Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
I seem to have misspoke about Spain, having remembered a graph Jérôme passed aournd a while back (or maybe it was in Krugman's blog)

There is a graph in Krugman's Spanish Doldrums (March 14, 2009) which he basically uses to argue that Spain needs 20% relative cost deflation between itself and Germany.

Now that boom is over. But it left as its legacy a sharp rise in Spanish costs and prices relative to the rest of the euro zone (the chart below is Spanish unit labor costs in manufacturing relative to the EZ average, but it doesn't much matter which measure you use):
There's something really wrong about 20% higher than average labour costs with 58% of the population making less than €14k a year (gross), and I'd like to know where Spain's "labour costs" are going because it's not wages.
The key is to make the top end pay
If you see the baseline scenario post in a top level comment, what we're getting is Greece being gutted for the purpose of serving as a conduit for government funds from the rest of the Eurozone going to bail out the French adn German banks who are Greek creditors.

It is apparent, given the public debt figures in the various countries over the past 10 years, that what has been going on for 10 years is that German banks have lent money to peripheral economy consumers to buy German cars, as well as to German retirees to buy hiliday homes on the Mediterranean, fuelling an unqualified-labour and land-value speculative boom in the peripheral economies. Now the banks are going to destroy Germany's Eurozone export markets in order to collect.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Thu May 6th, 2010 at 10:22:02 AM EST
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