EMU Spanien Spain

For those willing and able to examine our present situation with a reasonably open mind,
a comparison of the recent history of the Spanish and German economies can prove illuminating
As Wolfgang Munchau pointed out in the FT yesterday, Germany entered the eurozone at an uncompetitive exchange rate and embarked on a long period of (quite painful) wage moderation and deep structural reform.
A Fistful Of Euros, 31 August 2010 with many nice charts

Last year alone, Spain started to build 800,000 new homes
Unfortunately, the number of new houses was not just more than
France, Germany and Italy combined built last year.
It was also more than anybody wanted to buy.
FT editorial 28/4 2007

Ländernas konkurrenskraft har också betydelse för valutans stabilitet.
DN huvudledare 7/5 2010

Spanish banks asked for a record 130 billion euros ($166 billion) in July
Bloomberg 16 August 2010 with nice chart

Alla kan inte exportera sig ur krisen, för då är det ingen som köper.
Grekland och Spanien måste skära ned drastiskt, inget annat kan återställa finansmarknadernas förtroende.
Tyskland ska ha ordning på statsfinanserna, men ....
DN-ledare 29 juni 2010

Spain’s Unemployment Continues To Rise
Spain’s EU harmonised seasonally-adjusted unemployment rate (which is the interesting number) went up again in July, according to the latest data from Eurostat. It rose to 20.3% from 20.2% in June.
Edward Hugh, A fistful och euros 7 august 2010

IMF report
It isn’t only Spain where the current account deficits are going to persist.
Edward Hugh, A fistful och euros 7 august 2010

They are also expected to continue in the US, and the UK. The structural surplus countries China, Japan and Germany - will also continue on their path, as if nothing important had happened.
Which means the global imbalances will remain just the way they were, untouched and unmolested by the crisis
I can’t help asking myself, wasn’t that how we got here in the first place?

Edward Hugh counts Nobel Prize winner and American economist Paul Krugman among his avid followers. CNN June 10, 2010

Germany’s Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks didn’t have adequate reserves to maintain a Tier 1 capital ratio of at least 6 percent in the event of a recession and sovereign-debt crisis
Had the Tier 1 threshold been 7 percent, 24 of the banks would have failed,
said Andrew Sheets, Morgan Stanley’s head of European credit strategy in London
Bloomberg July 25, 2010

Certainly, the stress tests should be based on what one might call a plausible worst-case scenario, not one that represents the absolute worst. Nobody is asking the bank supervisors to stress-test the impact of an alien attack.
But sovereign default in the case of Greece is not such a far-fetched scenario – even if you believe it to be unlikely. It is irresponsible for the stress testers to ignore that sort of event.
That is like a car crash tester failing to consider the possibility of an oncoming vehicle.
Wolfgang Münchau FT July 25 2010

A notable exception is Spain, where the situation is the most severe, and where a serious attempt is under way to address it.

Only seven of 91 banks failed the tests
Five of the seven were cajas, Spanish savings banks
The Bank of Spain on Friday indicated that it had sufficient contingent liquidity measures in place to reassure caja customers and counter any threat of a run on these banks.
FT July 23 2010 17:46

One Size Fits One
"a lot of the issue can be captured by one picture"
Paul Krugman July 12, 2010

Reading these commentaries by Edward Chancellor and Wolfgang Munchau, it occurred to me that a lot of the issue can be captured by one picture.

The gap between Spain and Germany
These two countries share a single currency and inhabit the same monetary union.
Spain would benefit from a looser monetary and fiscal policy.
Germany would not.
Gavin Hewitt, the BBC's Europe editor, 9 July 2010

Germany is "big surplus" country, currently running at 5.5%. Even if the shine comes off some of these trends in the coming months the German motor is purring.

In Spain unemployment continues to edge up. It is close to 20% and is more than 40% for those aged between 16 and 24. The International Monetary Fund forecasts that Spain's economy will shrink this year by 0.4%. It is struggling to emerge from recession. Spain has a budget deficit of 10%.

In the private sector there is still huge debt, some of which may have to be written off. The Spanish good years were built on a housing boom. It was, for a time, the biggest creator of jobs in the EU. The burst bubble has left behind an injured coastline, 800,000 unsold homes, and companies burdened with debt.

These two countries share a single currency and inhabit the same monetary union. Spain would benefit from a looser monetary and fiscal policy. Germany would not.

For Spain there are two big questions: How will it grow again, and how will it become competitive again?

Spanish banks have been lobbying the European Central Bank to act to ease the systemic fallout from the expiry of a €442bn ($542bn) funding programme this week
FT, June 28, 2010

Banks across the eurozone, but in Spain in particular, have found it hard in recent weeks to secure liquid funding in the commercial markets, with inter-bank funding virtually non-existent.

The €442bn ECB facility, which charges interest at a rate of 1 per cent, is not set to be renewed, something that banks in Spain and elsewhere in Europe say ignores current commercial realities

International capital markets are “closed” to most Spanish companies and banks
chairman of Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, said on June 14.
the risk premium on Spanish government debt to a euro-era record
Bloomberg 29 June 2010

Spanish Finance Minister Elena Salgado said she hopes the European Central Bank is aware of lenders’ cash needs as the ECB’s first 12-month loan expires.

Stress test scenarios are not forecasts.
They are only scenarios, of the kind that market participants have already factored into the pricing of bonds.
What else is the implication of a 10 per cent yield on 10-year Greek sovereign bonds?
Wolfgang Münchau, FT July 4 2010
Highly recommeded

The decision to publish such tests for 26 banks was the one piece of good news to come out of the European Union summit two weeks ago. This was followed by negotiations to extend the tests to 100 banks, including some of the German Landesbanken and Spanish cajas considered to be most at risk.

