9 ms·

Why Crisis in Spain This Week Became More Important Than Greece

96 points by Flemlord 14y ago

guylhem 14y ago
So what are the opportunities there? Opening shop in spain to take advantage of an educated and competitive workforce?? Or it follows the greek way avoiding it altogether???
- ekianjo 14y ago
  It depends a lot on how the local government want to address the issues of the debt. If it goes through massive tax increase, it's probably not a good time to setup a business there.
- johnnyg 14y ago
  Best opportunity is to invest in physical silver and gold, as the euro (and by extension the dollar) will not be able to hold their value as the printing presses run ever faster...
  - modeless 14y ago
    (and by extension the dollar) How does an inflating euro cause inflation in the dollar?
    - johnnyg 14y ago
      The bonds Greece/Spain/Portugal hold and are defaulting on were largely purchased by German and French banks. These banks turned around and hedged the default risk with US banks. When the defaults occur (or if...they could choose to inflate to the moon or call the default by another name), the German banks will go to their US Bank counter parties asking to be made whole en mass. US banks will be unable to cover this pay out (unless the fed steps in with truly massive amounts of capital) and have no real reason to do so... What we saw in the US housing crisis is now playing out on a scale of nations.
    - maratd 14y ago
      It doesn't. But we're doing the same thing they are ... ergo, the same thing will happen here.
  - confluence 14y ago
    Yeah, you're a fool for thinking such a thing. Seriously, all the commodities guys are. If you look at gold/silver demand guess what the major determinant is - OH YEAH - JEWELLERY! You know the stuff people buy when veblen goods are popular (i.e. a strong world economy). Your baubles are worth nothing if the 2 largest economies go down. Everyone dumped emerging markets, the euro and stocks to buy dollars and treasuries (flight to quality during high vol.). Not because anything drastically changed, but because of the beauty contest dynamic in markets. You predict what others may predict to happen in the short term and act accordingly. Go buy yourself a gun, food, and some survival training if that is your position. You can't eat gold. You can't live in silver. And you most certainly can't sell it when everything goes down. Here's a hedge fund analyst's take on it: http://www.quora.com/Why-is-the-price-of-gold-rising http://www.quora.com/Why-is-the-price-of-gold-rising. Notice the graph and its constituents. Gold/Silver guys mock us fiat currency types (i.e. everyone) when they themselves are trading the same trust based tulips as the rest of us. Everything you trade is based on trust, and trust is, and always will be, a bet on the future being better. Gold/Silver is a bet for the world getting better, not worse. You can't invest in the end of the world. You can merely prepare for it.
    - johnnyg 14y ago
      Glad there are still some counter parties left to take my trades. Enjoy your tbills! :-)
      - confluence 14y ago
        Well seeing as my tbills represent the future output of the world's largest economies, and one of the greatest consumers of veblen goods (which includes most of the demand for your commodities), you and I aren't so different. We bet the same. But you have no idea what you're doing. I merely wish to point out that you can't bet for the end of the world. You can merely prepare for it.
        toomuchtodo 14y ago
        I can short the end of the world; as long as there is enough time between when I profit and when I cash that profit out into something that will provide me with long term value (house, etc). For this argument, I define value as providing ME something, not value that can be traded.
- mipapage 14y ago
  Its still too early, IMO. Prices aren't that cheap yet and the cost of living, while cheap, hasn't plummeted. Yes, there are a lot of people out of work, but speaking with a few folks in the last 6 months they say it is still hard to fill IT jobs. Wait until (if) Spain exits, then capitalize. But remember, the work ethic here is not the same as elsewhere. And people who don't fit that mold are leaving the country. If it doesn't exit... Hard to see what will happen here.
  - tluyben2 14y ago
    That's what I see; we tried to establish a developer team in Spain and we found out that good people went to Germany and a large portion of the remainder don't actually don't want to work. We are talking university level CS people. I was amazed by this. Even when I met one who was willing to work he wanted a contract for life and part time. I know a lot of kids there who finished school, live with their parents on (some kind of; I'm not totally clear on this; I know they receive a few $100/month) benefits. I'm from the Netherlands and this concept is alien to me. None of the people from the schools I went to would consider living off benefits unless very ill or something like that; the ones who did not get a regular job opened companies. Probably it depends on the part of Spain but it was a strange experience.
