Is Spain now cooking its books? | Hacker News Reader

Is Spain now cooking its books?

ftalphaville.ft.com

45 pointscwan30 comments

I'm spaniard. Spain has been cooking its books for a long time. Brussels knew it, like they knew about Greece doing the same thing(their economic pros are not stupid) but they short term benefited from that.

The "Spanish miracle"(like Ireland) was created when billions of euros mainly from German and French savers came to Spain as loans. That made money to flow and prices to go up, anyone could buy a 60.000eur house(with a loan with 0%down) and sell it three months later as 90.000eur. That is 30.000eur of profit putting 0%, way more than working. Real state agencies grew like mushrooms after the rainfall.

I had friends that bought one house and later two with the profit they made with the first one!! thinking "prices are never going to go down, they had never been down, we are going to be rich".

That was good for sellers, good for politicians(they get taxes money proportional to the assets price), good for the banks that lended(they got paid), good to the construction workers and companies, good for the gov(less unemployment), so they tried to keep it. They all wanted to believe it was sustainable. It was not. Houses grew +400% but salaries only 17%.

Now our prime minister, Zapatero, thinks "confidence" is the most important thing for the economy to grow. He doesn't care about lying at all, he thinks he could fool all the people, all the time. Time will tell.

Are housing prices still inflated? Also, are people able to renegotiate their mortgages?

The US also had a major housing bubble. I am interested in how Spain is handling it.

Quite inflated still, it'll be a long time until they go down or a longer time until wages catch up (in the opinion of some, me included).

The problem here is that you cannot return the house to the bank and be debt free. If you give your house back to them they sell it, and whatever is not covered by the sale you still owe to the bank.

And if you still owe 200K€ to the bank but your house valuation has gone under that you have a hard time, because you have to put up with the extra value with some other possessions you have.

So it's not very pretty.

How does bankruptcy work in Spain? Does such a thing exist?

It looks like the original blog posting has been changed. The tldr summary:

An anonymous blogger is claiming that Spain's GDP for 2008 and 2009 actually declined 17.3% in the most favorable scenario versus the reported data of 3.1%.

Actual report from anonymous blogger:

http://www.zerohedge.com/sites/default/files/Spanish_GDP_rep...

Commentary from zerohedge:

http://www.zerohedge.com/article/anonymous-blogger-speculate...

I have not understood most of it (economics is not my strength and I've got a cold or a flu that gives me a headache) so I'll have to ask.

Could the divergence (or some of it) be explained by the off the books economy that is quite strong here in Spain?

There's plenty of stories of people being "unemployed" but having a job, and employed people with other ways to increase their capital (off-the-books renting, hidden side-jobs, non-declared extra hours,...).

Thanks.

The off-the-books economy of Spain, Italy and Greece is amazingly large in both the private and goverment sectors. Your really have to live there to appreciate its size.

And Ireland, and Portugal... Spot the pattern?

What's the pattern?

Yeah, what's the pattern? Never heard that Ireland had a large grey economy, yet it seems to me to be the most troubled of the bunch.

Not so much in Dublin perhaps, but rural Ireland is all about favours and bartering, it's not even really a "black market" since cash isn't the currency.

I dunno, it's cool, it makes it feel much more like a connected community, but you can't trade mackerel for fenceposts (this is a real deal in which I was involved) in the global economy without going via actual cash...

From what I've read about Greece, Ireland's problems are completely different. Nothing to do with a black market, more to do with an incompetent government that let property prices get out of control.

PIIGS - the countries whose economies boomed and now are crashing so hard they're threatening to bring down the EU.

As a Portuguese citizen I consider that acronym as offensive. http://en.wikipedia.org/wiki/PIGS_(economics)#Controversy

I think that we all agree that generalizations are the sign of narrow-minded individuals...

No offense intended - I'm an American citizen so I don't have tons of room to talk!

PIGS is an acronym - it just makes it easy to remember. That's the only reason I can name all 5 countries. No one things that citizens of those 5 countries are swine, just like they don't think that citizens of the booming BRIC countries (Brazil, Russia, India, China) are dumb.

It seems to me that economies, like information, want to be free. Or that like the internet, they route around damage.

That's a nice way to put it.

Unfortunately, I don't think this is the way to a more free market.

Agorism is a political philosophy dedicated to the idea that free markets (and a more free society) can arise out of a trend toward disregarding governments in commercial matters. It comes with all the typical and commonly rejected anarchist ideas like "any state is inherently unjust and arbitrary," but isn't altogether unreasonable.

I thought that the economy of Spain and Greece can't collapse without ravaging its unofficial economy.

I live in Spain. From my understanding the ratio of Unemployment rate/GDP is very high because of the construction bubble collapse. That 9.7 increase are 80% because construction industry mainly. This bubble collapse affects much more to the increasing unemployment rate than to the GDP (which also does but less dramatically). That's is because we can't compare the ratios from Spain to other countries in Europe, as we have this additional problem.

Spaniard here (full disclaimer).

@carlos reasoning seems to be supported by the fact Spain's productivity is going up after all the low skilled workers in construction were sacked.

Some of the comments of the FT are highly interesting.

I agree some of the comments in FT are very interesting.

I'm not saying that productivity is going up, it's in fact going down, as the article says -3.1 variation GDP 2008-2009. But the ratio of unemployment/varGDP is very different to other countries because of the additional unemployment from construction industry, which is the suspicious indicator used by the author.

In any case I personally agree with some of the comments in the FT article saying that Spanish government may artificially modify some figures.

I was the one saying that productivity is going up in the last months.

I missed the productivity data in the report (I found only production output) and FT just took out the report from the web.

The question is not that the Spanish government did modify some figures, but if the modifications were in line with countries like Greece or like Germany.

Having spent most of this week trying to get my head round the terms of the National Bank of Greece rights offer I'm pretty sure Greece are cooking their books too.

Megan McArdle is skeptical: http://www.theatlantic.com/business/archive/2010/09/spain-co... , at least skeptical that Spain could've cooked the books to the extent reported.

How did people not learn from Greece? Yes, an entire country can tell an extreme lie and get away with it for a long time. Skepticism is justified, but not because "they couldn't have done it so badly for so long".

How did you get that link to work? Whenever I link to a ft.com link it brings up a request for me to subscribe to something. But your link worked fine.

Maybe because it's the financial times blog instead of the actual financial times.

Not to be beating the same drum I always do when it comes to these things, but if you spoof the "Referer:" header in the request to be http://news.google.com/ or similar, you'll always go straight through to the article on FT. RefControl plugin works well for me in Firefox; other extensions may work well elsewhere.

I'll probably stop mentioning this for a month, but it's just such a convenient hack.

You guys should look at Ireland. Ireland has a bottomless bail-out. Spain doesn't.

Anglos and their bias.

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