Results for “Spain” 377 found
Should I keep an eye on Spain? (from my email)
Keep an eye on Spain. What is happening politically is very serious and the tension is increasing.
Fernando Savater: Spain is formally a democracy, sure, but it is ceasing at a forced march from being a rule of law state.
https://theobjective.com/elsubjetivo/opinion/2023-11-05/resignados-sumisos-luchar-sanchez/
Felix de Azúa: The reactionary left will face the coup right with a predictable result: economic ruin and institutional chaos.
https://theobjective.com/elsubjetivo/opinion/2023-11-11/irse-preparando-sanchez/
…Felipe González is very worried, as well.
That is all from Mario Abbagliati.
Islam and human capital in historical Spain
We use a unique dataset on Muslim domination between 711-1492 and literacy in 1860 for about 7500 municipalities to study the long-run impact of Islam on human-capital in historical Spain. Reduced-form estimates show a large and robust negative relationship between length of Muslim rule and literacy. We argue that, contrary to local arrangements set up by Christians, Islamic institutions discouraged the rise of the merchant class, blocking local forms of self-government and thereby persistently hindering demand for education. Indeed, results show that a longer Muslim domination in Spain is negatively related to the share of merchants, whereas neither later episodes of trade nor differences in jurisdictions and different stages of the Reconquista affect our main results. Consistent with our interpretation, panel estimates show that cities under Muslim rule missed-out on the critical juncture to establish self-government institutions.
That is from a new paper by Francesco Cinnirella, Alieza Naghavi, and Giovanni Prarolo, via a loyal MR reader.
Spain’s second wave of Covid-19
Did this happen? Were Spain’s hardest hit provinces in the spring spared in the second wave?
To get a quick sense of the answers to those questions I plotted the cumulative number of cases per 100,000 population in the Spanish provinces since June 15 against the proportion of the population in the provinces that tested positive for antibodies after the first wave. If herd immunity were playing a large role in suppressing cases in the second wave, we would expect to see a negative relationship between provinces with high levels of antibodies in the population at the end of May and total case counts since that time…
Instead of a negative correlation, there is a positive, although weak, correlation between having higher prevalence of antibodies in the population and having a higher case rate in the second wave.
…Take Madrid for example, if roughly 13% of the population had antibodies after the first wave, at least one of the low-HIT models estimates the Rₑ would be approximately 60% lower than than the unmitigated reproductive rate (R₀). If population immunity were reducing transmission in the Madrid area by 60% below unmitigated levels, it seems unlikely Madrid would again have one of the highest rates of infection in the second wave [yet it does].
…Ultimately, the strongest conclusion that can be drawn from this look at infection rates is that there is not clear evidence herd immunity is playing a significant role, yet.
Also take a look at a deeper dive looking for herd immunity in Sweden (spoiler alert: no signs of it yet).
It is fine to call this inconclusive, but still the pattern predicted by standard herd immunity claims is not yet showing up. Here is the whole piece from Kbenes, very useful.
And elsewhere, this was not supposed to happen, as New York Orthodox Jews also have been cited as a “herd immunity” community:
Officials this week released statistics showing that the positivity rate in some Orthodox Jewish neighborhoods [in NYC] had grown to anywhere from 3 percent to 6 percent, significantly more than the city’s overall rate of between 1 percent and 2 percent. Officials are especially worried about the positivity rates in the Brooklyn neighborhoods of Borough Park, Midwood and Gravesend, which they have referred to as the “Ocean Parkway Cluster.”
Here is that full story (NYT).
Bryan Caplan on Spain
He spent a bunch of weeks there, there are many good observations, here is one of them:
17. Big question: Why is Spain so much richer now than almost any country in Spanish America? Before you answer with great confidence, ponder this: According to Angus Maddison’s data on per-capita GDP in 1950, Spain was poorer than Argentina, Chile, Mexico, Peru, Uruguay, and Venezuela, and roughly equal to Colombia, Bolivia, Costa Rica, Cuba, Ecuador, Guatemala, and Panama. This is 11 years after the end of the Spanish Civil War, and Spain of course stayed out of World War II.
And this:
The worst grocery store I saw in Spain offered higher quality, more variety, and lower prices than the best grocery store I saw in Denmark, Sweden, or Norway.
Do read the whole thing.
Spain Debates Whether Left Hand or Right Hand Should Pay Tax
Spain is currently embroiled in tremendous debate over who should pay the AJD tax, a tax on the creation of a mortgage. Should the buyers (consumers) or the sellers of the mortgage (the banks) pay the tax? The Supreme Court, the President, and the legislature have all stepped in.
