De Grauwe, P. (2014) “Revisiting the pain in Spain“, VoxEU Organisation, 07 Ιουλίου.
There has been a stark contrast between the experiences of Spain and the UK since the Global Crisis. This column argues that although the ECB’s Outright Monetary Transactions policy has been instrumental in reducing Spanish government bond yields, it has not made the Spanish fiscal position sustainable. Although the UK has implemented less austerity than Spain since the start of the crisis, a large currency depreciation has helped to reduce its debt-to-GDP ratio
The different macroeconomic adjustment dynamics in Spain – a member of a monetary union – and the UK – a stand-alone country – is stark. Paul Krugman popularised this contrast in his New York Times blog with the title “The Pain in Spain” (Krugman 2009, 2011), and commented on my own analysis in De Grauwe (2011).
Following the Greek sovereign debt crisis in 2010, Spain – together with other countries of the periphery – was hit by panic in the government bond market, leading to massive dumping of government bonds, fast increases in government bond yields, and a liquidity crisis, forcing the Spanish government to institute an intense austerity program. Although the UK faced similarly unfavourable fundamentals – a banking crisis, a deep recession, and exploding government debt – it was spared the panic, the ensuing liquidity crisis, and sky-high interest rates. This difference between Spain and the UK was explained by the fact that Spain did not enjoy a liquidity backstop from the central bank, while the UK government could count on the Bank of England to provide liquidity in times of crisis.
Σχετικές αναρτήσεις:
- Flesher Fominaya, C.(2014) ““Spain is Different”: Podemos and 15-M“, LSE EUROPP, 04 Ιουνίου.
- Díaz-Giménez, J. & Olsen, M. (2014) “The Future of Spain (2014 and beyond)“, Κείμενο Πολιτικής, Παρατηρητήριο για την Κρίση, 07 Απριλίου.
- IMF (2013) “Spain: Financial Sector Reform—Fourth Progress Report“, International Monetary Fund, Country Report No. 13/331, 22 Νοεμβρίου.