Saturday, October 19, 2013

King For A New Day?: Spain going forward

The Spanish Government has unveiled its latest plan to reduce the country's budget deficit and to bring it within the European Union's 3% requirement by 2016. The plan will mean yet more cost-saving and revenue-raising measures and hefty ones, too. Four billion euros will need to be found in 2015 on top of the four billion for next year. Taken together, these measures don't sound like confidence will be returning to the economy any time soon.

Yet, there are signs of possible improvement even if they are only brought about by temporary economic activity and by some talking-up. Tourism is bound to create some better performance, but if it didn't, then something would be seriously wrong; Spain's summer tourism, if not its winter tourism, is benefiting from uncertainties and unrest in key competitor destinations. This better performance has been highlighted in the Balearics, though the talking-up has been based on statistical evidence which doesn't, in itself, equate to actual economic growth. A nine per cent increase in tourism spend in the Balearics over the first nine months of this year is not an especially reliable indicator, though it is up by five percentage points over the same period in 2012.

Let's say, therefore, that there are some encouraging signs, but tourism would need to keep its performance going and indeed improving. Tourism's contribution is essential while other sectors remain moribund, one of them being retail, and it is small wonder that this sector, and so increased consumer spend, continues to languish. Increased rates of value added tax (IVA) and of income tax have done nothing to encourage consumer confidence or to lend a hand to growth.

The chances of tax rates going down - the government had said that increases would only be temporary - are remote for the foreseeable future. They are likely to remain at least into 2015. Righting the deficit is, therefore, a greater priority than effecting genuine growth, despite what the government might say about growth prospects.

Most Spaniards give politicians' pronouncements or prognostications on growth in the short-term little credence. In the Balearics, there is little credence given to President Bauzá's ham-fisted use of tourism spend information as evidence of improvement. The most recent Gadeso survey of consumer sentiment showed that there is negligible confidence in the real economy.

It is, however, the utterances of non-politicians which might help with the talking-up. If politicians are not believed, then maybe bankers will be. What am I saying? They were the ones who helped to bring about Spain's economic problems. Can, therefore, the words of the chief executive of Santander, Emilio Botín, be trusted? He has said that money is "coming in from all directions" - to the stock exchange and in the form of direct inward investment into Spain. Perhaps he can be trusted, but he will surely know that there are certain aspects of economic life in Spain which are not especially welcoming to inward investors, those who want to operate in Spain anyway. These include, as an example, the harmfully high levels of social-security payments. This, social security, is something that requires serious attention. It cripples many of the self-employed as well.

If not the politicians or the bankers, then what about the royal family? King Juan Carlos, recently in hospital again, is a declining figure. But while he declines, his son, Felipe, grows. At a business conference in Panama the other day, he echoed what the boss of Santander said about increasing investor confidence. He probably would say this, but nevertheless Felipe is cutting an altogether more impressive figure these days.

For so long in his father's shadow, Felipe's stock has risen. He has been unaffected by the corruption scandal involving his brother-in-law, Iñaki Urdangarin, which has harmed his father and both his sisters (Elena far less than Cristina but still so because of links to the same financial advisor). Despite persistent rumours as to possible problems with his marriage, Felipe does seem to be benefiting from better PR. He was the one representative at Madrid's somewhat shambolic Olympic bid presentation to come out with any credit. He spoke well. He showed the right blend of gravitas and communicativeness. He was impressive.

If Spain does come out of the doldrums, it needs to look forward and to show a new face. Too much of what is being shown by politicians is looking backward, an example being with the renewed emphasis on religion in education. If there is to be a new dawn in the hopefully not too distant future, then a young(ish) figurehead should be there to herald it, one who is increasingly confident both nationally and internationally and who would be representative of what might become a new but more sensible Spain.

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