If you are confused over Spain’s economic prospects you are in good company. Across all economies experts send out mixed signals. This is because they can only work with conflicting analysis based on unreliable information supplied by government offices of statistics. Many of these departments are crooked to the core. Naturally they put the best possible spin on their administration’s performance. Banks are adept at cooking the books. Mischievous interference from currency speculators attempting to manipulate markets further aggravates the problem.
A good example of this was when Spain’s statistics office issues conflicting press releases that are purposely misleading. For instance they choose not to seasonally adjust the data, which does not make sense when the economy is seasonally-driven.
The essential information on IVA returns and deficit reduction progress issued by the Ministerio de Economia y Hacienda is downright negligent. To quote Edward Hugh of Spain Economy Watch, “At best such data gives us completely meaningless information, and at worst it leads reporters who cover the Spanish economy hopelessly astray.”
According to Reuters ‘Spain’s unemployment rate fell to 19.79 per cent in the first quarter: It was the first fall since 2007 and was widely reported. This information came from the National Statistics Institute. If the figure is seasonally adjusted the true figure of 20.05 rose to 20.09. This was the highest rate in the EU and possible the developed world.
Problems caused by nations manipulating statistics are negatively affecting the credibility of the European Union. Jean-Claude Trichet, governor of the Banque Centrale Européenne, is scathing about anarchic bookkeeping common throughout the union. Some are worse than others. Without pointing the finger he says, “As we are in a highly integrated union, we need reliable statistics not just from the majority of the Member States; we need it from each and everyone, no matter how large or small the country is.”
DON’T BLAME THE MESSENGER
Spain and Greece are notoriously careless when it comes to manipulating statistics, the consequence is it being difficult to respond appropriately when trouble hits. The human mind is like a computer; it can only come up with the right answers if the right data is fed into it. If the number crunchers are cooking the books, and they are, it makes all predictions worthless.
Don’t blame the messenger. The news media has no interest in manipulating statistics or figures; it merely broadcasts press releases in good faith. Highly respected economist, Edward Hugh, says: “Economic statistic production is not a game where you attempt to fool as many people as you can as often as you can. Unfortunately all too often, Spanish statistical presentations fall woefully short of these required standards.”
THE WEAKEST LINK
Spain has lost its Triple ‘A’ credit rating with major credit agencies following its downgrading by Moody’s. This means that Spain’s borrowing costs are 2% higher than Germany’s and double what it was in 2009. This extra cost cascades down through Spain’s hard-pressed taxpayers. The good news was that the downgrading was not more severe but that is hardly a reason for national jubilation.
The reason was a ‘considerable deterioration’ in Spain’s public finances. The slow growth of the Spanish economy would also present challenges. The country’s credit rating is described as ‘stable’ with two years being given to the government to meet is deficit reduction targets. Its economic growth is put at 1 per cent over future years. This does not compare favourably with the 2% forecast for the UK; 1.5% and 2% or Germany and France.