The miracle of Spain continues to manifest to the sound of GDP growth on an annual basis of + 3.4% and + 0.8% on a quarterly basis. Growth is not even remotely comparable to the European economy.
Spain is growing at faster rates than the European average, beating Germany and France economies. The Spanish government has said repeatedly that this growth has been possible thanks to the approval of a series of structural reforms that have improved the innovation and the quality of production of the Spanish goods.
Objectively, however, it seems that the Iberian economy is the result of favorable economic factors and measures that favored exports at the expense of the welfare of workers, making the economy extremely fragile.
The Iberian country has been one of the hardest hit by the crisis because of the huge bubbles.
Simon Tilford, ex former chief economist of the International Monetary Fund about a year ago explained why the Iberian growth is not in any way related to the use of structural reforms.
The expert believed the Spanish economy has enjoyed some economic factors along with a lowering of wages. Tilford explained that if we analyze the composition of exports of the country, we realize they are based solely on low-quality goods.
The devaluation of the euro and the cutting of incomes are not growth factors but, rather, threaten the Spanish economy to global crises.
Tilford statements are confirmed by Angel Talvera (Oxford Economics), who explained that the Spanish economic growth is based on a remarkable cost-adjustment, i.e. wage cuts that have helped to increase the competitiveness in the export of low-value products.
The statements of the two experts are confirmed by the macroeconomic data. If the rate of inflation (deflation in this case) continues to decline more and more, it is proof that there is something wrong.
Inflation can be driven by domestic demand, production costs and excess of money supply (which depends on the ECB).
The collapse of raw materials has led a deflationary dynamic while the ECB is trying to increase the excess currency in circulation with negative rates but the effects are still unseen.
A clue leads then to the last factor: the domestic demand for goods. If it is true that exports increased more than the European average it is not the same for imports.
Arguably, the domestic consumption is improved. Not so. Spain has an unemployment rate among the highest in Europe, with a sharp + 21%. Youth unemployment has a 45.5% rate.
If in Spain there are wealth and growth, then why the public debt rose more than 100% of GDP two months ago?
New generations of workers are confronting the rapid destruction of all workers’ rights. The European economy is going to be like Japan, that is no longer growing, and it will be difficult especially for new workers.
There will be less and less welfare, considering also that European population is aging without turnover. Simply, the labor market it is becoming more like the Anglo-Saxon or rather American.