It gives me great pleasure to start this “Readers’ Corner” section off with a comment from Tim Drummond, an American who has lived in the coastal town of Torrevieja for the last 8 years and has a lot of business and investing experience to bring to the debates about the Spanish economy and its problems.
I love Spain. I live in Spain by choice. I’m retired and there are many countries I could choose but I choose here.
However, I am worried about Spain. I am worried because of the financial problems caused by the banks over-leveraging while not marking assets to market. I am worried by the austerity programs that I know Rajoy has to implement. I am worried by the bond prices and their spreads. I am worried about the strikes that are being threatened as weapons against change.
I worry about all the people paying on mortgages that exceed the worth of the house without any chance of genuine debt relief—only an accumulation of debt for the future.
But what worries me most is that Spain has two major problems. The current fiscal situation and the future with its aging population. The government cannot myopically focus on just the current fiscal problem but must work on the first with an eye to the second or we are unlikely to ever leave this painful cycle.
The current fiscal problem will be corrected by a disciplined government that needs to extend all the way down to the municipal level. But the future needs stimulus and creativity and requires a different set of solutions.
I would like the government to look at the things that Spain does best and exploit them to their fullest and not try to be all things to everyone.
Potential areas where Spain has shown abilities such as: medical tourism, retirement villages, agriculture including hydroponics and renewable energy come to mind.
If the government and industry would choose specific fields and create decent research and development budgets without a bureaucratic nightmare and incorporating fresh eyes could go a long way into the future. So that we have a future path shining in our eyes as we exit the current mess.
Only a crazy person repeats the same process over and over expecting different results. It is time for change.
(If you would like to share your ideas on Spain with other readers in Readers’ Corner, just visit Readers’ Corner—Your Post, read the the rules and fill in the form with your ideas.)
I think the demographic problem is not even a medium term problem as migrant flows can cope with any imbalance between productive and dependent populations. I am not sure that Govt. involvement in picking winners is a good way to go.
The problems of Spain are structural and supply side constraints. It is essentially a corporatist and beaurocratic state imposed on an essentially anarchistic population. The new Government has to deal with the structural deficit urgently and, I am sure, will attempt to within the constraints of the europe wide problem but it may not have the will or desire to tackle the supply side problems which could change the long term future of Spain.
I have lived here for 13 years but been involved for 28 years, including a spell as director of a spanish company.
Just a little story – we, a british company, had acquired a spanish subsiduary which we invested in and were able to grow to the extent that we could operate 24/7 – to cover the weekend days we offerred locals a 2 shift partime job, an addition to our existing workforce. Good pay too – it took nearly a year of negotiations with the unions to get this going – so all those potentialy extra jobs went beggining.
Andrew, I couldn’t agree more with you about Spain existing as a corporatist and beaurocratic state. The stories I’ve heard from people owning and attempting to start businesses here just make me shake my head in disbelief. Regarding the supply side I would have to snarkily comment that they would have to begin to base their taxes on some kind of reality before they could start adjusting the rates to correct the problems. But my point was not for the government to pick winners but to seed a few areas so that some success stories could begin. And a good place to begin would be government investment in R&D for the future and resolution to it’s beaurocratic thinking. Entrepreneuring is not a predictable process and needs to be allowed to grow by creating an environment where it can exist.
If you look at Spain’s population pyramid http://www.nationmaster.com/country/sp-spain/Age_distribution you will see that Spain’s aging population is growing very fast. The replacement population by foreigners is only a myth if you look at the current statistics: http://www.elperiodico.com/es/noticias/sociedad/20110301/numero-inmigrantes-espana-cae-por-primera-vez-desde-2010-hasta-los-millones/910128.shtml which indicates it is not a done deal and to whether they will come and stay is unpredictable. As I said, Spain needs to plan to deal with this rapidly coming dilemma and they won’t be able to correct it with a simple and short solution since it is likely to require infrastructure changes and creative thinking. This is not a situation where you see a lorrey coming and you’ll just swerve out of the way. The lorrey is locked on you and no matter where you will swerve it is going to meet you head on unless some basic changes happen fast.