There are two reasons why one might want to conduct, and publish, stress tests. The first is to reduce market uncertainty about the banking system as a whole through a credible and transparent process; the second is to recapitalise the most vulnerable banks.

But for this to work, the stress tests themselves must pass three tests: they must include realistic scenarios; they must be credible; and they must be backed up by a plausible re-capitalisation strategy.

First, by realistic stress I mean the inclusion of extreme, not probable, worst-case scenarios. Given the recent discussions about Greece, this must include the worst estimates of a “haircut” – a deduction suffered by bondholders – of about 50 per cent of the face value of Greek bonds. The stress tests will, according to reports last week, include a uniform haircut on sovereign bonds of 3 per cent . This number is a joke. Some institutions will have a stronger exposure to Greece, Portugal, Ireland or Spain than others, and it is important that those banks are stressed on the assumption of significant haircuts of their sovereign risk portfolios.

Tyska banker har lånat ut motsvarande ungefär 800 miljarder kronor till spanska banker.
Spanska banker har i sin tur lånat ut ungefär 900 miljarder i Portugal.
Noterbart är också att franska banker ensamt står för halva utlåningen till Grekland.
Ekot 14 juni 2010

Av utlåningen till Grekland, Irland, Portugal och Spanien handlar inte enbart om statspapper, utan även om lån till företag. Det visar BIS-statistik som Wall Street Journal refererar till.

De fyra staternas skulder är bara ungefär 15 procent av beloppet.
Resten är alltså utlåning till framför allt företag, vilket också kan förklara varför många bedömare oroar sig så mycket för vad nedskärningarna kan betyda för tillväxten.

The BIS noted in a separate report that, while large depreciations in currencies tend to be associated with substantial permanent losses of output, since the losses usually take place before the fall in the currency, it is likely the factors that spur the drop in the currency's value rather than the depreciation itself that is the trigger.
Taken alone, the currency depreciation can actually be good for output.
Wall Street Journal 14 June 2010

"We're not afraid of transparency," said the Spanish Banking Association (AEB), saying the full truth would put an end to rumours battering Spain's instutitions. El Pais reported that the government backs the initiative, putting it on a collision course with Germany which insists on secrecy.
Ambrose Evans-Pritchard, 15 Jun 2010

Josef Ackermann, head of Deutsche Bank, warned last week that it would be "very dangerous" to publish the results of each bank, fearing that it would trigger flight from weak lenders and set off a chain reaction.

Spain's risk premium, as measured by the yield spread on Spanish bonds over German bunds,
hit its highest level since the creation of the euro
after El Economista reported the International Monetary Fund, the European Union and the U.S. Treasury are preparing a €250 billion ($308.68 billion) liquidity facility for Spain.
Wall Street Journal 16 June 2010

Spain's government, banks and companies have faced increasing difficulties financing themselves in recent weeks as investors fret over the country's double-digit budget deficit, 20% unemployment rate and lengthy economic downturn

The Greek 10-year yield premium, or spread, over bunds stood at 6.84 percentage points,
off the day's highs but still 0.29 percentage points above Tuesday's close at 6.55 percentage points.

The yield premium for Portugal's bonds stood at three percentage points, up from 2.85 percentage points at Tuesday's close.

The yield spread on 10-year Spanish bonds over benchmark German bunds rose 0.13 percentage points to 2.235 percentage points, with the bonds yielding 4.881%,

In the US, stress tests carried out in the spring of last year revealed how healthy certain balance sheets were, forced weaker institutions to raise capital and turned round sentiment to stave off a crisis that now threatens to engulf Europe.

But politicians in Europe are balking at making public the results of stress tests, which are being carried out by banking regulators, in spite of pressure from the European Central Bank to do so.
David Oakley, FT June 14 2010

This is because of worries that releasing details of what lies on balance sheets may be counter-productive and create the very crisis that everyone is trying to avoid.

In a separate news report, Frankfurter Allgemeine writes that Barroso and Trichet were worried about the state of Spanish banks, and pleaded for aid. The paper also cites the latest statistics from the BIS, according to which German banks had given credits to Spain of $202bn, more than half of which to Spanish banks.
The exposure of French banks is $248bn – mostly to companies and households.

In a short comment, the paper makes the point that the €750bn rescue umbrella is just another bank bailout package.

El Pais spoke of a "perverse spiral" in its editorial.
Fitch has not downgraded Spain for lack of austerity
Spain's unemployment was already 20.5pc even before this latest dose of shock therapy.
There are 4.6m people without work.
Dole payments alone account for half the budget deficit
Ambrose Evans-Pritchard, 30 May 2010

EMU caused Spanish interest rates to halve overnight,
with dire results as the Bank of Spain's governor confessed in April 2007. "The single monetary policy has meant that excessively loose conditions for our economy have been almost continuous," he said.

Real rates were -2pc as the bubble reached its crescendo.
Nearly 800,000 homes were built in 2007, more than in Britain, Germany, and Italy combined.

Britain still has the instruments to extricate itself. The Bank of England has engineered a devaluation of 20pc, restoring competitiveness at a stroke.

Spain can try to claw back an even greater loss by cutting wages, but that risks a slow death by debt-deflation as compound interest tightens its vice.