    - mipapage 14y ago
      I'm Canadian and have lived here (Spain) for 10 years. I think it is partly a generational thing. If you find a mid-30's developer with kids, my experience is they will take what they can get. The trouble is, as you said, many have left (I know a few now in Germany) and others have simply created their own little space/niche of work. The younger gen seems exactly as you say: back to home, parents footing the cost (I know one guy whose parent's are paying the loan on his BMW!). At some point the pain is going to become too much and the "ni-ni"s, as they call them, are going to have to do something. Their country has already been sold, what next?
      - tluyben2 14y ago
        It might be true about the mid-30s for developers, but as anecdote: I read in a local newspaper about a small taxi company almost going bankrupt and we needed a taxi for quite a bit of a ride. So I called them, asked if they had time for a half day ride; they guy sounded happy and said they had. Then I told him where we live. No that was too far away (it isn't; it's a little more than half an hour drive from him); I told him we would pay for it. But it was a definite no; too far he wouldn't do it. I see that mentality everywhere; builders (who are all out of a job now), pool cleaners, car repair etc. If something is slightly out of the comfort zone it's usually a no. How bad does it need to become before people see it doesn't work that way (anymore; obviously before 2008, if you were lucky and not too greedy, money was rather 'free' for a lot of people; for instance the local bar owner didn't have to work at all; his bar was packed every day before 2008 so he hired people, put the profit into building; unfortunately he got out too late and there you go; hard working which he 'doesn't do'. Rather live in poverty.).
mcantelon 14y ago
>In fact in the case of France much of the local debt was inherited from the central Government, which “delegated” the debt to localities where national funds were spent, effectively reducing the national debt headline figure. French finance Minister during this process was Christine Lagarde, now head of the IMF. Interesting: a uniformly distributed, uniformly crippling debt. The public will be forced to adopt whatever the business community's EU/IMF proxies ask for in exchange for debt maintenance.
- incredimike 14y ago
  Without trying to sound like a foil-hat wearing loonie, I feel like this is the direction things will go, and the IMF (and related orgs) will welcome it.
JamisonM 14y ago
Canadian austerity in the '90s was largely a systematic shifting of financial burdens down to provinces and then many of those provinces them under-funding areas where local government would be forced to pick up the slack. I suspect the Europeans were guilty of this in many places in trying to meet the EU budget restrictions. Unlike Canada they did not get lucky, in Canada we were recovering from a recession and the real estate values that property taxes were based on were steady or rising and provided some cushion for the local governments. The EU municipalities find themselves in the opposite circumstance as the real estate markets are a disaster. They are being crushed from both sides.
fauigerzigerk 14y ago
Interestingly, the article doesn't say how much debt Catalonia has relative to its GDP (it's 17%) or its tax revenues. Without that information, we don't know anything other than the obvious, which is that a sudden quadrupling (or whatever) of interest rates is going to be a problem for any debtor. Just imagine 10-year treasuries going to 5% by the end of the year. Presenting Catalonia as some kind of an exemplary case for a larger problem may be misguided for another reason. Spanish regions are famously independent minded. Normally, no one outside Spain listens to the the Catalonian government's tactical maneuvering to extract concessions from the central government. But these days, any mention of debt in Europe causes panic attacks. The Levenshtein distance between Catalonia and California is just 4 whereas the distance from Catalonia to Greece is 9. That can't be a coincidence ;-)
- brutuscat 14y ago
  I think that the writer wanted to show how the "best" part of Spain was struggling after having done almost everything "right". I couldn't see if the writer wanted to cause panic attacks or just make us think about what is the "right" thing to do....
  - fauigerzigerk 14y ago
    The author's claim is this: Local debt is the big untold story of the Euro crisis and, if that was not apparent before, it became glaringly so when Catalonia’s President this week told the world his autonomous Catalan Government would struggle to meet its bills at the end of this month. What I take issue with is that he didn't actually fact check whether or not Catalonia is an example of a dangerously indebted region. He makes it sound as if Catalonia is on the brink of default by the end of the month, which isn't the case at all. He just takes the words of a politician at face value, apparently unaware of the internal dynamics of Spanish politics. What the Catalonian president did was to pressure the Spanish government to let the regions refinance in federal Spanish bonds because interest rates are lower than for debt issued by the regions.
