Friday, August 31, 2012

A Different, More Optimistic View Of Spain

Last spring my wife and I traveled to Barcelona. We had a marvelous trip,  and found the city to be extremely welcoming and culturally exciting.

The timing of our April trip was propitious.

Only two weeks before we arrived, there had been a massive protest against the government's austerity programs right outside the Barcelona stock exchange.

Walking by the exchange during our visit you could still see the marks on the walls of the exchange where protestors had thrown rocks and paint.

But still:  the restaurants were full, and the shopping areas mobbed.  For all of the troubles that the international press had reported, Barcelona seemed to us to be a vibrant and bustling place.

We had coffee with a couple who live in Barcelona.  They confirmed that while beneath the surface economic conditions were less than ideal, the actual living experience of most citizens in Barcelona was not all that bad.

The Financial Times had an interesting piece about the contrast between life in Spain and the steady stream of poor economic data emanating from official sources:

For foreign investors arriving in Madrid, signs of economic duress are not always as obvious as they might have imagined.

Bars are regularly full, traffic appears steady and, most surprisingly, the country's youth, of which more than half are not in work, appear subdued.

"People who come from abroad for the first time are often surprised," a banker who organizes meetings for overseas managers says.  "They expect there to be young people rioting on the streets." 

So we were not alone in our puzzlement.

But what about 50% Spanish unemployment rates in people aged 16 to 25 that is often reported?

Well, as the article notes, it turns out that this figure is slightly misleading.

While Spain uses the methodology employed by all EU members to calculate youth unemployment, most recently at 53.5 per cent, the percentage of young people who are unemployed, looking for work and outside education or another form of activity stands at 23 per cent - a very large, but less alarming number.

"It is a diagnostic error to take these numbers at face value," {Spanish labor expert Angels} Valls says. "Fifty per cent youth unemployment is not the same as half of all young people being out of work."

I have read elsewhere that reported Spanish unemployment rates have always been higher than most other countries.  In 2007, for example, unemployment rates never got below 15%, despite the housing-fueled boom that was going on in Spain at the time.

The reason?  Well, let's just say that many Spanish workers share the same aversion to paying taxes similar to other Southern European nations.

This is not to belittle the very real financial problems that Spain faces.  Earlier this week Catalonia - the region in Spain which includes Barcelona - officially asked the Spanish government for 5 billion euro as emergency funding.

But the contrast between the strains in the Spanish financial system and its citizens' economic reality is striking nonetheless.