Santiago Niño Becerra

What has changed in Spain?

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Presentación Cuadro Macro (abril de 2013)Presentación Cuadro Macro (abril de 2013)

These are the macro figures that the Spanish government submitted to Brussels on last April 26, when it asked for a two-year extension to meet Europe’s wondrous 3% target deficit. Look at the figures closely: see how the anemic growth magically accelerates once the target is met, how the rampant public debt surprisingly declines upon compliance with such a target, and how the currently unbridled unemployment rate miraculously begins to recover at the very moment the target deficit figure is achieved.

These figures, you will recall, were accompanied by speeches made by various members of government whom at the time underlined that the Spanish economy was at a critical crossroads. Of key relevance to effectively send the message across were the speeches delivered by Prime Minister Rajoy and Minister of Economy De Guindos. Subsequently, Brussels gave its assent to the figures and granted Spain the two -year extension it had requested on the target deficit.

A few weeks ago, on October 17, the Spanish government submitted an updated version of last April’s macro figures to Brussels, only this time the projections end in 2016. Indeed, the revised chart scraps the magic that was to take place thereafter.

Presentación Cuadro Macro (octubre de 2013)

The differences between the two charts mainly lie in estimations of a little more growth and a substantial increase in debt. There are no unemployment figures in the new chart, or such did not make it to public opinion. Of course, scrupulous compliance with the target deficit was maintained from one document to the other. The numbers, as you can see, are sad and anemic, and continue to envelop the arabesque promise of target-deficit compliance; which I think is impossible to achieve unless it is all based on significantly higher doses of pain: a staggering deficit reduction from -4.2 % to -2.8 %.

Naturally, these figures were again accepted by Brussels. This is the point where we go into paroxysms of laughter.

Mysteriously, all talk regarding the above figures, as well as discussion of the 2014 Budget have ceased. Indeed, and relying on the meager 0.1% growth projections published by the Bank of Spain for Q3 of this year, as well as on the recent decline in the unemployment rate (which seasonally adjusted did not actually happen), the government and other semi institutional entities have rushed to announce the end of recession, that the Spanish economy now sees the light at the end of the tunnel, and that foreign investors’ such as Bill Gates’ have renewed their interest in Spain. What has happened?

Despite the country’s macro figures and a budget which assumes that 30% of the country’s spending next year will go to debt interest payments, how is it possible that we are suddenly being bombarded with wonderful news about Spain’s current situation – no longer at a cross roads – and colorful future? Several things have happened, I think.

First, the public wants to hear nice things because they are tired of hearing the bad; so if they want good stories, they’ll get them . No matter what happens tomorrow. Tomorrow, when reality hits and the scissors are again sharpened to trim that which growth will not produce, not even to even pay the interest on the debt, the public will be told other stories.

Second, time references have changed. The date now is the end of November 2014, when the European Central Bank (ECB) is due to publish the findings on its grand audit of the euro area’s largest 126 banks (16 of them Spanish ), as well as the results of the various tests that the European Banking Authority (EBA) will have administered on such banks. Until then, let there be peace everywhere, but specially in Spain. Surely, after next Summer, and in order to prepare the people’s mindset for what is to come, a few things may be filtered, but that will be then. For now, do not be surprised to hear things such as “Spain is doing well again.”

Finally, the divorce between the people and their representatives has consummated. The government tells its stories while the people perceive a different reality. Yet this matters little. What matters is making it through tomorrow. And if to make it through tomorrow the government has to go back on its words and say it meant differently from what it said not long ago, so be it.

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Santiago Niño Becerra

Santiago Niño Becerra is Economic Structure professor at the Ramon Llull University in Barcelona. He publishes a daily colummn in La Carta de la Bolsa.

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