Thoughts from Galicia, Spain: 16.3.18

Spanish life is not always likeable but it is compellingly loveable.

- Christopher Howse: A Pilgrim in Spain. 

If you've arrived here because of an interest in Galicia or Pontevedra, see my web page here.

Spain

• Damn my lazy brain. I knew Isabel Preysler wasn't Isabel Presley but I still typed the latter. And missed it at least 5 times.
• For those who can read Spanish, here (HT to Lenox of Business Over Tapas) is an article on the urgent problems in the Spanish economy which Brussels has asked Madrid to do something about. Translation below for everyone else. It makes for rather gloomy reading, justifying some pessimism about Spain's future after the Brussels taps are turned off. Or if tourism turns down, as Ryanair is predicting it will, as it resurfaces in other locations.
• Don Quijones again addresses here the problems of Italian banks. And the implications for some Spanish banks. There's arisen, he says, a dangerous relationship of mutual dependence between governments and banks. Which is not good news for taxpayers, who always seem to foot whatever huge bills come down the track.

Life in Spain

• My experience of the flashing amber lights for drivers at pedestrian crossings is that drivers will always stop if the pedestrian light is green. But, when it's red:-

1. Most drivers won't stop for a pedestrian at the side of the road
2. A few will stop
3. A larger number will stop – though still a minority – if the pedestrian is standing on an island in the middle of the road.

Draw your own conclusions. And take your own risks.

• It's easy to get on a Law course at a Spanish university, as the required Selectividad marks tend to be very low. So, the country is awash with abogados. And, of course, not all are competent, or even honest. Click here , if you want to know how to complain about one, for any reason.
• I mentioned the dreadful Modelo 720 recently. Here's all you need to know about it.

The EU

• Ambrose Evans Pritchard claims that: Europe’s political uprising is shifting to a second front. Once-silent intellectuals are starting to challenge the core assumption of EU ideology, indicting the project for moral vandalism and a reckless attack on the democratic nation state. There's been, he says, a shift in intellectual opinion. With the result that: The drive for ever closer union already seems an anachronism, yet monetary union cannot function without such union. AEP cites a professor who thinks it's theoretically possible for the EU to become a super-nation with the attributes of a state but that - Utopian or not - this goal isn't desired by the crushing majority of Europe. Like me – and I believe Don Quijones and Alfie Mittington, bless him – AEP would go further and characterise this goal as completely deranged. IOHO.

The UK

• No sooner do I mention that Anglo lawyers have high status and make very good money than along comes a survey confirming this for the UK. Doctors might make more on graduation but lawyers overtake them as regards pay progression. Students of law came out best on this measure with median salaries ten years after graduation being a third higher than salaries five years after graduation.

Galicia/Pontevedra

• There's a report in today's media about the Guardia Civil collaring a gang of Spanish and Portuguese drug traffickers. I was astonished to read they were down in Extremadura, not here in Galicia.
• Which reminds me . . . The first chapters of Fariña are a great intro into how the smuggling industry arose and diversified here. At one stage – after economic fortunes had reversed – the commodity smugglers turned to the even-more-profitable game of bringing Portuguese folk into Spain. Through a border region which, back then, officially belonged to neither Spain nor Portugal.
• BTW . . . I was able to read these chapters while waiting for over an hour to see my (private) doctor. I was, of course, the only person reading in a crowded waiting room.

Finally

• After my complaints about Línea Directa, this is a bit embarrassing, in a couple of ways. Having never made a car insurance claim in the UK, I'm unversed in the workings of comprehensive(all risks) policies. I had assumed that accidents which were my own fault were not covered. But, incited by my neighbour Ester, I called the company and found that they are, and so they will pay €4,000 to repair the front of my car, after I'd driven (slowly but expensively) into a granite bollard. All that admitted, it was all done over the phone. No good writing to them in any form. Of course, my premium will rise, though not for the policy renewable in 2 weeks' time. Because the computer has already dictated what it will be for 2018/9. Computer says No. In my favour for now.

Today's Laugh

Courtey of Private Eye. Too good to ignore:-

THE ARTICLE

The 10 most urgent problems Brussels sees in the Spanish economy: Juan Sanhermelando

The high level of public and private debt and the high unemployment rate are the main vulnerabilities.

Despite four consecutive years of solid growth, Spain remains vulnerable to a sudden change in market sentiment or a rise in interest rates due to high unemployment and public and private debt. This is the main conclusion of the European Commission's comprehensive annual diagnosis of the state of the Spanish economy. The report also warns that Spain will be one of the EU countries where pensions will fall the most in the coming years, which puts at risk the standard of living of retirees.

Brussels criticises the paralysis of Mariano Rajoy's government. Since 2014, little action has been taken to meet the EU's recommendations and correct economic imbalances. "The current minority government seems to concentrate its political capital on a few strategic issues and to avoid reversing previous reforms," the report said. The EU executive asks Rajoy to take advantage of the recovery and reactivate the reform drive to correct the problems of the Spanish economy before the next crisis.

