The heavily indebted Spanish economy is in almost as bad shape as that of Greece. But the Spanish economy accounts for 12% of European Union gross domestic product, 4 times the size of the Greek economy. Some say this makes it too big to fail. Undoubtedly its failure could mean the death of the EU and the single European currency, sparking an every-country-for-itself financial free-for-all that no one could predict the outcome of.
Needless to say European and World leaders are keen to stop this happening. This led to them — including a personal intervention from Barack Obama — putting pressure on Spain’s minority left wing Prime Minister, Jose Luis RodrÃguez Zapatero, to enact a strict regime of austerity in order to bring down the budget deficit and the country’s debt to put the world and its markets at ease.
In this respect Zapatero has stepped up to the plate; by announcing cut-backs including cutting civil-sector wages by 5% and freezing civil-sector pensions next year. However, the consensus of opinion is that the cut-backs he has proposed will cut spending and therefore cut borrowing, but they will not do anything to bring down the budget deficit.
As Brits involved in the overseas property industry, we want to look at how the cut-backs could affect the Spanish property and how it could affect the lives of British expats living in Spain.
Well, we have all heard about the thousands of Britons involved in the property industry that have sold up and shipped out or just shipped out to come back home after their jobs, businesses and/or livelihoods were crippled by the financial meltdown. What you don’t hear as much about are the thousands that are fighting to hold on, who all care a great deal about the Spanish economy and particularly that its return to strong growth can be expeditious.
In the BBC’s coverage of the Spanish austerity measures, British expat David Sidley commented:
“I have lived in Tenerife for eight years now and have never seen it so bad.
“Where I work is just barely staying afloat, but every day it gets worse.
“I work in the construction industry – I run a machinery hire company. We used get 30 or more clients a day. Now, if we are lucky, we get three a week.”
It is a difficult balance to find; cutting spending and increasing growth. According to other comments on the BBC Spain’s biggest problem is corruption in politics, the consensus being that it could save the country billions were it stamped out.
Zapatero is a left-wing politician, which always drives him towards liberal policies, and those with in-depth knowledge of his governance believe it will take more pressure from Brussels and even America to make sure Zapatero stays on the austerity track. It is possible that they will first need to cut borrowing and increase the confidence of lenders before they can start concentrating more on increasing growth. So it could be a long-wait for those expats waiting for growth to return.
Photo credits: reservasdecoches via flickr