The Spanish economic recovery is a fact hard to deny. The hangover after the economic crisis has been at the same level of the unbalances accumulated in the expansion phase, making the process even harder and longer. It is true that most of the Spaniards do not have noticed the recovery dividends yet, but no one can deny that people live more calmed in the Spain of 2015 than in 2012, when we almost touched the economic collapse.
The external financing recovery, once silenced all the doubts about the future of the euro, and a sharp increase of competitiveness are in the base of this recovery. A recovery that, essentially, has followed the same path than other economic recovery processes in the past. The gain of competitiveness allows a positive contribution of the external sector to the GDP that generates incomes in the country used to finance investments that increase productive capacity and generates employment, causing a consumption and tax incomes expansion.
“A recovery that, essentially, has followed the same path than other economic recovery processes in the past.”
However, being a typical development of facts in our economic history, there are two circumstances that had appreciably increased the quality and credibility of the project, that could end in a very desirable structural change in the Spanish economy. On one hand, the competitiveness earnings have not been achieved devaluing the currency, as we were use to before joining the euro. It is a fact that between 1975 and 1995, Spain suffered four devaluing processes with well-known results. In this occasion belong to a single currency has obeyed us to initiate an internal devaluing policy of prices, salaries and rents with a furthermore retarded effects, politically painful, but more positive in which credibility concerns and the trust we must create after the bubble economy we create collapsed. Besides, the economic policy has been rise to the occasion. The implementation of what we could call the ”European recipe”, that is to say, tax discipline, banking clean up and economic reforms have succeed in Spain. It is true that there were not many options to initiate other policies, but it is true that political wisdom lies in choose each one of the ingredients to stabilize and recover the economy at the same time that social peace remained. That goal, with nuances, has been achieved.
But the main matter is to figure out how healthy, solid and sustainable is this economic recovery. To summarize, to know if this time is different or the good tune of our economy it is just the result of a change in the trade cycle. There are at least three reasons to support the idea that economic growth is more solid, even to support the thesis that Spain is in the structural change threshold if it perseveres in the three pillars previously mentioned.
First of all, the labour market performance. The labour reform approved in 2012 has been by far the most ambitious of the Government and the deepest reform of our economic history. A reform that has caused something new in our economy making employment and growth increase at the same time. Before the economic crisis, Spain need a 2% of growth to create employment approximately. After the reform this rate has been reduced to a 0,6%, allowing economy to create more than one million of employments since the beginning of the recovery and returning the misemployment to a decreasing path.
“The labour reform approved in 2012 has been by far the most ambitious of the Government and the deepest reform of our economic history.”
In second place, the financial sector reforms have supposed a huge transparency, restructuring and recapitalization effort, giving a sanitized sector able to finance the recovery with growth rates of new credit for SME higher than 10% annual from the beginnings of 2014 and able to transmit the ECB’s monetary policy signs as the sensitive improvements of the credits from mid 2013 to beginnings of 2014, has brought to light.
And finally in third place, Spain is responding successfully to the main doubt that our experts has been asking of the need of generate growth in the necessary deleveraging context after the unbalances accumulated. For the first time in our recent history and, certainly, since we are in the euro, economic growth has not been a decrease in the deleveraging rate of the private sector which progress well since the beginning of the crisis. Increasing investment and consumption rates are growing with high deleveraging rates of companies and particulars. For two years, in Spain has been recorded a surplus in the current account balance consolidating an unusual net financial capacity. Thus, while the economy financing stock is being reduced, the new credit to SME and particulars flow is significantly growing since the beginning of 2014, this is only possible through a production factors resignation to ”new sectors” as, for example, export industry. Hence that exportations in Spain have passed to represent more than the 32% of the GDE, when in the beginning of the crisis only exceed lightly the 22%. An export growing not only quantitative, also with an intense diversification project of the diversification of the target market which has enable a decrease of the dependence to EU exportations, which represents less than the 48% as against more than the 60% in 2014.
“To conclude, Spain, thanks to the applied policies and to the standardization of the euro area, has a fantastic opportunity to develop an economical change which enable the country to take a better profit – this point should not be very hard- of the globalization’s opportunities.”
However, the vulnerability level of our economy keeps being very high. We still having a very high unemployment rate, a public deficit that stills being one of the highest of the developed countries and one of the highest public and private debt in the world. In this circumstances, the only way to keep going in the correct path is continue applying the three pillars that has enabled us to generate the good results we have already commented. A second round of the labour reform to reduce more the dichotomy and allow more flexibility in periods of crisis; a comprehensive reform of tax system improving its capacity for revenue collection and reducing distortions that generates in the behaviour of the economic agents; reform of the welfare system that guarantees its sustainability and make it more efficient to reduce inequality; also measures that let us increase the size of the companies, are priorities for any Government elected in the next presidential elections.