Debunking The "Spain Is Safe" Myth
We’re concerned about austerity in a country that already has 20% unemployment; where home prices are down only 11% with half the newly constructed ones sitting unoccupied; and with $3.4 trillion of household and corporate debt (220% of GDP, one of the highest ratios in the world).
Tyler Durden on 06/08/2010

The closer that economists and strategists are to a region, the harder it has been for them to see a negative paradigm shift.
Examples include Citicorp in Mexico 1994 (the only U.S. firm that had a Mexican branch banking license); Asian economists in 1997; Renaissance Capital, Deutsche Bank and CSFB in Russia in 1998; U.S. technology analysts in 2001; Argentina’s “Chicago Boys” economists defending its currency board; etc.

The eurozone’s crisis has blown sky-high the idea that developed countries are 100 per cent safe.
A bank can buy all the Spanish debt (current rating: AA) it likes without having to back it up with a cent of capital
Lex, FT May 27 2010

Spain lost its AAA credit grade at Fitch Ratings
Standard & Poor’s lowered Spain’s ratings to AA on April 28
Bloomberg 28 May 2010

The Bank of Spain has ordered the country's lenders to face up to bad debts and set aside reserves of up to 30pc on property holdings in a bid to restore global confidence
. Deutsche Bank said Spanish lenders need to refinance €125bn by late 2011. Ambrose Evans-Pritchard, 27 May 2010

Even the strongest banks – Santander and BBVA – are paying a stiff premium over Libor. The Wall Street Journal reports that BBVA has been unable to roll over €1bn in commercial paper. This has raised fears of a chain reaction through Europe's banks due to the nexus of loans. Data from the Bank for International Settlements show that European banks – led by German lenders, in some trouble themselves – have $851bn (£584bn) in exposure to Spain, as well as $240bn to Portugal and $189bn to Greece.

Spansk strejk mot sparpaket
Mer än 2,5 miljoner spanjorer arbetar inom den offentliga sektorn, lönesänkningar med fem procent
Dessutom försämras villkoren för pensionärer och nyblivna föräldrar
Spaniens budgetunderskott är det tredje största i Europa, näst Grekland och Irland.
DN/TT 8 juni 2010

Fixing Spain's Savings Banks Means Paying Workers to Play Golf
The central bank has coaxed ailing savings banks to merge, financing the process with more than 10 billion euros. Consolidating the lenders, known as “cajas,” may eventually cost as many as 50,000 jobs, with many workers taking early retirement
Bloomberg July 15, 2010

Välvilliga spanska sparbanker i kombinaton med spanjorernas önskan att själva äga sina bostäder har eldat på den prisbubbla som ledde fram till landets krasch på bomarknaden.
Bokrisen slår direkt mot ett fyrtiotal småbanker, som kämpar för sin överlevnad och sprider skräck bland ekonomer i hela eurozonen.
DI 8 juni 2010

Sedan toppen i mitten av 2007 har bopriserna fallit med 15-30 procent. I vissa kustområden är siffran 40 procent. Antalet bostadsaffärer minskade dessutom drastiskt när krisen kom, och Spaniens expertbedömare utesluter inte fortsatta prisnedgångar.

Trots att Spanien inte har så stor statsskuld har medborgarnas höga belåning satt skräck i bedömare utomlands.

”Spanien är allvarligt. Det är ett stort land”, berättade ekonomen och Financial Times-krönikören Wolfgang Münchau när han i dagarna gästade svenska Avesta för att ge sin bild av förutsättningarna för eurozonen under Engelsbergsseminariet, som arrangeras av Axel och Margaret Ax:son Johnsons stiftelse och som samlat en rad tunga forskare och ekonomer i en herrgård i Dalarna.

Spaniens centralbank meddelade på lördagen att den tagit kontroll över sparbanken Cajasu
Spanska banker har i stort ridit ut den globala finanskrisen väl, tack vare ett strikt banktillsyn.
Men en sprucken fastighetsbubbla har lämnat de spanska bankerna med 300 miljarder euro i osäkra fordringar.
DN/TT 22 maj 2010

Den spanska statens finanser har rasat från ett behagligt överskott på 2 procent så sent som 2007.
Fallet började efter en fastighetskollaps sommaren 2008.

Some countries that have big deficits today, notably Spain, easily met the fiscal criteria, so long as their bubble economy was inflating: Spain ran a fiscal surplus in 2005, 2006 and 2007.
Martin Wolf May 11 2010

How can a loan guarantee solve a problem of excessive indebtedness?
We should remember that, unlike in Greece, the issue in Spain and Portugal is not primarily fiscal, but an excessively indebted private sector. Private debts constitute large contingent liabilities for the state due to the bank guarantees – the result of another expensive European summit two years ago.
So unless José Luis Zapatero, Spain’s prime minister, is going to present the mother of all economic reform packages, it is hard to see how the mother of all bail-outs is going to work.
Wolfgang Münchau May 10 2010

The eurozone came extremely close to a breakdown 10 days ago.
What is completely missing in Brussels – and even more so in Berlin – is an understanding of the urgency of the situation.
Wolfgang Münchau, FT May 16 2010

Spaniens problem handlar varken om fusk eller om bristande budgetkontroll. Sedan Spanien blev euromedlem har budgetpolitiken varit ”anmärkningsvärt disciplinerad”, skriver Sapir och Pisani-Ferry
Budgetunderskotten uppstod först i samband med den ekonomiska krisen 2008.
Bakom Spaniens nuvarande kris ligger i stället en långvarig och successsiv urholkning av konkurrenskraften och växande underskott i bytesbalansen.
DN 7/5 2010

"Ländernas konkurrenskraft har också betydelse för valutans stabilitet."
DN huvudledare 7/5 2010
"Slutsatsen är att det behövs grundligare kontroller och analyser av både euroländernas statsbudgetar och ekonomier. Det var förödande att de politiska ledarna vid 2000-talets mitt luckrade upp stabilitetspaktens regler, men ländernas konkurrenskraft har också betydelse för valutans stabilitet."

