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Is Merkel give a master class competitiveness Zapatero?

March 17, 2011 by Forex Market

Gonzalo Perez-Seoane, President WM

It is now Chancellor Angela Merkel to Spain. On the first page of his book just a recommendation for the Spanish government imperative: competitiveness. In the second and last page of a deep concern: Spanish deficit, divided, leathery, and not so illustrious evolution as Spanish makers predict.

Competitiveness?. The Spanish Government has not yet taken his true position to the term competitiveness. Thus, it seems appropriate that Merkel and his team give lectures about the Spanish economic leaders who wander are lost in this game of macroeconomic competitiveness (Law of Sustainable Economy, Education … First Amendment).

The competitiveness has to do with two variables: the inflation differential that affects the relative price of services and prices in the short term, thereby making them more attractive or less quickly (especially at the intra-EU) and the productivity variable key to economic growth in the medium and long term and well described in its action by Nobel Laureate Solow.

So the central issue for Spain is inflation. Light rise 9.8% in January 2011, gas 3.9%, 3.1% transport nearby, high-speed transport 2.3. Spain, and the latest inflation figures and begins to separate from the EU average. Are they concerned about the further actions of the Government of Spain?.

Yes. A growing and imported inflation arising from the global rise in the price of basic commodities (oil and food), the Government of Spain also has its laudable bit with the increases outlined. This excessive increase in prices, and import and domestic manufacturing, fatten the lack of competitiveness of Spain before its European partners. Spanish inflation Looking from a broader perspective, one might say that inflation in Spain has two main origins (there are more).

First, the aforementioned born of misguided government decisions, which in the minds of all Spanish centrifuge for the cost of their mistakes (excessive deficit and useless) promotes final cumulative process uncompetitive Spanish perpetuated.

The second reason is that the EU has a serious structural problem. On the one hand, and as Nobel Prize Mundell (father of the Euro) now recognizes, for the euro relates without fanfare and a stable relationship with other global currencies need a serious fiscal harmonization at European level. But alongside this, and for the euro-zone in terms of full functioning competitive balance needed harmonization intra European labor. The world economy operates at medium and long term in terms of relative prices, so the differences around the job / salary eventually affect prices and relative competitiveness. The bulky asymmetries between different labor systems in Europe are the main cause of differences in relative competitiveness between partners (and inflation), not foreseen by Mundell dysfunction or for those who participated in the introduction of the Euro. So the harmonization work, being necessary to the stability of the single currency is the key to ensuring economic fair play within the Community. As long as the absence of the harmonization work, the inflation differential will favor some and hurt others, and Spain is among the biggest losers.

(Those who wish to comment on this article Gonzalo Perez-Seoane can do below)

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Filed Under: World economy news

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