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Not so. Spain's gov't spending to GDP ratio developed in the same way as the Netherlands: http://imgur.com/I5AZaN9 http://imgur.com/I5AZaN9 Spain had a housi

by gizmo 11y ago

Not so. Spain's gov't spending to GDP ratio developed in the same way as the Netherlands: http://imgur.com/I5AZaN9 http://imgur.com/I5AZaN9 Spain had a housing bubble, of course. And the housing bubble was the primary cause of the crisis. But there was a bubble in the responsible northern countries too. And in the USA. So it's not the case that Spain was an outlier in terms of fiscal responsibility. Don't forget that Spain had a lower debt to GDP ratio than Germany at the start of the crisis: http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/ http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/ If Spain was irresponsible, then Germany and the Netherlands moreso. Private and commercial borrowing in Spain was a big part of the problem, but because the Eurozone has no trade barriers the government in Spain can't stop it. I'm not saying Spain isn't partially to blame for the mess, but it's not a case of fiscal irresponsibility.

adventured 11y ago
Yes, it is so. Spain's total government spending increased by 60% from 2002, to 2008. That is a fact [1]. Spain's household debt to income ratio, increased from 70% to 125% from 2000 to 2007, another fact. [2] Both are clear indications of fiscal irresponsibility. How could increasing total government spending by 60% in six years, be anything but? How could households taking on so much leverage so quickly, be anything but? You reference the Netherlands, which has the most indebted households in the Euro zone, and is in the midst of a debt disaster. That's a really bad example [3]. Their GDP hasn't increased in nearly eight years. [1] http://i.imgur.com/tSu2htA.jpg http://i.imgur.com/tSu2htA.jpg [2] http://i.imgur.com/z8VUtFs.png http://i.imgur.com/z8VUtFs.png [3] http://www.cnbc.com/id/100905782 http://www.cnbc.com/id/100905782
- gizmo 11y ago
  I don't dispute the accuracy of your numbers. Spain's household borrowing was unwise/irresponsible, no question about it. No good comes from a housing bubble like that. Of course, this housing bubble was funded by foreign banks. When people see an opportunity to live in a big house for cheap they just sign on the dotted line. That's human nature for ya. Household debt in the Netherlands also way too high, although it's unclear whether it will become a disaster in any meaningful sense. Stagnant GDP caused by austerity. No surprise there. I specifically mentioned the Netherlands because they're portrayed as a responsible country, in contrast to GIPS countries. Spain's labor costs also increased by 50% during the boom (http://i.imgur.com/pdHgmf4.png http://i.imgur.com/pdHgmf4.png), so gov't spending had to go way up just to provide the same services. Besides, spending a lot of money for a couple of years is no big deal when the country doesn't have a big national debt, and Spain didn't. Doesn't mean Spain's fiscal policy was beyond reproach, of course. Ideally speaking a government should have anti-cyclical fiscal policy. Bubbles followed by recessions happen all the time in Western Europe and the US, but the consequences are usually pretty manageable. When it comes to Spain the government was no more irresponsible, but because of the Euro they got pulled into a crushing depression. If you want to argue that every modern government is irresponsible, fine. But if you want to demonstrate that Spain was fiscally irresponsible compared to the rest of Europe or the US you're going to need better stats.

by gizmo 11y ago

adventured 11y ago

Yes, it is so. Spain's total government spending increased by 60% from 2002, to 2008. That is a fact [1]. Spain's household debt to income ratio, increased from 70% to 125% from 2000 to 2007, another fact. [2] Both are clear indications of fiscal irresponsibility. How could increasing total government spending by 60% in six years, be anything but? How could households taking on so much leverage so quickly, be anything but? You reference the Netherlands, which has the most indebted households in the Euro zone, and is in the midst of a debt disaster. That's a really bad example [3]. Their GDP hasn't increased in nearly eight years. [1] http://i.imgur.com/tSu2htA.jpg http://i.imgur.com/tSu2htA.jpg [2] http://i.imgur.com/z8VUtFs.png http://i.imgur.com/z8VUtFs.png [3] http://www.cnbc.com/id/100905782 http://www.cnbc.com/id/100905782

gizmo 11y ago
I don't dispute the accuracy of your numbers. Spain's household borrowing was unwise/irresponsible, no question about it. No good comes from a housing bubble like that. Of course, this housing bubble was funded by foreign banks. When people see an opportunity to live in a big house for cheap they just sign on the dotted line. That's human nature for ya. Household debt in the Netherlands also way too high, although it's unclear whether it will become a disaster in any meaningful sense. Stagnant GDP caused by austerity. No surprise there. I specifically mentioned the Netherlands because they're portrayed as a responsible country, in contrast to GIPS countries. Spain's labor costs also increased by 50% during the boom (http://i.imgur.com/pdHgmf4.png http://i.imgur.com/pdHgmf4.png), so gov't spending had to go way up just to provide the same services. Besides, spending a lot of money for a couple of years is no big deal when the country doesn't have a big national debt, and Spain didn't. Doesn't mean Spain's fiscal policy was beyond reproach, of course. Ideally speaking a government should have anti-cyclical fiscal policy. Bubbles followed by recessions happen all the time in Western Europe and the US, but the consequences are usually pretty manageable. When it comes to Spain the government was no more irresponsible, but because of the Euro they got pulled into a crushing depression. If you want to argue that every modern government is irresponsible, fine. But if you want to demonstrate that Spain was fiscally irresponsible compared to the rest of Europe or the US you're going to need better stats.