DN har skådat ljuset: "Ländernas konkurrenskraft har också betydelse för valutans stabilitet."
Rolf Englund blog 2010-05-07

Take the example of Spain. It has enjoyed strong growth after its accession to the Eurozone, but this growth was not sustainable.
It was mainly driven by a construction boom, itself the outcome of a housing bubble.
As construction is not a traded good, the result has been a massive trade deficit, which reached 9% of GDP.

As the boom heated the economy (relative to its equilibrium level which involves a rather high level of unemployment), Spain has experienced consistently greater inflation than the average of the Eurozone. This inflation has in turn deteriorated its competitiveness, which has further added to its trade deficit, while making it quite painful to reallocate resources to the export sector now that the construction industry is gone. Greece has experienced similar inflation differentials and its competitiveness is even more crippled than Spain's.

Risken är stor att Spanien hamnar i samma situation som Grekland.
Det säger banken SEB:s chefsekonom Robert Bergqvist.
DI 6/5 2010

I en räddningsplan för Spanien ser Robert Bergström ett scenario där Kina och Japan hjälper Europa genom att de ställer upp med kapital för Spanien genom internationella valutafonden.
Ett räddningspaket för Spanien skulle sluta på 500 miljarder euro istället för de 110 miljarder euro som gäller för Grekland och det mäktar eurozonen inte med.

"Man bör ha en räddningsplan i beredskap för Spanien. Den kommer att inbegripa ett större ansvar från internationella valutafonden eftersom det beloppet kommer att bli större", säger Robert Bergqvist.

Help Portugal Help Greece
The real fun begins if Spain’s cost of borrowing rises above the pooled loan rate.
It has to lend €9.8 billion to Greece.
Charles Forelle, Real Time Brussels, WSJ 5/5 2010

Spain has $1 trillion in sovereign debt outstanding, and, according to Desmond Lachman, a scholar at the American Enterprise Institute, a gross external debt burden of "a staggering 135% of GDP…".

Worse still for Spain's prospects, "the Spanish economy has lost even more price and wage competitiveness than the Greek economy…."

Which raises the key question: Is the Zapatero government willing to impose the pain on Spain that will allow it to cut its fiscal deficit from 11.4% of GDP to 3% in 2013?
Apparently not.

Southern Europe's problem is essentially a competitiveness problem, and not a fiscal one,
and if many states have been having growing difficulty with their negative fiscal balances, this is a symptom of the problem, and not its cause.
Even in the worst of cases - countries like Greece and Portugal - the rising recourse to fiscal outlays has been a response to lack of "healthy" growth, and the root cause of this continuing difficulty in generating real growth has been the underlying lack of competitiveness, and the inability to export your way out of trouble once the burden of debt starts to rise,
so simply pruning the fiscal side isn't going to cure the problem, and by now that simple point should be obvious, I would have thought.
Edward Hugh, Spain Economy Watch March 24, 2010

Det riktigt stora potentiella bekymret är Spanien.
Spaniens externa nettoskuld är fem gånger så stor som Greklands.
Det skriver Per Lindvall på e24.se i en utmärkt artikel.
Rolf Englund blog 24/3 2010

As one of the “big four” eurozone economies – with Germany, France and Italy – Spain is four times as large as Greece, five times the size of Ireland and six times that of Portugal.
Victor Mallet, FT, February 1 2010

Greece, Ireland, Portugal and Spain will cut the demand
So, unless as-yet-unspotted foreign cavalry ride to Europe’s rescue by buying up the continent’s products, aggregate demand will fall.
Less competitive Eurozone countries will be forced to deflate and shrink their economies to match Europe’s diminished and diminishing circumstances.
FT Editorial March 15 2010

Former Federal Reserve Chairman Paul Volcker is confident the /Euro/currency will survive
“I’m still a believer in the euro,” Volcker said in an interview in Berlin March 6.
The lack of a unified government to back up the European Central Bank is a “structural crack” and “maybe fortunately it’s tested with a country as small as Greece, which doesn’t present an insuperable financing problem.”
Bloomberg March 8 2010

Finansanalytikern Peter Malmqvist konstaterade nyligen i Dagens industri:
Den svenska kronan är industrivärldens svagaste valuta.
i Spanien har valutavärdet mer än fördubblats
Olle Wästbergs nyhetsbrev 22 Februari 2010

Samtidigt som fokus ligger på ett krisande Grekland har oron för en rad grannländer - de så kallade PIIGS-länderna - ökat.
Spanien, Irland, Italien, Grekland och Spanien som åtminstone har ett gemensamt – de kommer att få svårt att exportera sig ur den kris de hamnat i.
Spanien och Irland har haft en kredittillväxt och en byggbom som gick alldeles för långt, säger professor Lars Calmfors.
SvD/e24, 2010-03-09, reporter Annelie östlund

I EMU-länder som Spanien och Irland, där överhettningen varit särskilt uttalad, har man inte kunnat höja räntan för att kyla av ekonomin. Därför har inflationen stigit vilket inneburit att realräntan fallit.

– Generellt sett har de här länderna haft för stora pris- och kostnadsökningar. Spanien och Irland har haft en kredittillväxt och en byggbom som gick alldeles för långt, säger professor Lars Calmfors.

