This just in – economists have finally noticed that Spain is not Italy or Greece.
For the record, of course it isn’t. I have noted that here numerous times.
Most importantly, Spain does not have a problem with government debt, which could be plausibly said about both Italy and Greece. May I remind you about this New York Times article about debt levels in Europe? Note how low Spain’s is. Note particularly how its public debt-to-GDP ratio is lower than in Germany. And France. And Britain. (And the United States. Though this particular graphic doesn’t show it, it is also less than in Canada.) http://www.nytimes.com/imagepages/2011/10/22/opinion/20111023_DATAPOINTS.html?ref=sunday-review
Think the numbers might have changed between when the Times ran this article and now? Wikipedia has the most recent numbers. Spain remains well under all of those countries in public debt-to-GDP ratio. http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
Spain is a financial basket case for reasons that have – please say it with me, folks – NOTHING to do with public debt. There is a lot of debt in Spain, to be sure, it’s just not the public kind. Governments in Spain have been decent enough money managers. Businesses in Spain, on the contrary, have taken some pretty extreme risks. You can see the breakdown at this website.
The astute will notice that Japan tops the “total-debt-to-GDP” chart presented by that last link, and yet no one has wringing their hands about how Japan’s failing economy will ruin us all (even though most of Japan’s debt is public debt, unlike Spain). True enough, Japan is also not Italy or Greece. The main mitigating thing here is that Japan’s total debt liabilities are balanced out somewhat by its debt assets – Japan owns a large chunk of other countries’ debts. So we need to see what a list that takes that kind of thing into account looks like. The statistic that measures this is called the Net International Investment Position, and Wikipedia has the numbers for that, too.http://en.wikipedia.org/wiki/List_of_countries_by_net_debt#List_of_countries_by_net_international_investment_position
On this list we can see a bit more why people think Spain is a problem even though its government debts are tiny compared to other large industrial countries these days. Indeed, the miscreants we’re supposed to expect to find are there at the bottom of this list…Greece, Spain, Ireland, Portugal. Oh, but there’s New Zealand. And Australia. And Poland. Interestingly, international creditors are not circling the wagons for any of them yet. And Italy’s not looking so bad on this list, either.
Spain is not Italy, and it is not Greece. Reasoning by analogy is problematic even with the most parallel of cases, but it’s especially problematic here when the stories are radically different from country to country. Certainly, blaming sovereign or public debt alone for the problems European countries are experiencing is unreasonable, most evidently in Spain, which has had pretty fiscally responsible governments. In Spain, the problem with debt has largely been the private sector’s rather than the public sector’s.
So, let us no return to the fact that the Winnipeg Free Press has suddenly deigned to notice that Spain is not Italy or Greece, when it manifestly has not been all of this time. Why is this being noticed _now_?
I’m sure people will say I’m too cynical for assuming the difference seems to be that Spain elected a conservative government, so now conservative talking heads want to portray Spain as taking constructive steps rather than being dangerously profligate. I’m sure people will say I’m too cynical, furthermore, for assuming that this might be an especially important meme for conservatives to get out there in the week just before the Greeks return to the polls, possibly to reject the austerity coalition there outright this time around.
Nonetheless, I think that’s the interpretation that fits the facts best. The reason economists are now saying “give Spain a chance” is because its government is appropriately submissive to the austerity agenda, not because any of Spain’s numbers have changed. The reason economists are not saying “give Greece a chance” is because the Greeks are evidently trying to take a different road than Spain is taking.
Anyway, you now have the relevant numbers. Judge for yourselves.