Monday, June 25, 2012
One step forward, two steps back
First and foremost, the actions taken by those with the ability to do so can be labelled as “baby-steps”. Labour law reform has been tepid and watered down by the fear of a monumental social backlash. Fiscal changes have moved in the wrong direction, further dampening any hope of a consumer or investment driven recovery. Moreover, the most important part of the public sector deficit equation, public spending, has only been marginally addressed.
Spain remains a decentralised, quasi federal state, bloated with 17, yes 17! local parliamentary bodies, provincial and municipal infrastructure whose purpose is frequently to serve as the source of political and petty regional disputes rather than effective governance. The mere mention of a drive towards a re-centralisation of power, on purely economic and common-sense grounds elicits such outrage that our political leaders have skirted the issue at a great cost.
Tragically, our nation seems intent on not learning from history or even from our neighbours, which to varying degrees, (no one has quite matched our unemployment rate of 24%), are enduring similar economic distress. While it is clear that nations like Germany, who, let’s not forget, was not in great shape in the early 1990’s as it absorbed the cost of re-unification; have kept real labour costs down over the last 20 years, and focused their efforts on productivity as the basis for competitive advantage, we on the other hand have experienced major wage inflation and a little in the way of productivity gains.
Add to this an unskilled workforce, a bloated and often duplicated bureaucracy, together with a private sector economy starved of technological innovation and you have a considerable mess in your hands.
Unless our political leaders are willing to put aside ideological constraints and adopt a more pragmatic approach, it will be a long time before I or, more importantly, other much larger potential investors place Spain on their sights.