De länder som just nu är i blickfånget – Grekland, Italien, Irland, Spanien och Portugal – skulle enligt detta synsätt ha klarat sig bättre om de inte avhänt sig makten över styrräntan till Europeiska centralbanken. ECB:s räntemedicin har passat dem illa. Deras överhettade ekonomier hade behövts kylas ned med en högre ränta.
Peter Wolodarski, DN Krönika 2010-03-07

Spanien är ett skolexempel på att Margaret Thatchers ekonomiska rådgivare, Alan Walters, hade rätt i sin kritik mot EMU
”Spanien hade inte hamnat i det här läget om landet inte hade varit med i EMU.”
menar professor Lars Calmfors SvD/E24 2010-03-03
reporter Annelie östlund

Spanien har inte, som Grekland, misskött sina offentliga finanser. Spaniens problem är istället en tidigare mycket kraftig överhettning i ekonomin som slog över i lågkonjunktur. Att överhettningen blev så kraftig hängde ihop med att EMU-medlemmen Spanien inte kunde föra en egen räntepolitik.

– Med en egen valuta hade det naturliga sättet att hantera en sådan här kris varit att devalvera och därmed återställa kostnadsläget och få igång ekonomin igen, säger Lars Calmfors.

– Nu måste man ”devalvera” genom att hålla tillbaka lönerna istället. Och man får räkna med att det kommer att ta mycket lång tid för Spanien att rätta till sitt kostnadsläge. Sverige befann sig i en liknande situation på 1990-talet. Det som drog oss ur krisen var att kronan sjönk i värde och exporten drog igång. Något sådant kan inte ske mellan euroländerna.

Ett land utanför EMU kan i en överhettning höja räntan mer än inflationen så att realräntan går upp och efterfrågan dämpas.

Men ett enskilt land som är med i EMU kan inte höja räntan i en överhettning. När inflationen då stiger betyder det att realräntan istället går ned vilket förstärker överhettningen. Det blir en självförstärkande mekanism.

Margaret Thatchers ekonomiska rådgivare, Alan Walters, pekade på det här problemet som därför brukar kallas Walterkritiken.
– Spanien är ett skolexempel på att den kritiken var berättigad. Vad som hänt visar hur fel de hade som viftade bort argumentet att de så kallade asymmetriska störningarna kunde bli ett allvarligt problem i EMU.

Lars Calmfors, professor, DN Debatt 15/1 2010
Man kan försöka beräkna hur mycket den gemensamma ränta som ECB sätter för hela euroområdet skiljer sig från den ränta som skulle vara önskvärd för det enskilda eurolandet utifrån dess konjunktursituation.
European Economic Advisory Group har gjort sådana kalkyler /som/ tyder på att skillnaderna i konjunkturläge mellan länderna i dag är större än någon gång tidigare sedan EMU-starten.
Några euroländer har drabbats mycket mer av den pågående krisen än andra. Det gäller främst Irland, Spanien och Grekland.
De djupa nedgångarna i dessa länder beror dessutom i hög grad på att den gemensamma penningpolitiken inte tillräckligt motverkade de tidigare överhettningarna där med snabb kredittillväxt, fastighetsbubblor och kraftigare prisökningar än i omvärlden.
De mest aktiva EMU-förespråkarna har närmast velat förlöjliga argumentet om asymmetriska störningar. Men argumentet måste uppenbarligen även fortsättningsvis tas på största allvar.
Läs mer här

Varför ska Sverige gå med i EMU?
Framför allt Grekland, Irland och Spanien har under senare år haft kraftiga överhettningar som inte har dämpats tillräckligt av den gemensamma penningpolitiken.
Dessa överhettningar har bidragit till att de pågående konjunkturnedgångarna i dessa länder har blivit särskilt djupa.
Lars Calmfors Sieps JULI Nr 6-2009

Miguel Angel Fernández Ordóñez, governor of the Bank of Spain:
“Unfortunately,” he told a conference last week, “we find ourselves at a historic moment.”
Victor Mallet, FT February 28 2010

The crucial issue for Spain and its European neighbours is the credibility of its “stability plan”, which outlines sharp cuts in government spending, including a near-freeze on hiring civil servants, and aims to reduce the deficit from 11.4 per cent of gross domestic product last year to 3 per cent of GDP in 2013.

Mr Zapatero and his ministers, like their foreign peers, deserve some sympathy for their post-Keynesian hangover. At a meeting in London this month Mr Zapatero recalled that the same organisations and markets that had demanded massive fiscal stimulus to avert an economic depression were now complaining about the resulting fiscal deficits. “What a paradox. What a contradiction,” he said.

The bad news for Mr Zapatero and other deficit-burdened European prime ministers is that the markets, impersonal yet fickle, do not give a damn about paradoxes or who was to blame yesterday for a problem today.

Victor Mallet
Born on May 14, 1960, he went to school in England and earned a degree in English language and literature from Oxford University. He is married, with two children.
Victor Mallet also writes a regular column on sailing and yachting in the Weekend FT.
Read more here

Millions of migrants have arrived in Greece, Italy and Spain over the past decade.
To avoid serious social problems, those countries need to do a better job of making them feel welcome
Time Magazine March 1st 2010

EMU skapar social och demokratisk kris
Krisen är djup i Spanien, bruttonationalprodukten sjunker med 3,5 procent. Arbetslösheten är tvåsiffrig
Olle Svenning, Aftonbladet, 21/3 2010

Det krävs givetvis en annan penningpolitik i Holland med 3,6 procent arbetslösa än i Spanien, där arbetslösheten i år rusar upp mot 20 procent.
Men EMU-samarbetet tillåter inte det, när räntevapnet har vridits ur händerna på de enskilda länderna.
Värmlands Folkblad 2010-02-17

Sveriges ränta bestäms av Riksbanken och ingen annan. Det är en styrka i dag. Ett snart medlemskap i EMU, efterlängtat av Jan Björklund och en rad nyliberaler, skulle inte förbättra situationen. Euron kan gott vänta.

