CNBC: - ... a healthy export sector that has increased
market share throughout the recession; of these exports,
steel and chemicals make up for 26 percent of the total,
followed by capital goods (20 percent) and automobiles (17
percent); food products, Spain's traditional source of
foreign exchange, are now only 16 percent of the total.
2. Improved competitiveness in the labor markets - something
that France for example is struggling with.
CNBC: - While public servants have had pay cuts of
between 10 and 25 percent, cuts of 20 to 40 percent are not
uncommon in the private sector. In short, Spain has regained
competitiveness and is in a position to benefit from growth
in her trading partners.
This second item is particularly interesting given Spain's
large temp workforce which provides an additional level of
flexibility (
see
discussion).
The one area the article didn't discuss in sufficient detail
is Spain's banking system other than to say that the
restructuring is nearly complete.
CNBC: - The restructuring of the banking system is
nearly completed (partly at the cost of a higher public
deficit), and de-leveraging of the banking sector is slowly
proceeding (from 19 in 2007 to 16.7 in 2011)
Technically Spain has made the right moves toward
stabilizing the banking system. More importantly the ECB has
been instrumental in bringing some degree of confidence and
stemming depositor flight out of the country. But the
Spanish banking system, especially among domestically
focused institutions, still has a long way to go before it
becomes fully functional. In particular analysts feel that
the housing correction in Spain has not run its full course,
which means that property loan portfolios have a long tail
of failures. Clearly Ireland's situation was different, but
the comparison below leaves investors asking questions.
|
Housing price indices for Spain
and Ireland (source: CS) |
We are certainly going to see economic improvements in Spain in
the next couple of years, but the full blown recovery may be
some time away.
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