At the beginning of this year, the civil division of Supreme Court clearly ruled that the tax on mortgages should be paid by consumers and not banks. However, on the 18th of October the Contentious-Administrative division pronounced the other way, that banks should pay. So two divisions of different jurisdictions of the Supreme Court (civil and administrative) have issued conflicting sentences producing a legal mess…
that was the situation as of October 24. But then on Tuesday:
The Spanish Supreme Court has done a U-turn again: it is the clients who must pay for a controversial mortgage tax, and not the banks
…The decision was reached on Tuesday evening in the Administrative Division of the Supreme Court after two days of intense debate, and with just two votes of difference: 15 justices were in favor of making the client pay the levy, and 13 voted to confirm a groundbreaking decision reached by this same court in mid-October that it should be the banks who pick up the tab.
Leaders are up in arms and street protests are threatened:
Leaders of the anti-austerity Podemos party have already announced protests over a decision that “calls into question” the court’s independence and undermines democracy, in the words of party leader Pablo Iglesias. …Alberto Garzón, head of the United Left coalition, went even further: “Private banks are thieves, they are the main enemy of democracy and they are responsible for gutting our economies. A majority of the Supreme Court sides with them, ratifying that justice has a price and that the system is rotten and spent,” he tweeted.
Under pressure, the socialist Prime Minister announced “a Royal Decree would be approved ‘so that Spaniards will never pay this tax again’,” and the Prime Minister pledged that the new law would be in place by Friday!
What’s amazing is that the Spanish uproar is over a decision that Econ 101 says does not make a whit’s worth of difference to anything of importance. Whether the buyers send the check to the government or the sellers does not change the true incidence of the tax. As Tyler and I say in Modern Principles, “Who pays the tax does not depend on the laws of Congress but on the laws of supply and demand.” The tax simply drives a wedge between what the buyers pay and what the seller receives. Since sellers typically post prices, when the sellers must send the check the posted price will include the tax but the price the sellers receive will be the posted price minus the tax. If buyers must send the check to the government the posted price will not include the tax but the buyers will have to pay the posted price plus the tax. Either way, the seller, buyer, and government all end up net the same amount. It’s little different than debating whether the right or left hand must pay the tax. See Tyler in the video below for the diagram and further details.
Thus, the whole Spanish imbroglio has been caused by a failure to understand Econ 101.
Addendum: Bank shares fluctuated as the tax jumped back and forth which might suggest non-neutrality but that is because an earlier proposal would have had the banks pay consumers “back” for taxes the consumers paid years ago. A retroactive tax would indeed be bad for banks because while the tax would be retroactive the price would not. Going forward, however, the price adjusts with the placement of the tax so there is little beyond convenience and transaction cost to prefer one system to the other. In fact, once it was established that the tax would not be retroactive, bank share prices recovered.
Hat tip: Mauricio Drelichman.
Spain Italy fact of the day
Spaniards have became richer than Italians — a heartening indication of Spain’s economic revival but a worrying sign for Italy, the eurozone’s third-largest economy, which is stuck in political gridlock. Spain’s per capita gross domestic product exceeded that of Italy in 2017, according to IMF data published this week that compare countries on a so-called “purchasing power parity” basis. The IMF also forecast that Spain would become 7 per cent richer than Italy over the next five years. A decade ago Italy was 10 per cent richer on the same basis.
That is from Valentina Romei from the FT.
Spain was a weak state, and that still matters
Robin Grier (with Jerry F. Hough) puts it thus:
The great weakness of the Spanish government was not its bureaucratic nature, but its inability to build an effective bureaucracy until the 1700s. Without an effective bureaucracy, Spain was doomed to a personalistic policy process in which options and tradeoffs often were not properly weighed. Rulers could not trust the market because they were incapable of taxing decentralized economic activity.
One example of the lack of bureaucratic capability during the 1500s and 1600s is found in the example of Philip’s attempt to conquer England with the Spanish Armada. Until the 1580s Philip’s “defense department” had only one secretary assisted by a handful of clerks, none with military experience.
As he prepared to launch the Spanish Armada to try to conquer England, he doubled the number of responsible defense officials to two – one for the army and one for navy!
The ships were largely rented from Genoa. Although many of them were sunk in the failed attack, Philip did not try to build a merchant fleet of his own to match Elizabeth’s rapid expansion of her armed merchant fleet at the same time.
That is from her new and excellent The Long Process of Development: Building Markets and States in Pre-industrial England, Spain and their Colonies, recommended. This is essential reading for the history of colonial Mexico in particular.
