Fogbound, but Mildly Optimistic

The mark of a bona fide alarmist is that he or she not only is capable of finding imminent and life-denying threats on all sides, but also proposes solutions utterly impossible to implement or those that will end up, if put in practice, doing at least as much harm as the perceived menace. The best escape from death in a plane crash being to jump out of the falling projectile before the it strikes the earth, as it were.

We would put the so-called 'internal devaluation' - a (for example) 20-30% reduction of wages across the board - remedy to Spain's economic problems, and its inevitably consequent depression and sovereign default, into the latter category.

The problem, though, is that Spain - despite appearances to the contrary - is probably undergoing something similar. Totally apart from the recent wage cut foisted upon the country's civil servants, a conversation with a construction-worker friend from the economically devastated province of Almería reveals that:

1). The last few months, ending a period of one-and-half years on the dole in his case, have shown a considerable revival of the building trade - this mostly in the form of small jobs that are in a certain abundance;

2). Most are strictly under-the-table positions and involve about a 50% salary reduction.

Most outstanding, though, were his remarks on the above-board labour market.

Our friend is a specialist tile setter. During the boom he was paid piecework whilst simultaneously receiving an official salary with its corresponding tax deductions and social security contributions. Of the approximately 4,000 euros a month he earned slapping down baldosas on per square metre basis, 2,800 were paid in cash - the remaining 1,200 being what was statistically considered to be his wage.

His current short-term job is with a small operator and is paid in cash, but the larger companies are apparently reacting to increased government inspections by both the Ministry of Labour and the income tax department by declaring 100% of the pay of the newly re-hired. The end result is that official statistics will either end up registering an increase in certain employee costs when the reality is that they have dropped substantially, or miss completeley the uptick in activity in the underground economy.

With reference to the residents of the region in the northwest of Spain, it is said that 'you can't tell whether a Gallego is coming or going'*. We would suggest that one of the structural problems of the Spanish economy (in response to a reader request) is that, in the innocent and untrained eyes of international investors, economists, most pundits and apocalypticals in general, this opacity unfortunately permeates much of the Spanish statistical mass.

*No offense intended. The writer is, after all, married to one.

As an interesting aside, if the loosely interpreted 'magazine cover indicator' has any validity, this Spain-related item from the New York Times leads us to believe that it should be clear sailing for Spain, Greece, Latvia and the entire eurozone from here on in.

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