h weeks instead of 40h weeks. (25% pay cut) Would you then take money from your heavily indebted parents to then buy product (economic stimulus) from the company so that their earnings increase just enough to be able to afford to hire you back to full capacity? Would you have your heavily indebted parents borrow more money to buy enough product? Not likely. You'd probably rather just look for other work or start a company and take the financial hit/cost of having to look for new work or starting a company. Basically starting over. You could also just tough it out and stick to eating cheap canned goods, cancel netflix, and slowing down repayment of your parent's debt and getting them the cheap diapers and only absolutely necessary meds (austerity option)
Applying moral of the story: If Spain doesn't go through bankruptcy, (or severe, short-term austerity) it's keeping the 30h work week while the parents are still saddled with huge debts while also trying to maintain the lifestyle that it could maintain working 40h weeks.
So the less Spain spends today and tomorrow, the less it has to tax today and tomorrow.
The above is all for illustrative purposes.
Would seem to me that it would been even harder to get credit flowing once all your previous creditors have been wiped out.
For sure, no one will be keen on buying 30-year government bonds. This is a huge problem for the credit markets. We've seen some mixed results in Iceland, though. But a larger economy like Spains? Might not fare as well.
Sweden and Canada are the best two examples where austerity worked. Need to realize that there is no austerity in Europe, every economy is still spending more than they were just 5 years ago.
I do define it as living under your possibilities.
Having deficit is not austerity. Having to pay enormous debt and interest of malinvestments of the past bubbles is not austerity(you become debt slave not austere).
Tell the Germans to fuck off, leave the Euro, pull an Argentina, watch the new peso exchange drop to 1000 to 1 Euro, get a flood of French and Germans hunting for bargains, which generates jobs. But make customs treat these tourists like shit, just for a little passive aggressive revenge.
Yes! At this point, taking more money out of the economy will increase economic activity...no...wait...I'm with Keynes that this is the wrong thing to do.
Spain's problems are endemic; but most of Europe shows similar tendencies now - High level of entitlements, soaring deficits, lower cost efficiency and lumpen youth. Europe's post developmental problems need high level of innovation - but the youth do not seem particularly ready for it.
The SGS numbers are basically fictional. See this contemporaneous discussion of what really changed between the pre-1994 and post-1994 counting methods: http://www.bls.gov/mlr/1995/10/art3full.pdf. The current U4-U6 do include discouraged workers, they simply require the person to indicate on the survey that they have searched for a job in the past year rather than the unworkably vague prior methodology that simply asked whether the person wanted a job. See: http://www.ritholtz.com/blog/2012/08/discouraged-by-the-medi....
The most sensible employment measure is U4 (official unemployment + people who have searched for a job in the last year). U5 and U6 are far too sensitive to demographic changes to serve as a good basis for comparison. E.g. since the 1950's the work force has added a lot of female part-time workers that are counted in U6, but would have been stay-at-home wives in the 1950's and thus not counted as unemployed at all. Also, older people have always been over-represented among the marginally-attached, part-time work force, and as the population ages there are naturally more of this demographic. Both trends inflate U6, but neither are a negative indicator for the economy per se.
I'm guessing you're not here for any kind of rational discussion, but, could you explain a little bit about your motivation to post that comment? I'm not sure I've seen a pro-Krugman bias on news.yc. Even among most of those who think he's right, I'm not sure that deification is an accurate description.
In this case, it's particularly confusing, since Spain is one of Krugman's "look, austerity is bad" poster children.
It would also be very surprising if he didn't outright loathe the employment regulations that are strangling Spain. He is an economist, after all. I'm not Krugman accolite, but the "there are bad things happening so Krugman is wrong" logic is just weird.
What I find missing is how entrepreneur-social culture in Spain is, basically, the least funny joke you'll hear in all Europe. 23.3% of GDP are black market operations. The European country with highest quantity of 500€ banknotes per briefcase. 10% unemployment for workers with tertiary education. Esperanza Aguirre wanting to exile the poor from Madrid (it's a long story). Widespread, also not very covert, abuse from employers. That sort of thing.
Fortunately, the country is sort of duct-taped together, so it all works fairly well in the end. Not at all as gloomy as pictured here.
[1] Like a chav, but Spaniard.