Spain fact of the day
According to the Spanish National Statistics Institute, population last year fell for the first time since the 1940s, declining 206,000 to 47.1 million. The number was entirely accounted for by a fall in the number of registered foreign residents. It is a turnaround from the situation in the first decade of the century when an almost forgotten housing boom caused the immigrant population in Spain to rise fivefold to 5.7 million from 924,000. The numbers also suggest that Spaniards are starting to head out of the country to look for work, a trend that seems destined to intensify over the medium term.
Spain fact of the day
Now, if we look back over Spain’s “good” economic years, it is clear that even though growth between 1999 and 2006 was normally in the 3% to 4% range, most of this growth came from population increase, which was extraordinarily rapid, while productivity growth was miniscule, and even in the best of cases less than 1%.
And yet now the Spanish population is shrinking because of emigration:
In fact the negative movement in Spain’s population is accelerating and no one really knows how far this acceleration will go, or how long it will continue. What we do know is that the likelihood of Spain’s unemployment rate falling below 20% by 2020 is small (it is currently over 26%), and with such high unemployment the pressure to move will continue to be strong.
Of course protecting older workers at the expense of the young only makes this problem worse, since the young are more likely to leave.
That is all from Edward Hugh.
Spain estimate of the day
Yiagos Alexopoulos at Credit Suisse estimates that Spanish capital outflows are currently running at an annualised rate of 50 per cent of GDP.
Here is more, including a scary picture.
Pictures of Spain
Grandiose projects across Spain now sit empty and dying. The New York Times focuses in on Ciudad de la Luz, a mega-movie studio built far from cultural centers that is now foundering.
Ciudad de la Luz has become a prominent example of Valencia’s frenzy of modern-day pyramid building, which left a legacy of $25.5 billion in regional debt and bankrupt infrastructure projects as well as the backlash now building against it.
Valencia’s other investments included a harbor for superyachts, an opera house styled like the one in Sydney, Australia, a futuristic science museum, the biggest aquarium in Europe and a sail-shaped bridge, not to mention an airport that never had a single arrival or departure. It also attracted extravagant events like the America’s Cup and Formula One racing.
The Daily Mail takes a look at Spain’s “ghost airport,” a billion Euro project that was meant to serve 5 million passengers a year and is now closed after just three years in operation.
The Socialist regional government spent millions propping up the venue, promoting the project with advertising campaigns and approving a €140 million guarantee to keep it afloat.
But, last October, it saw its final commercial flight, by Vueling. The airport remained open for another six months, the staff still being paid to deal with a handful of private arrivals.
It finally closed in April, but even though it is now closed to air traffic, maintenance tasks still have to be carried out.
The 4,000 metre runway has to be continually painted with yellow crosses, so pilots flying over the airport will know they cannot land there.
Private money appears to have also taken a bath on many of these projects although it’s always difficult to say after government guarantees and kickbacks. The Times quotes one tourist on the meaning:
“I understand now why there’s a financial crisis in Europe,” said Bryce Matuschka of New Zealand. “The bridge is a real work of art, and the aquarium is great, but for some of these buildings you just have to ask, What was all that money spent for?”
I don’t think that’s quite right. My view is that rather than causing a crisis, bad investments are mostly masked by a boom and revealed by a crisis. Still, “infrastructure spending” doesn’t always create jobs; sometimes it’s better to stick with slow rail and sewers.
Is Spain finally going to be for rent?
Now, the Popular Party (PP) government of Prime Minister Mariano Rajoy is planning to bring more flexibility to the rental market with a set of measures that make it easier for landlords to get their properties back and for tenants to terminate their lease.
For instance, once the reforms are enacted, owners may demand that a tenant leave the property at any time regardless of the duration of the lease, while tenants will be able to walk out with just one month’s notice. Until now, contracts were for five years by default, and a further three if neither party said anything to the contrary. The executive wants to bring these periods down to three years and one year, respectively.
Here is more, mostly covering the reasons why Spain has overinvested in home ownership.
Quick Spain thoughts
Is there actually any news in the “deal”, summarized here? It’s long been known that Spain would end up getting a chunk of ESM and/or ESFS (indeed they had a quota of 93 billion euros and this is barely more at 100 billion euros), and now they have, although the details still are not announced. And Spain already had been given an extension on their austerity target, so not attaching “austerity conditionality” to this deal isn’t quite news either. Their obligations are already “floating” in this regard, because even the previous target could not be met.
Did I mention there were already a trillion euros lent from the ECB since December (not all to Spain)?