omegant 14y ago
Here in Spain the biggest problem has been the three years that the real debt has been kept hidden under the carpet. The previous socialist government expected that the general recovery would help to exit the crisis and then be able to clean all the mess with out to much light from the international markets. Meanwhile they said that they were making a "social" exit of the crisis. That means increasing the spenditure, a bad idea when what you have is a mad excess of public wasting. Very little has been spent in R&D or other meaningfull spendings, just new rich projects and "me too" business plans. The problem is that nobody really knew ( maybe they didn't want to know) how big the hole really was: municipal debt (the bigest debtors to private companies in Spain, are city Halls), public banks (cajas) unrecoverable credits (huge lendigs to political friends for building proyects), crazy public spending ( huge airports,high speed railroad between small towns..). Mind you that all this has been caused by every political party, government agency, local government, private companies( mostly construction ones) and banks( friends of mine bank office directors were regularly yelled by their bosses to increase lending no mater who). Of course a gold rush of cheap credit infected the whole population. A perfect storm if ever have been one in the spanish economy. Finally this government is taking the rudder of all this madness , and making real changes relatively fast: new transparency law for public agencies(there was none, all the accounting was almost secret!), plan for paying all the municipal debt to small companies (this finally has made public all hidden cities debt, and will avoid that lots of small companies go bankrupt), new banking and financial markets law (to increase the transparency and safety levels), public spending cuts (pretty heavy ones), another law to take control of regions that are not taking measures and making the needed cuts in spending. I think that we are at the worst of it but only because all the truth (well maybe only the biggest part) is coming in to the light. I also think that we will go through this as real measures are being taken, in Greece they have the problem that there is no strong government taking this kind of measures. Also a real deflation is taking place, in salaries and prices( as we can not devaluate due to the euro), this is quite traumatic for the people as you see how bussiness are cuting your pay slowly every year. But as prices were artificially inflated due to the euro ( germany used to be expensive in the nineties, now lots of things are cheaper there!), and the competitiveness of Spain sank, we only created wealth via credit. Maybe this deflation will increase our export rate slowly. Somebody commented if it would be a good oportunity to start a bussiness or a shop here. Nothing that is related to sales is a good idea, as there is no cash around to buy anything. But it is a good time for hiring people with high qualification at a discount ( programers , biologist, architects, physicists, lawyers, ingeniers, doctors) for little more than 1000€/month, even with 1000€ you'll have peolple lining up for the Job. Also it is a good time to buy spanish companies (we have some good ones too) with big discounts due to market undervaluation and their need for money (banks are not lending AT ALL!). Edit: typos and general editing as I wrote it from the Iphone.
lifeisstillgood 14y ago
This thread is the second reason why HN still outclasses everyone else. I have just got a better perspective on the Euro crisis than all the newspapers and tv of recent weeks. I never knew the debt delegation issue had been happening. I would like to know how we can see the total level of debt for each country. If we can find a reliable source let's put it on wikipedia :-)
dimitar 14y ago
Hey, if you read what Nobel laureate Paul Krugman was writing you will have known this for at least 2 years. http://krugman.blogs.nytimes.com/2011/12/09/slow-learners/ http://krugman.blogs.nytimes.com/2011/12/09/slow-learners/ From reading his blog you'll also know that: - Spain had surpluses and was lowering public debt before the crisis - The catastrophe that austerity caused and how the idea was very bad in the first place - How the crisis was made worse by the 'euro straightjacket' (ECB tight money policy). - How the euro caused trade deficits in the southern countries that were compensated with German and French capital. The weird thing is - its not even unorthodox, unconventional economics. Its the basics that everyone studies, but no one remembers.
deleted 14y ago
[deleted]
coldarchon 14y ago
I just saw a documentary about a desalination plant which got closed due to some activists protesting that it was actually letting the salt water flow back into the ocean. I want them to go bankrupt!