German exposure to the region amounts to €43bn in Greece, €47bn in Portugal, €193bn in Ireland, and €240bn in Spain,
according to the Bank for International Settlements.
German lenders are already vulnerable, with the world's lowest risk-adjusted capital ratios bar Japan.
Ambrose Evans-Pritchard, 10/2 2010

Det är intressant att läsa att en svensk nationalekonomisk auktoritet som Lars Calmfors påtalar det uppenbara
att det är de nu blottlagda bristerna i EMU- och europrojektet som är orsaken till de gigantiska bekymmer som den absolut största av de sydeuropeiska problemhärdarna, Spanien, har att hantera.
Per Lindvall, SvD/E24 2010-03-03

En mycket kraftig kredit- och fastighetsbubbla byggdes således upp, där lamporna hos en självständig centralbank i Spanien eller Irland skulle ha blinkat illrött.

Men den europeiska centralbanken ECB hade fullt upp med att hantera den tyngre tyska deflationen och höll sin styrränta alldeles för låg för dessa länder.

Det fanns nästan ingen som varnade för att dessa länder hade slagit in på en mycket farlig väg som hade alla historiska ingredienser att sluta i en stor krasch.

Det är bara att hålla med Lars Calmfors att euron är ett politiskt projekt som skapats för att för att öka den politiska integrationen av Europa.

För en av få lösningar på dessa stora bekymmer är att införa mera överstatlighet och någon form av europeisk beskattning för att kunna stötta de länder som håller på att gå ner sig.
Frågan är bara hur de politiker vi och de andra EU-länderna har och inte minst de vi kommer att få klarar att hantera detta?

As I’ve tried to point out in a number of posts, Spain’s troubles are not, despite what you may have read, the result of fiscal irresponsibility.
Instead, they reflect “asymmetric shocks” within the eurozone, which were always known to be a problem, but have turned out to be an even worse problem than the euroskeptics feared.
There’s a kind of classic simplicity about the story — it’s almost like a textbook example. Unfortunately, millions of people are suffering the consequences.
Paul Krugman, New York Times, 9/2 2010

Am I calling, then, for breakup of the euro. No: the costs of undoing the thing would be immense and hugely disruptive. I think Europe is now stuck with this creation, and needs to move as quickly as possible toward the kind of fiscal and labor market integration that would make it more workable.

Logiken i det hela rör sig i federativ riktning... Sch! säger Kohl åt mig när jag tar upp det.
Göran Persson

Jag tror ingen egentligen har tänkt igenom det här ordentligt. Ja, de som är federalister har gjort det, och de har gjort det lätt för sig, naturligtvis. De vill ha ett Europas förenta stater med direktvalt organ och alltihop, det är enkelt.
Men vi är inte federalister i Sverige, vi är för en europeisk union som vi vill skall bli större, men vi vill inte ha en federation.
Göran Persson

Det är målsättningen om ett ständigt fastare förbund - "ever closer union" - som är själva grundbultsfelet med EU.
Kunde vi rulla tillbaka Sovjetunionen skall vi väl kunna rulla tillbaka Europeiska Unionen.
Rolf Englund Barometerns website 7/6 2005

Spain is an object lesson in the problems of having
monetary union without fiscal and labor market integration.
Paul Krungman, New York Times, February 5, 2010

Spain is an object lesson in the problems of having monetary union without fiscal and labor market integration.

First, there was a huge boom in Spain, largely driven by a housing bubble — and financed by capital outflows from Germany. This boom pulled up Spanish wages.

Then the bubble burst, leaving Spanish labor overpriced relative to Germany and France, and precipitating a surge in unemployment.

It also led to large Spanish budget deficits, mainly because of collapsing revenue but also due to efforts to limit the rise in unemployment.

If Spain had its own currency, this would be a good time to devalue; but it doesn’t.

On the other hand, if Spain were like Florida, its problems wouldn’t be as severe. The budget deficit wouldn’t be as large, because social insurance payments would be coming from Brussels, just as Social Security and Medicare come from Washington. And there would be a safety valve for unemployment, as many workers would migrate to regions with better prospects.

The point is that this has nothing to do with a spendthrift government; what’s happening to Spain reflects the inherent problems with the euro, which now more than ever looks like a monetary union too far.

Det som nu händer är precis det som kritikerna, bland annat nobelpristagaren Paul Krugman och andra, varnade för inför bildandet.
Systemet har mycket svårt att hantera så kallade ”assymetriska chocker” där ett lands konkurrenskraft och betalningsförmåga plötsligt urholkas av någon exogen händelse.
Per Lindvall, SvD/E24, 2010-02-11

Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal
The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.
Ambrose Evans-Pritchard 4 Feb 2010

Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”

Credit default swaps (CDS) measuring bankruptcy risk on Portuguese debt surged 28 basis points on Thursday to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures.

Daniel Gross from the Centre for European Policy Studies said Portgual and Greece need to cut consumption by 10pc to clean house, but such draconian measures risk street protests. “This is what is making the markets so nervous,” he said.

