Political risk in Europe was largely ignored in international markets because of the mirage of the so-called “Macron effect”. The ECB’s massive quantitative easing program and a perception that everything was different this time in Europe added to the illusion of growth and stability. Continue reading After Italy… Spain Risk Soars→
In the early 2000s the Spanish economy was also booming, but it was on the back of debt-fuelled domestic demand, an overheated and uncompetitive construction sector and a severe housing bubble. The trade deficit reached more than €100bn. Now exports make up a third of national output, compared to a quarter before the crisis, and there was a €22bn current account surplus in 2017. The domestic construction sector has shrunk rapidly, replaced by manufacturing and other high-skilled industries. “The Spanish economy is seeing robust growth, but also more resilient growth,” says Daniel Lacalle, chief economist at fund manager Tressis. Moody’s, on issuing their ratings upgrade last month, said: “It has become increasingly clear that structural changes in the economy have changed the growth model to one that is broader-based and more sustainable than in past recoveries.”
Spain has been an example of how to recover from the crisis and it cannot be an example of how to fall into recession.
See my comments at the European Parliament in this video.
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