96 points by Flemlord 14y ago

So what are the opportunities there? Opening shop in spain to take advantage of an educated and competitive workforce?? Or it follows the greek way avoiding it altogether???

ekianjo 14y ago
It depends a lot on how the local government want to address the issues of the debt. If it goes through massive tax increase, it's probably not a good time to setup a business there.
johnnyg 14y ago
Best opportunity is to invest in physical silver and gold, as the euro (and by extension the dollar) will not be able to hold their value as the printing presses run ever faster...
- modeless 14y ago
  (and by extension the dollar) How does an inflating euro cause inflation in the dollar?
  - johnnyg 14y ago
    The bonds Greece/Spain/Portugal hold and are defaulting on were largely purchased by German and French banks. These banks turned around and hedged the default risk with US banks. When the defaults occur (or if...they could choose to inflate to the moon or call the default by another name), the German banks will go to their US Bank counter parties asking to be made whole en mass. US banks will be unable to cover this pay out (unless the fed steps in with truly massive amounts of capital) and have no real reason to do so... What we saw in the US housing crisis is now playing out on a scale of nations.
  - maratd 14y ago
    It doesn't. But we're doing the same thing they are ... ergo, the same thing will happen here.
- confluence 14y ago
  Yeah, you're a fool for thinking such a thing. Seriously, all the commodities guys are. If you look at gold/silver demand guess what the major determinant is - OH YEAH - JEWELLERY! You know the stuff people buy when veblen goods are popular (i.e. a strong world economy). Your baubles are worth nothing if the 2 largest economies go down. Everyone dumped emerging markets, the euro and stocks to buy dollars and treasuries (flight to quality during high vol.). Not because anything drastically changed, but because of the beauty contest dynamic in markets. You predict what others may predict to happen in the short term and act accordingly. Go buy yourself a gun, food, and some survival training if that is your position. You can't eat gold. You can't live in silver. And you most certainly can't sell it when everything goes down. Here's a hedge fund analyst's take on it: http://www.quora.com/Why-is-the-price-of-gold-rising http://www.quora.com/Why-is-the-price-of-gold-rising. Notice the graph and its constituents. Gold/Silver guys mock us fiat currency types (i.e. everyone) when they themselves are trading the same trust based tulips as the rest of us. Everything you trade is based on trust, and trust is, and always will be, a bet on the future being better. Gold/Silver is a bet for the world getting better, not worse. You can't invest in the end of the world. You can merely prepare for it.
  - johnnyg 14y ago
    Glad there are still some counter parties left to take my trades. Enjoy your tbills! :-)
    - confluence 14y ago
      Well seeing as my tbills represent the future output of the world's largest economies, and one of the greatest consumers of veblen goods (which includes most of the demand for your commodities), you and I aren't so different. We bet the same. But you have no idea what you're doing. I merely wish to point out that you can't bet for the end of the world. You can merely prepare for it.
      - toomuchtodo 14y ago
        I can short the end of the world; as long as there is enough time between when I profit and when I cash that profit out into something that will provide me with long term value (house, etc). For this argument, I define value as providing ME something, not value that can be traded.
mipapage 14y ago
Its still too early, IMO. Prices aren't that cheap yet and the cost of living, while cheap, hasn't plummeted. Yes, there are a lot of people out of work, but speaking with a few folks in the last 6 months they say it is still hard to fill IT jobs. Wait until (if) Spain exits, then capitalize. But remember, the work ethic here is not the same as elsewhere. And people who don't fit that mold are leaving the country. If it doesn't exit... Hard to see what will happen here.
- tluyben2 14y ago
  That's what I see; we tried to establish a developer team in Spain and we found out that good people went to Germany and a large portion of the remainder don't actually don't want to work. We are talking university level CS people. I was amazed by this. Even when I met one who was willing to work he wanted a contract for life and part time. I know a lot of kids there who finished school, live with their parents on (some kind of; I'm not totally clear on this; I know they receive a few $100/month) benefits. I'm from the Netherlands and this concept is alien to me. None of the people from the schools I went to would consider living off benefits unless very ill or something like that; the ones who did not get a regular job opened companies. Probably it depends on the part of Spain but it was a strange experience.
  - mipapage 14y ago
    I'm Canadian and have lived here (Spain) for 10 years. I think it is partly a generational thing. If you find a mid-30's developer with kids, my experience is they will take what they can get. The trouble is, as you said, many have left (I know a few now in Germany) and others have simply created their own little space/niche of work. The younger gen seems exactly as you say: back to home, parents footing the cost (I know one guy whose parent's are paying the loan on his BMW!). At some point the pain is going to become too much and the "ni-ni"s, as they call them, are going to have to do something. Their country has already been sold, what next?
    - tluyben2 14y ago
      It might be true about the mid-30s for developers, but as anecdote: I read in a local newspaper about a small taxi company almost going bankrupt and we needed a taxi for quite a bit of a ride. So I called them, asked if they had time for a half day ride; they guy sounded happy and said they had. Then I told him where we live. No that was too far away (it isn't; it's a little more than half an hour drive from him); I told him we would pay for it. But it was a definite no; too far he wouldn't do it. I see that mentality everywhere; builders (who are all out of a job now), pool cleaners, car repair etc. If something is slightly out of the comfort zone it's usually a no. How bad does it need to become before people see it doesn't work that way (anymore; obviously before 2008, if you were lucky and not too greedy, money was rather 'free' for a lot of people; for instance the local bar owner didn't have to work at all; his bar was packed every day before 2008 so he hired people, put the profit into building; unfortunately he got out too late and there you go; hard working which he 'doesn't do'. Rather live in poverty.).