Is the euro forever?
The problem for the eurozone is that Italy is not alone. The CEPS report says: “Portugal and Greece are in a similar situation. These two countries are also running the highest government budget deficits in the eurozone. Even a strong performer like Spain masks under the strong growth a deteriorating competitive position that, were its housing market to slow down, would put its economic performance at risk. Thus, the list of countries at risk is increasing, and could easily become a majority soon.”
Wolfgang Munchau Financial Times 8/6 2005

Spain's troubles are less immediate, but it lost as much competitiveness during the early EMU boom, that debt trap of negative real interest rates. External corporate debt is dangerously high. The budget deficit was 11.3pc of GDP last year. Madrid has drawn up €50bn of cuts to sweeten the markets, even though unemployment is already 19pc. The jobless typically receive 50pc to 60pc of former earnings for around 18 months, then the axe falls. The social distress hits with a lag. How much more tightening can Spain endure before Catalan, Basque, and Galician seperatism rocks the Spanish state?
Ambrose Evans-Pritchard, 31 Jan 2010

What the eurozone must do if it is to survive
The clear and present danger to the eurozone is Spain.
Wolfgang Münchau January 31 2010

Spain, like Greece, has suffered from an extreme loss of competitiveness during a period in which it relied on a housing bubble to generate prosperity. While the Greek government is at least beginning to recognise the need for reform, perhaps too late, Spain’s political establishment remains in denial.

The first of the essential conditions is a robust and transparent system of crisis management. Maybe the Greek bail-out will provide a blueprint for such a system. But in any case, it would need to be worked out formally and approved by national parliaments to achieve a maximum degree of legitimacy. This should not be imposed by diktat.

The reason I have become more sceptical about the eurozone’s long-term prospects is not the inherent economics of monetary union. It is that I doubt the political will exists to do what is necessary

Joblessness among young people has surged beyond 40 percent
Spain’s unemployment rate, the highest in the euro region, rose more than expected, threatening to delay recovery from the worst recession in six decades.
Bloomberg Jan. 29, 2010

The jobless rate rose to 18.8 percent from 17.9 percent in the previous quarter, the National Statistics Institute said today in an e-mailed statement. The active population fell as immigrants left the labor market.

Reeling from the collapse of a debt-fueled construction boom as well as the global crisis, Spain’s unemployment rate has more than doubled in two years and joblessness among young people has surged beyond 40 percent.
The greatest job losses in the euro region are eroding support for the Socialist government of Prime Minister Jose Luis Rodriguez Zapatero, re-elected in 2008 on pledges of full employment

The deeper concern is Spain, where youth unemployment has reached 44pc
and the housing bust has a long way to run.
Nouriel Roubini said Spain is too big to contain.
"If Greece goes under that's a problem for the eurozone. If Spain goes under it's a disaster," he said
Ambrose Evans-Pritchard 28 Jan 2010

Roubini said he’s never been more pessimistic about the future of European monetary union,
saying Spain poses a looming threat to the euro region holding together.
“Down the line, not this year or two years from now, we could have a breakup of the monetary union,”
Roubini said in a Bloomberg Radio interview from the World Economic Forum’s annual meeting in Davos
Bloomberg Jan. 27 2010

Spanish bankshave some astronomical €325 billion ($456 billion) in non-performing loans by real-estate companies.
That's about a third of Spain's GDP
American Thinker 26/1 2010

So far, banks have been able to keep a brave face because the law allows them to buy back the property at face value when the loans become delinquent, thus avoiding the lender's bankruptcy

USA:s huspriser övervärderade med 14,0 procent
Spanska huspriser övervärderde med 55,1 procent
Svenska huspriser övervärderade med 34,7 procent
Engelska huspriser övervärderade med 28,8 procent
The Economist print Decembet 30th 2009

We — that is, the United States — have a floating exchange rate. Spain, however, being part of the euro zone, does not. Its wages are too high compared with those of other eurozone members, now that the housing boom and massive capital inflows are over. If Spain still had a peseta, I’d say devalue it; since it doesn’t, wages have to give.
Paul Krugman, December 17, 2009

Moody's downgraded a third of the entire stock of Spanish mortgage bonds or "cedulas" – covered bonds deemed safer than US sub-prime securities – but also made from debt that is sliced into packages.
Most were cut from AAA (Aaa) to Aa1. They are largely owned by German or French banks and pension funds.
Ambrose Evans-Pritchard, 18 Dec 2009

The agency said the Spanish savings banks that issued the bonds are heavily exposed to Spain's property crash. Moody's said it had based its stress test on assumptions of a 45pc fall in house prices.

The scale of yesterday's action is huge, roughly equal to a trillion-dollar downgrade in US terms. Spanish banks avoided damage from the global credit crunch because they eschewed US toxic debt, but their own internal sub-prime crisis is slowly catching up with them.

Professor Luis Garciano from the London School of Economics said Spain's property bubble left an over-supply of 1.5m homes, the most concentrated glut in the world.

Standard & Poor's revised its outlook for Spain to "negative" from "stable".
Mr Zapatero, the Spanish prime minister, boasted that his Socialist government's generous emergency spending plans had helped stave off economic depression and had saved hundreds of thousands of jobs, even though, according to one measure of unemployment,
about 18 per cent of the workforce in Spain, or more than 4m people, are without jobs.
FT December 11 2009

At 70 percent of GDP Spain’s mortgage and consumer credit burden
is the largest of the euro region’s major economies
June 3 2009 (Bloomberg)

Annual growth of almost 4 percent over a decade turned Spain into an engine of Europe’s economy, boosting pay and prices as a building boom encouraged households to rack up 800 billion euros in debt. More than a year into a housing slump that helped spark the worst recession in six decades, the challenge is to trim labor costs and pay back loans without hobbling the country’s route to recovery.

One of Spain’s most pressing problems is that it has become less competitive since the euro was created in 1999, with Commerzbank AG estimating based on labor costs that it has become 10 percent more expensive relative to the rest of the currency bloc.

