the euro zone

Doom and gloom

In the second quarter of this year, Spain's GDP expanded by 0.5% rather than the 0.6% predicted by the Spanish government. Does that depress you? Is your life going to be affected, in any meaningful way, by the fact that the country's economy failed to meet that forecast by 0.1%? Exactly. Curious to see, then, that the Q2 statistics have been described by an international newswire as "adding another layer of gloom to an increasingly fragile situation in the euro region". The same article also cited a Spanish infrastructure group as reporting a tiny drop in its domestic sales, in part because of the "uncertain political environment".

There's lots to unpack here, such as the idea that the miniscule slowdown might be a cause for doom and gloom, which obviously it's not (unless, perhaps, you're an academic economist obsessed with Spain's economic plight). In fact, the rate of Spain's GDP expansion has consistently beaten the eurozone average over the last five years, posting numbers that make countries such as France and Germany look sluggish.

There are still many problems dogging the Spanish economy - unemployment and debt levels chief among them - but its overall performance since 2014 has been remarkable, a fact which isn't changed in the slightest by the Q2 statistics (the eurozone as a whole expanded by about 0.2% during the same period). Rather than adding "another layer of gloom" (to what, exactly?), the fact that Spain's GDP growth failed to meet its goal between April and July illustrates the esoteric aspect of macroeconomics, and how easily they can be used to bolster opposing narratives.

Secondly, I'm always amazed when "experts" or research papers speak of "political uncertainty" in Spain as if it's anything new, as if it's something that's suddenly making people or companies stop and think. There's been no real political certainty in Spain since the general election of December 2015, which exploded the forty-year duopoly of the Conservative People's Party and the Socialists. There's been even less political certainty since October 2017, when Catalonia's regional government held an illegal independence referendum, prompting a furious backlash from Madrid.

Ever since the historic vote of 2015 - which launched Ciudadanos and leftist Podemos onto the national scene, much to the annoyance of the older parties - coalitions and deadlock have characterised Spanish politics, yet the country's GDP hasn't flinched. During 2016, when Spain lacked a functioning government for ten months, its economy expanded by 3.3%, compared to France's 1.2% and Germany and the UK's 1.9%.

Again, those facts could be used to various ends: to argue for the small state, for example, or for the economic irrelevance of the squabbling and posturing that so many politicians prioritise over policy formation. That they do so certainly provides reason to be gloomy.