mcantelon 14y ago

>In fact in the case of France much of the local debt was inherited from the central Government, which “delegated” the debt to localities where national funds were spent, effectively reducing the national debt headline figure. French finance Minister during this process was Christine Lagarde, now head of the IMF. Interesting: a uniformly distributed, uniformly crippling debt. The public will be forced to adopt whatever the business community's EU/IMF proxies ask for in exchange for debt maintenance.

incredimike 14y ago
Without trying to sound like a foil-hat wearing loonie, I feel like this is the direction things will go, and the IMF (and related orgs) will welcome it.

JamisonM 14y ago

Canadian austerity in the '90s was largely a systematic shifting of financial burdens down to provinces and then many of those provinces them under-funding areas where local government would be forced to pick up the slack. I suspect the Europeans were guilty of this in many places in trying to meet the EU budget restrictions. Unlike Canada they did not get lucky, in Canada we were recovering from a recession and the real estate values that property taxes were based on were steady or rising and provided some cushion for the local governments. The EU municipalities find themselves in the opposite circumstance as the real estate markets are a disaster. They are being crushed from both sides.

fauigerzigerk 14y ago

Interestingly, the article doesn't say how much debt Catalonia has relative to its GDP (it's 17%) or its tax revenues. Without that information, we don't know anything other than the obvious, which is that a sudden quadrupling (or whatever) of interest rates is going to be a problem for any debtor. Just imagine 10-year treasuries going to 5% by the end of the year. Presenting Catalonia as some kind of an exemplary case for a larger problem may be misguided for another reason. Spanish regions are famously independent minded. Normally, no one outside Spain listens to the the Catalonian government's tactical maneuvering to extract concessions from the central government. But these days, any mention of debt in Europe causes panic attacks. The Levenshtein distance between Catalonia and California is just 4 whereas the distance from Catalonia to Greece is 9. That can't be a coincidence ;-)

brutuscat 14y ago
I think that the writer wanted to show how the "best" part of Spain was struggling after having done almost everything "right". I couldn't see if the writer wanted to cause panic attacks or just make us think about what is the "right" thing to do....
- fauigerzigerk 14y ago
  The author's claim is this: Local debt is the big untold story of the Euro crisis and, if that was not apparent before, it became glaringly so when Catalonia’s President this week told the world his autonomous Catalan Government would struggle to meet its bills at the end of this month. What I take issue with is that he didn't actually fact check whether or not Catalonia is an example of a dangerously indebted region. He makes it sound as if Catalonia is on the brink of default by the end of the month, which isn't the case at all. He just takes the words of a politician at face value, apparently unaware of the internal dynamics of Spanish politics. What the Catalonian president did was to pressure the Spanish government to let the regions refinance in federal Spanish bonds because interest rates are lower than for debt issued by the regions.