Is the deal in some way a new signal? I would think the new signal is that if you play a bit tough with the Germans you get a more relaxed deal, at least nominally in a way that you can take to your citizens. Maybe you think the more relaxed deal is a better outcome, but in the longer run does this keep the Germans on board? Does it keep Ireland on board? Do Greece and Portugal now wish to renegotiate? One hundred billion euros is unlikely to be enough, so what precedent is created when Spain negotiates for the next round?
Doesn’t this all mean that Netherlands, Finland, and Slovakia are getting somewhat rolled? They feel less responsible for the rest of the eurozone than Germany does.
How senior will the debt be from this new package? That seems like the key question to me. Very senior debt will kill the Spanish bond yields, but very junior debt will make this pure aid. How many eurozone countries are up for supporting pure aid on this scale?
Spain fact of the day
Data published by Spain’s central bank showed €97bn had been pulled out in the first quarter – around a 10th of the country’s GDP – as concerns mounted over Madrid’s ability to contain its twin economic and financial crises, which have forced government borrowing costs to euro-era highs.
Here is more. Overall I am finding economic conditions here — most of all in the cyclical, macroeconomic sense — to be much worse than in Italy. There is also this:
“My concern is that we haven’t yet seen the most recent numbers, which could be far worse,” said Raj Badiani, an economist at IHS Global Insight. “We are seeing a perfect storm.”
What views can you hold about Spain?
Choose A or B:
A: Spain is in a recession, which will end. For instance, this story reports: “The OECD on Tuesday predicted more pain for Spain over the next two years when the economy will remain mired in recession with a quarter of the population out of work.”
B: Spain is in a self-cannibalizing downward spiral, as Greece was and is. It will not end until there is, at the bottom, an absolute and total crash.
I choose B, noting that I wrote most of this post a few days ago and already A does not appear to be a serious answer. You add up the required deleveraging, the provincial debts, the shaky state of the banks, the shaky accounting at the banks, the productivity problems, the European-wide political uncertainty, self-defeating fiscal adjustments, the broken real estate lending technology, once-again spiraling yields, broader deflationary pressures, unsatisfactory ngdp performance, the drying up of credit for small and mid-size businesses, disappearance of quality collateral, and the de-europeanisation of the capital markets, and you have B. Oops, I forget to mention the massive proliferation of have-to-pay-them-back-first governmental senior debt claims; why wait in that line?
The fact that you are not used to seeing the credit institutions of an advanced economy unravel before your eyes — “going entropic” — should not blind you to this reality. Nothing new bad has to happen for Spain simply to go “pop,” rather the ticking of the clock will suffice.
Note that a sufficiently large bailout plan, starting with debt forgiveness and reflation, could convert B to A, but right now we are in B.
If you chose A, you think life will be (relatively) easy. I have spoken with numerous intelligent Europeans who believe in A, but because — in my view — they cannot grasp the terribleness of the alternatives, or the magnitude of the error of their previous attachment to the euro, not because they have strong macroeconomic arguments for pending recovery and capital market survival.
If you chose B, there are three more options:
B1: It is a political economy problem. If the Spanish could simply institute the right policies, whatever that might mean, they could convert the destructive spiral into a mere recession.
B2: It is fundamentally a problem of aggregate demand and credit contraction. Without a European-level major bailout and stimulus, Spain will go splat. Yet sufficient stimulus could bring Spain back to its PPF frontier relatively easily.
B3: There is a major problem of aggregate demand and credit contraction, and a political economy problem, and this is paired with multiple equilibria. Investors are judging whether Spain is still a major European economic force, as they had thought for a while, but perhaps had not thought back in 1963. The equilibrium which obtains will depend upon the Spanish response to the crisis, but the best bet is to expect Spain to revert to something, in economic terms, resembling 1999 + Facebook. The institutional quality and level of trust in Spain will receive a semi-permanent downgrade, most of all in the eyes of Spaniards, and it will look very much like an output gap but will not be remediable through traditional macro remedies.
The real euro pessimists are the multiple equilibria people.
Germany and Austria also have multiple equilibria, but those equilibria are not so far apart. For Greece the multiple equilibria are extreme — “Balkans nation,” or “European nation”? Or should I say were extreme?; probably we are down to one of those options at this point.
For Spain, if a truly major bailout does not arrive, the roller coaster ride down will be extreme and terrifying. But still, we must put this in perspective. I was in Spain in 1999 and it was very nice, the large fiction sections of the bookstores most of all, the Basque restaurants too.
I am arriving in Madrid as you read this, perhaps I will have more to say.