Spain's economic stagnation

The zapping of Zapatero

After procrastination and paranoia, it is high time for some prime-ministerial leadership

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This is a comment about other comments that seem to address the current Spain problems and question Mr. Zapatero leadership using as ground for their arguments values and interpretations as minimum argumentative and without data, supporting the Partido Popular campaign mantra 'the worse the better'.
By the way, probably there's no conspiration neither against Spain nor the Euro. There's only market or, blind, may i add, Market. This could arise the question: Do markets attack flanks where debt is too high?
Italy, UK, Ireland, what next?

Alejandro 1990

Obviously, spanish people know that they are in a bad situation. We also know that we must restructure our economy and, of course, we have to change our mind. Our politicians don´t do anything or tell us lies. This situation must be change.
However, I´m totally disagree with people who think that, if we are "prudent", we should leave our country. These ideas doesn´t help to our financial markets or our image in the world. In my opinion, spanish people have to protect and improve their economy, so we need the UK, Germany or France´s Help. We are the European Union, so we should act as a big family and solve our comunity problems, cause today happens in Spain but tomorrow could happen in Britain or France.

It´s only the point of view of a spanish student, who is very proud of his country. I think that it is not a madness.


Spain is worse than the weather proves Greece, there are now more police officers but most thieves but speculation is more unemployment or a crappy country


Wow, finally! After years reading half hearted and ambiguous reporting on this curse that we Spaniards put on ourselves, at long last you write an article I can agree with almost in full. The guy is a shameless empty suit with bits of disconnected ideals here and there, and not much more. He's been riding the wave for over five years, and now he's finally realized he's heading towards the rocks at a dangerous speed.

The only point I don't agree with is the possibility that some kind of national pact is either possible nor a solution. For starts, the opposition leader, Rajoy, is just as pusillanimous as Zapatero. There is also the problem of all those devolution movements that for the last 30 years have been brewing and will never accept restrictions in their autonomy to decide their spending. But sadly, worse of all, the sense of urgency has still not reached the zeitgeist: the media is still covering external problems (Afganistan, Greece...) and internal virtues (football, celebrities...).

I have one advice for all Spaniards out there: have your passports ready - I've got mine.


Get real. Why is the Economist always making excuses for "the market"? Spain's macroeconomic policies have been utterly orthodox -its present troubles just show that the orthodoxy is pretty irrelevant. The European markets' "animal spirits" led to the Spanish boom, and now those same markets are punishing Spain for their own herd behaviour.

The very fact that people are talking about "contagion" shows just how irrational it all is, because why should Greeece's troubles provide any new information on Spain's circumstances? The EMH was always a deeply stupid idea, refutable by even a cursory glance at the history of capitalism.

It is way past time to make banking a boring business again. And past time to reread Keynes' great masterwork again too - "when the capital allocation of a country becomes a byproduct of the activities of a casino, the job is likely to be ill-done".

Peter F.

Never has a president in Spain's recent history done more damage to the country in such a short time than Rodríguez Zapatero. He is incompetent to govern and what is even worse that he surounds himself with a mediocre government which is a typical feature of his incompetence.


Mobility in the European Union is a problem, not only within the European borders, but within each country's, at least in the case of Spain. Cheap money brought by the Euro was not a problem, the problem was Spaniards' risk aversion and the imprint left by Franco's home ownership policies on the national psyche. This led the country to overborrow to invest in real estate. High rates of home ownership are also, incidentally, one of the causes of mobility problems, which I believe are creeping up in the US as well.


I strongly disagree with some of the comments for the following reasons:

1) Being honest, can we say that the Spanish labour market lacks of flexibility? A labour system that provides the country with 2.000.000 unemployed people in one year and a half is not flexible enough?

2) People with permanent contracts are privileged in Spain? I think this affirmation doesn't fit at all with the real situation of workers in Spain. How many of these people have been dismissed within the last year? A permanent contract (which suppose, in the best circumstances, a payment of 45 days of salary per year of employment) is not a guarantee of permanent job any more.

3) Would have reached Spain the current situation without the financial crisis from the USA? I'm sure it wouldn't. The financial crisis has greatly accelerated what would have been a process of smooth fall of the building sector. This smooth fall would have allowed the Spanish Government to stablish a new economic model in the country.

4) Have the workers any responsibility in the crisis? I don't think so. So, if the crisis didn't come from the labour market, why we have to solve it by reforming something that hasn't cause the trouble? May Prime Minister Zapatero have been so reluctant to reform labour market for this reason? Is this a matter of social justice and commitment with workers' wrights or isn't it?

I'm sorry, but I think Zapatero is not, by far, the only responsible for the crisis in Spain. I now this is unpopular, but it's my opinion.


It's very sad, 'cause Mr Rajoy, head of the Popular Party, in the opposition, would do even worst


Zapatero and his team are continuoulsy showing their incompetence in all fields. They're driving this countrly bancrupt and damageing tremendously the positive image that Spain managed to create through years of hard work.

An intelligent person would in the current situation resign and ask the people whom they want to head the country in this critical situation.


I'm very concerned about the UK economic situation. If Spain had this situation it is more probable than not that a couple of S&P's A would have been already deleted from its rating. Don't worry, in a few years from now, Banco de Santander will be the largest financial instotution in the country, Telefonica the largest mobile telcom operator and Iberdrola the largest clean energy producer in the UK. You are in good hands. They will help to put some order in the stale economic structure of the country.