omegant 14y ago

Here in Spain the biggest problem has been the three years that the real debt has been kept hidden under the carpet. The previous socialist government expected that the general recovery would help to exit the crisis and then be able to clean all the mess with out to much light from the international markets. Meanwhile they said that they were making a "social" exit of the crisis. That means increasing the spenditure, a bad idea when what you have is a mad excess of public wasting. Very little has been spent in R&D or other meaningfull spendings, just new rich projects and "me too" business plans. The problem is that nobody really knew ( maybe they didn't want to know) how big the hole really was: municipal debt (the bigest debtors to private companies in Spain, are city Halls), public banks (cajas) unrecoverable credits (huge lendigs to political friends for building proyects), crazy public spending ( huge airports,high speed railroad between small towns..). Mind you that all this has been caused by every political party, government agency, local government, private companies( mostly construction ones) and banks( friends of mine bank office directors were regularly yelled by their bosses to increase lending no mater who). Of course a gold rush of cheap credit infected the whole population. A perfect storm if ever have been one in the spanish economy. Finally this government is taking the rudder of all this madness , and making real changes relatively fast: new transparency law for public agencies(there was none, all the accounting was almost secret!), plan for paying all the municipal debt to small companies (this finally has made public all hidden cities debt, and will avoid that lots of small companies go bankrupt), new banking and financial markets law (to increase the transparency and safety levels), public spending cuts (pretty heavy ones), another law to take control of regions that are not taking measures and making the needed cuts in spending. I think that we are at the worst of it but only because all the truth (well maybe only the biggest part) is coming in to the light. I also think that we will go through this as real measures are being taken, in Greece they have the problem that there is no strong government taking this kind of measures. Also a real deflation is taking place, in salaries and prices( as we can not devaluate due to the euro), this is quite traumatic for the people as you see how bussiness are cuting your pay slowly every year. But as prices were artificially inflated due to the euro ( germany used to be expensive in the nineties, now lots of things are cheaper there!), and the competitiveness of Spain sank, we only created wealth via credit. Maybe this deflation will increase our export rate slowly. Somebody commented if it would be a good oportunity to start a bussiness or a shop here. Nothing that is related to sales is a good idea, as there is no cash around to buy anything. But it is a good time for hiring people with high qualification at a discount ( programers , biologist, architects, physicists, lawyers, ingeniers, doctors) for little more than 1000€/month, even with 1000€ you'll have peolple lining up for the Job. Also it is a good time to buy spanish companies (we have some good ones too) with big discounts due to market undervaluation and their need for money (banks are not lending AT ALL!). Edit: typos and general editing as I wrote it from the Iphone.

lifeisstillgood 14y ago

This thread is the second reason why HN still outclasses everyone else. I have just got a better perspective on the Euro crisis than all the newspapers and tv of recent weeks. I never knew the debt delegation issue had been happening. I would like to know how we can see the total level of debt for each country. If we can find a reliable source let's put it on wikipedia :-)

dimitar 14y ago

Hey, if you read what Nobel laureate Paul Krugman was writing you will have known this for at least 2 years. http://krugman.blogs.nytimes.com/2011/12/09/slow-learners/ http://krugman.blogs.nytimes.com/2011/12/09/slow-learners/ From reading his blog you'll also know that: - Spain had surpluses and was lowering public debt before the crisis - The catastrophe that austerity caused and how the idea was very bad in the first place - How the crisis was made worse by the 'euro straightjacket' (ECB tight money policy). - How the euro caused trade deficits in the southern countries that were compensated with German and French capital. The weird thing is - its not even unorthodox, unconventional economics. Its the basics that everyone studies, but no one remembers.

deleted 14y ago

[deleted]

coldarchon 14y ago

I just saw a documentary about a desalination plant which got closed due to some activists protesting that it was actually letting the salt water flow back into the ocean. I want them to go bankrupt!