Last September, we popped up a post in which we insinuated that the labour cost uncompetitiveness argument with regards to Spain - and its corollary solution, the 'internal devaluation' - was a complete crock of shit not borne out by the actual facts. Another look at the data (thanks to an urging from this December piece at FT Alphaville) anything but dissuades us in our opinion.The first chart on the left shows Spain's monthly balance of trade with the three eurozone heavyweights, as well as the United Kingdom, since January of 2000. Evidently the millstone of a fixed exchange rate has resulted in the country's deficit with Germany finding itself at near minima for the period. The cases of France and Italy speak for themselves - both positive. As for the UK, the 20 percent depreciation of the pound with respect to the euro over the period has had no apparent negative effect on Spain.
The second graphic shows Spain's trade position vis a vis the rest of world, the rest of the world less the OPEC countries (Spain produces almost no oil) and the rest of the world excluding OPEC plus the usual group of beggar-thy-neighbour economies - Germany, China and Japan.Again self-evident. Ex-OPEC, the trade balance is negative but approximately the best its been since the year 2000. Removing OPEC plus the chronic surplus lot - which are never going to allow themselves to beaten at the game - and the trade balance is just shy of positive.
Arguments that this all reflects a collapse of internal demand in Spain deny the evidence that nominal exports have been increasing over the duration of the recession. Simply put, Spanish companies that don't or can't sell beyond their own borders run the risk of going out of business. And many are evidently reacting to this circumstance.
For our highly personal take on why Spanish exports only account for 25 percent of GDP (an almost identical figure to those of France and Italy), readers might read our later piece, Homie Nation - certainly before mocking a recent government suggestion that they might consider subsidizing from social security funds the hiring of Spanish unemployed by domestic multinationals to work outside the country.
We think the idea is brilliant, but are certain that it goes nowhere.
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2 Comments:
But will Brits continue to buy expensive fake acorn-fed ham now they're going to be slightly less employed and substantially less able to pay on the never-never? Surely the credit boom just masked the problem.
I guess they could always get it from China....
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