

Is Spain now cooking its books? - cwan
http://ftalphaville.ft.com/blog/2010/09/30/356201/an-anonymous-tip-off-regarding-spanish-gdp/

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forgottenpaswrd
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.

~~~
kqr2
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.

~~~
GreenNight
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.

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

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kqr2
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...](http://www.zerohedge.com/sites/default/files/Spanish_GDP_report.pdf)

Commentary from zerohedge:

[http://www.zerohedge.com/article/anonymous-blogger-
speculate...](http://www.zerohedge.com/article/anonymous-blogger-speculates-
spanish-gdp-inflated-%E2%82%AC40-billion-goldman-gets-involved)

------
GreenNight
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.

~~~
bobds
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.

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

~~~
bobds
That's a nice way to put it.

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

~~~
higher
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.

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carlos
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.

~~~
rogersm
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.

~~~
carlos
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.

~~~
rogersm
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.

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VBprogrammer
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.

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jseliger
Megan McArdle is skeptical:
[http://www.theatlantic.com/business/archive/2010/09/spain-
co...](http://www.theatlantic.com/business/archive/2010/09/spain-cooking-the-
books/63828/) , at least skeptical that Spain could've cooked the books to the
extent reported.

~~~
blueben
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".

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cturner
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.

~~~
barrkel
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.

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

Anglos and their bias.