Javier S.

Mr. Hervada: excellent analysis. I would just point out that "serious" Euroland members can stop being serious sometimes as well. Both France and Germany broke the stability pact much before this crisis -with no consequences by the way, while Spain and others where doing it right. I agree however that an anchor may help maintain confidence for the whole, but that was what the euro was about from the very start. There have been at least two failures with the monetary union: first the extremely low interest rates - apropriate for some countries at the time (i.e. the "serious"), but not for "pigs". This provoked the huge housing boom, the huge misled investments, the excess demand, the zero savings... Second problem: the lack of fiscal coordination within the eurozone. Without that a single currency just doesn't work. And that was crucial. Was there anyone at Brussels checking Mr.Rodriguez's (or any other government for that matter) fiscal policies? Or even Greece's statistic systems? Not much to ask for!
A bit late, but now we have to put the ultimate fiscal coordination in practice - you may call it a rescue for the benefit of the headline- but that was part of the euro deal, so it shouldn't come as a surprise.


The Economist had never supported the euro. It has accepted it with reluctance.

Zapatero is a catastrophic economic leader, but he has a record of social liberalism, for instance gay marriage. The housing bubble started in 1998 with a fiscal reform under Aznar's government. His right wing administration (1996-2004) and the socialist one, from 2004 onwards, have no idea of changing the economic model. Not even tried it.

Spain wanted to be the Florida of Europe, so it is. As a catalan I want to get rid of this stupid nation strategy. I would like a Dutch model for an independent catalan state.


Aren't most of Spain's problems due to the Euro? They could have prevented the housing bubble by increasing interest rates but France and Germany needed low rates so that's what the European Central Bank provided. They could have increased the value of the Peseta relative to their trading partners but of course there is no such thing as a Peseta. They could have increased taxes but they were already in surplus in the run up to the crises and voters hate big budget surpluses. Now a devaluation would be in order but they can't do that either.

Such things are not a problem with the US because 1. With a common language and uniform laws it is easy to move to another state to gain employment and 2. If a region is in recession, it sends less money to the central government in taxes and receives more money in subsidies. Neither of these things help Spain.

Juan A. Hervada

In more than one sense, what France and Germany, assisted by the other “serious” Euroland members, are doing is to turn the ClubMed Pigs into some sort of economic protectorates. In fact, it amounts to recognize that Spain, Greece and Portugal are presently ruled by a self-serving political caste completely incapable of ruling their countries with a modicum of honesty and competence. In the case of Spain the explanation of the current frustrating situation is to be found in the country’s recent history.

Hard to swallow as it seems, the core problem of the Spanish economy is that neither Mr. Zapatero, nor the bureaucratic Leftist elite have wanted to dismantle the paternalistic labor system they inherited from the Franco regime. The authoritarian General Franco forbade strikes and political parties but kept alive a “National Movement” –the only legal political organization- and a corporatist labor regulation which made it almost impossible to fire a worker. The Francoist unions were largely inspired by the Mussolini model, with touches copied from the USSR and the National-socialist model of Hitler, mainly for the Ponzi-like Social Security; it was an authoritarian, pyramidal structure governed by a bureaucratic caste consistently submissive to the political power.

After the death of General Franco, came democracy and the tiny illegal Socialist Party was largely taken over by younger cadres of the National Movement and a cohort of opportunists. The same process took largely place for the UGT, the old Socialist union. The Communists, the only sizable underground party during Franco’s reign, understood very early that they wouldn’t be a major electoral label, so they negotiated a share of union power for themselves and cut themselves a deal with the former National Movement bureaucrats. They eventually constructed the current two-tier labor system, where a wage-earner aristocracy of functionaries (by definition impossible to fire under any circumstances) and the holders of “permanent contracts” are a privileged 20%-35% of the labor force.
Mr. Zapatero has never ever hold a job outside the party bureaucracy. He was a benevolent demagogue who could entertain the voters with cvultural war issues, like homosexual marriage o a policy of aggressive atheism to nose-thumb the Catholic Church, but he lacks the minimum skills to steer a European country of Spain’s size out of the crisis. He can’t govern his country in the crisis context for the very good reason that he doesn’t know how.

He was sort of all right, while the economic ship navigated on automatic pilot fueled by the housing bubble but his anti-crisis tactics (to talk of a strategy would be a gross overstatement) have all failed miserably, gulped many precious billions and are responsible in my opinion for at least 5 to 6 points of Spain’s 20% + unemployment (talking in real terms, without statistic massaging).
So I don’t care how they dress the dummy, but I think a hard thought should be given to the intervention of Spain’s economy by some compassionate (and honest) technicians from Brussels, Frankfurt or wherever.


Mostly agreed. Except that, well, not sure that the "Anglo-saxon press" is a huge fan of the Euro. As an illustration, how often are Greece's fiscal problems featured on the FT, Economist, Wall Street Journal etc., compared to the attention given to the fiscal woes of, say, California? Both represent states without monetary autonomy in a hugely diverse union with explicit no bail-out rules. Only that California represents roughly 12% of its union's population and GDP compared to Greece's 3%... give us a break!



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