“The only way for Spain to recover the lost competitiveness of the last 10 years will be for a sustained drop in prices and wages,” said Luis Garicano, a professor at the London School of Economics.

More than 1 million households in Spain now have no one in work to support them,
and a third of working age Spaniards under 25 are unemployed.
Financial Times May 14 2009

Spain, which grew rapidly in the past decade on the back of a surge of home construction, has suffered the highest rise in unemployment following the collapse of the housing bubble, a severe setback for José Luis Rodríguez Zapatero, the Socialist prime minister, ahead of next month’s European elections.
Hundreds of thousands of building workers have lost their jobs, and the unemployment rate reached 17.4 per cent of the workforce, the highest in the European Union, in the first quarter of this year.

Landets oftast olistade sparbanker svarar för runt halva det finansiella systemet. De är mest exponerade mot krisdrabbade fastighetsbolag

The Bank of Spain is to take over Caja Castilla la Mancha in
the first bank bail-out in Spain since the global financial crisis began.
The government will also back the bank with 9bn euros (£8.4bn) in guarantees. BBC 30/3 2009

Shares in banking giants Santander and BBVA declined on concern over the health of the banks in Spain, where the housing market has been badly hit.

In September, Santander agreed to take over the savings accounts of the Bradford & Bingley as part of the UK government's attempts to stop that bank collapsing.

The Bank of England may have averted a catastrophe.
If ever there was a time when this country needed its own monetary authorities this is the moment.
Those nations with fossilised or timid central banks clinging to outdated ideologies are not so lucky.
Even less lucky are those such as Spain and Ireland that have surrendered policy to a body that is deaf to their pleas and constitutionally obliged to ignore the welfare of their particular societies.
They face crucifixion.
Ambrose Evans-Pritchard, Daily Telegraph, 08 Mar 2009

"There is no risk that the euro will break apart," said Jean-Claude Trichet,
the European Central Bank's president, speaking at the World Economic Forum.
Ambrose Evans-Pritchard in Davos 30 Jan 2009

S&P downgraded Spain's credit rating to AA+ from triple A, following a similar cut for Greece last week.
Ireland and Portugal were put on credit watch, and Italy may be next in line.
Wall Street Journal 23/1 2009

Being a member of the eurozone doesn’t immunize countries against crisis.
In Spain’s case (and Italy’s, and Ireland’s, and Greece’s) the euro may well be making things worse.
Paul Krugman, New York Times January 19, 2009

The pain in Spain isn’t hard to explain.
Spain was basically Florida, with a housing bubble inflated by both resident and holiday purchases,
and now the bubble has burst.

But Spain is in worse shape than Florida, for two reasons — reasons familiar to anyone who was involved in the great debate about whether the euro was a good idea.

First, Europe doesn’t have a central government;
Spain, unlike Florida, can’t draw on Social Security and Medicare checks from Washington. So the burden of recession falls entirely on the local budget — hence the country’s declining credit rating.

Second, the United States has a more or less geographically integrated labor market:
workers move from distressed regions to those with better prospects.

The PIIGS
The euro zone faces tough times as the PIIGS — Portugal, Ireland, Italy, Greece and Spain —
will need a flexible exchange rate to compensate for the economic slowdown
so some of them may decide to break free from the single currency's straightjacket
Hugh Hendry, Chief Investment Officer and Partner at Eclectica, CNBC 12/1 2009

Santander, the euro zone's largest bank by market value,
said its clients had an exposure of €2.33 billion ($3.1 billion) to Mr. Madoff's investment funds
Wall Street Journal DECEMBER 15, 2008

Spanish unemployment hit a four-year high in the third quarter as tens of thousands of jobs were lost at the end of a decade-long housing boom
Until last year Spain was one of Europe's engines of economic growth and job creation.
Largely thanks to a massive home-building boom, the economy created over a third of all new jobs in euro zone in the past decade.
Wall Street Journal, October 27, 2008

Since the credit squeeze began a year ago,
Spanish institutions raised their monthly borrowing from the ECB by 31 billion euros to a record 49.4 billion euro
(=3 times Zapatero's fiscal stimulus package).
RGE Monitor 29/8 2008

Meltdown
Two aspects of the eurozone economy are often mixed up. One is its overall performance.
The other is the divergences that at any time exist within the single currency area.
If you look at the eurozone from a great height, a meltdown of the Spanish economy looks like a minor regional wildfire.
Wolfgang Münchau, Financial Times, July 20 2008

Germany and Spain have clashed in an escalating dispute over the European Central Bank,
exposing the deep rift that has emerged between Europe's North and South.
Ambrose Evans-Pritchard, Daily Telegraph 10/6 2008

Some 98pc of Spanish mortgages are on floating rates and the country is now in the grip of a fully-fledged housing slump.

"I would advise Mr Trichet to be more careful in his comments: we expect the European Central Bank to be more responsible," said Spain's premier, Jose Luis Zapatero.
In a rare breach of diplomatic etiquette, Germany shot back yesterday with a public rebuke of Spain's elected leader. "We have no criticism to make of the ECB or Mr Trichet. If Mr Zapatero sees this differently, he must explain that," said Thomas Steg, spokesman for Chancellor Angela Merkel.

The emergence of a Paris-Rome-Madrid axis changes the balance of power in the euro-zone and poses a serious threat to ECB hegemony. Together they make up three of the "Big Four" euro powers.
Under Maastricht Article 109, politicians have the ultimate power to set exchange rate policy. If they choose to invoke this clause - by qualified majority vote - they could overrule Germany.

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