1. High unemployment and abuse of temporary contracts

The unemployment rate continues to fall rapidly but is still the second highest in the EU (16.3%), behind only Greece. Unemployment particularly affects young people (36%), with the resulting potential for untapped talent. Almost half of the unemployed in Spain have been out of work for more than a year, which threatens to make the problem chronic. Brussels sees the need for continued wage moderation and warns that the increase in the minimum wage approved for 2017 and 2018 could have"negative effects" on employment, especially for young people and low-skilled workers. The study also criticises the limited effectiveness of public employment services and active employment policies in Spain.

2. The abuse of temporary contracts

The abuse of temporary contracts negatively affects productivity growth and exacerbates income inequality. The temporary employment rate in Spain is 26.8%, one of the highest in the EU. This reduces the incentives for workers and employers to invest in lifelong learning, which in turn hampers productivity. Temporary workers are at greater risk of poverty and accumulate fewer entitlements to social benefits. The Commission believes that the incentives approved by Rajoy to promote fixed contracts have had only 'minor effects'.

3. The ineffectiveness of social assistance

The population at risk of poverty or social exclusion has fallen from 28.6% in 2015 to 27.9% in 2016, but remains above the pre-crisis level and above the EU average. The risk of poverty is particularly high among the unemployed or single-wage households, as well as among children. In addition, family support and social benefits, such as regional basic income systems, are characterised in Spain by unequal coverage and low efficiency. "High levels of income inequality, early school leaving and child poverty can adversely affect equal opportunities," the Commission warns.

4. High public debt

After rising sharply during the years of the crisis, public debt in Spain peaked in 2014 at just over 100% of GDP, 65 points higher than in 2007. According to the latest forecasts from Brussels, it will now fall from 98.4% in 2017 to 95.5% in 2019. But without additional adjustments, it will remain at around 95% until at least 2028. Pension reforms ensure the sustainability of the system at the cost of lower benefits, but health expenditure will continue to rise. The Commission calls on the government of Mariano Rajoy to evaluate the effectiveness of all public expenditure strands.

5. Private indebtedness

Private debt reduction continues. It has already fallen 58 points from its 2010 peak to 159.9% of GDP. This has allowed credit to be reactivated, particularly for SMEs and families. However, construction and real estate service companies as well as low-income households or their unemployed members remain heavily indebted and have little capacity to cope with potential shocks, such as rate hikes.

6. Low VAT collection

In 2016, the tax burden in Spain stood at 33.3% of GDP, well below the EU average (38.9%) and the eurozone average (40.1%). Brussels complains in particular that Spain levies much less VAT than it should because it applies reduced or super-reduced rates to a large number of products. A rise in VAT on these items (in particular restaurants and hotels) would increase tax revenues by between 0.2% and 1.4% of GDP. Any negative impact on the low-income population could be offset by social assistance, according to the Commission. Environmental taxes and recurring property taxes are also below the EU average in Spain and therefore have room for improvement.

7. Educational deprivation

University students continue to face difficulties in finding suitable jobs, and both over- and under-qualification (25%) and under-qualification (17%) are widespread in Spain. Although the rate of early school leaving is decreasing, it remains among the highest in the EU (18.3%) and educational outcomes vary widely from one autonomous community to another. Brussels also criticises the use of temporary contracts to recruit teachers and sees insufficient efforts to teach students digital skills.

8. Bureaucratic obstacles to business 

The Commission complains that efforts to improve the business environment have slowed down in recent years. The Market Unity Law has not yet been fully implemented and has been affected by several rulings of the Constitutional Court. Mariano Rajoy's government has also failed to deliver on its promise to liberalise professional services. Regulatory disparities and restrictions that depend on the autonomous communities increase the burdens on companies, reduce the geographical mobility of workers and companies and prevent productivity growth. In contrast, Brussels believes that new public procurement legislation, if properly implemented, can improve the fight against corruption in Spain.

9. Lack of investment in R&D

Public and private investment in research and development in Spain remains very low. Spain spends just 1.19% of GDP on R&D, far short of the 2% target set for 2020. Small and medium-sized enterprises have a low capacity to take up innovation and benefit from digitisation, which also weighs on long-term productivity. Brussels also denounces the lack of coordination between the central government and the autonomous communities in the aid for innovation, as well as the lack of systematic evaluations of its results. Although Spain generates highly qualified researchers, their career prospects and scientific mobility are limited. [So, guess what happens]

10. The investment gap in interconnections

Bottlenecks at Spain's borders prevent closer integration into the EU gas and electricity markets and slow down trade flows in transport. In 2017, Spain's electricity interconnection level was 5.8%, a long way from the European target of 10%. Brussels also warns of the lack of investment in water supply infrastructure.


Colin Davies, Pontevedra, Spain