A yellow card to Angela Merkel

I do not agree with mediterranean economies screaming for continuous credit injection by ECB as the magic solution to cope with their well deserved chaotic balances .

However it is evident that some of those economies are getting the wrong perception of your messages

Where you say that what Mr.Rajoy is doing is welcome because it is aiming at the right target , you could instead complete your diagnosis of our economy and give a whole proposal of things to do .

Anybody with enough knowledge of economy will realise that the main problems of our economy are :

-The misuse of soft credit facilities during the last ten years , as the respective governments used those facilities to promote a fictious growth of our GDP based exclusively in the speculation on housing , instead of using it to promote a change of our archaic saturated model by incentivating the replacement of the old industrial structure by new companies and ventures able to produce goods and services with higher technological structure and higher added value of their outputs .

-The insufficient investment of spanish companies relying too much in low skilled labour force readily available at very low salaries , makes the spanish companies too sensitive to labour force costs in times of crisis . Spanish companies are in other words set up for times of euphoria with strong demand and fast growing inflation with a very high need for low salary force , big amounts of raw material , outsourced components and energy consumption .

The above in the present crisis caused by the full dramatic collapse of the balance between offer and demand , has resulted in one of the biggest corporate and family debt with very high percentage of payment failures .

The estate which is also designed for an era of senseless euphoria with central and regional administration spending as godfathers to gain general influence and electors favor , has specially contributed to the general chaotic situation of the country’s economy .

On such conditions your applause of our labor reform without further comments , is really an exercise of political and economical immaturity .

Without entering any sort of evaluation of the labor reform blindly endorsed by you , it is clear that any type of reform non accompanied by a change of the economical model , will only cause a further increase of unemployment and the subsequent further deterioration of the purchase power of the already low miserable standards of the spanish middle class .

It is time to recall that the spanish economic model demands a high level of consumption amounting to 75 % of the GDP ( PIB ) .

With such a low purchase power standards a level of consumption to reasonably match the spanish GDP structure , can only be accomplished by an extraordinary level of credit and this , specially under the current situation of private and corporate debt , is simply impossible .

So with all this the so called expenses cut and tax moves , have to be specially careful to concentrate primarily in non productive areas and only then in areas related to basic aspects of the economy .

By now Mrs Merkel you should have enough material to understand that your coffe mate style cheers of what our government has carried out in their limited capacity , is not precisely what a real good economist would have chosen as the ideal pack of actions .

It is sad to see that poor political options elected by the little informed citizens of our society are not exclusive of the southern economies .

Your karma Mrs Merkel is that spaniards with all their defects are not that stupid to exit the eurozone and your also speculative banks and which is more sad your citizens , will be paying for banks and irresponsable politicians deeds more than they should , because you have been too superficial and slow in your action .

Brahmason

Brahmason@gmail.com

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Published in: on julio 23, 2012 at 10:39 am  Comments (12)  

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