I want to highlight a couple of facts regarding
Spain's performance that I consider to be notable. By that I don’t mean (or imply)
that the Spanish economy is in good shape. One look at the country’s unemployment
rate or several other factors (that I don’t want to go into) would make such a
claim border to the ridiculous. But one can search for and find green shoots in
many rather unlikely places and try to learn from them.
The first notable achievement for Spain is
depicted in the following chart.
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| source: Eurostat |
As you can see Spain’s trade deficit has all
but zeroed. What’s more, growth in service
and goods exports was equally robust.
 |
| source: Eurostat |
Furthermore, the strong export growth was the
undisputed catalyst of the trade deficit narrowing, since no
severe decrease in imports was recorded.
 |
| source: Eurostat |
Is this
remarkable growth in exports the result of internal devaluation (meaning an outright slash in wages) ? Well, hard as I
looked I couldn’t find evidence of a slashing of wages in Spain. Here are the
official figures from INE (Spain’s national statistical agency).
 |
| source: INE |
I would like to caution against interpreting
the slump in aggregate compensation of employees (Eurostat data) as a wage decrease.
This is an aggregate figure and unemployment in Spain holds the sad Euro-Area
record (even higher than my native Greece). So there was no actual decrease in
wages (at least not one that I could find in official figures – anyone that
knows differently should say so in the comments section and enlighten us all).
Nonetheless, Unit Labour Costs for Spain
decreased.
 |
| source: Eurostat |
But how is
that possible? The next chart can provide the answer.
 |
| source: Eurostat |
The answer is that the decrease in unit labour
costs (ULCs) stems from a sustained spike in productivity, which for all years
since the current depression started rose significantly faster than the 00s.
One could not claim that the impressive
performance of Spanish exports can be attributed solely to the fall in ULCs, it
is undoubtedly a multifactor occurrence. What we should note is that measures
which boost productivity can result in a reduction in ULCs that could equals the one produced by
wage-slashing.
P.S. I don't know what figures Eurostat uses in order to compile the ULC measure but I doubt they are the same with the INE wage time-series, any inconsistencies are down to that.
P.S.2. Here's the chart showing the % change in the unemployment rate and in the aggregate compensation of employees.
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| source: Eurostat |
