Is Pedro Solbes misreading, or misleading? That is the question.

In case anyone who follows this blog hasn't guessed by now, I have very little faith in Spain's Economy Minister, Pedro Solbes -- not that I have much faith in any of his colleagues, either. However, he holds a special place in my disdain because of what can only be his misreading of, or misleading about the economy

When he served in Brussels as European Commissioner for Economic & Financial Affairs (1999-2004), he denied that the introduction of the euro contributed to inflation. Then in December 2007 he said, "When I was in Brussels, I said the opposite, but now I can say that the euro has had an inflationary effect on low cost items." Was that a misreading, or was he misleading?

At that same time he predicted that Spain's inflation rate, which was 4.1%, would go below 3% by March 2008. Solbes was wrong again, as by April it had risen to 4.6%. By May it was 4.7%. Misreading, or misleading?

Solbes continued to deny there was an economic crisis through the first half of 2008, as people lost jobs, the cost of living soared, the real estate bubble burst, and the economy just generally went into the toilet. In May Solbes equated "crisis" with "recession," and added, "To talk about recession is exaggerated." Misreading, or misleading?

It seemed like he might be ready to admit the truth when it was leaked to the media that he used the word "crisis" in a June 10th closed door session of parliament. However, on June 11th he qualified that by saying, “Yesterday, the only thing I said was that we need to prepare for a crisis, but I never talked about 'the crisis.'” The official line from the Socialist Party spokesperson, José Antonio Alonso, was that Solbes had had a “slip of the tongue.” Misreading, or misleading?

Then to muddy the water further, he said on June 13th that while the Spanish economy was experiencing an “abrupt adjustment” he didn't use the word “crisis” because that would be "abusing a false affirmation. Crisis means that everything is going badly and that every other thing is going well, neither one thing or the other.” Misreading, or misleading?

By July he had finally started using the "C" word publicly, even declaring in one interview, "For me, this is the most complex crisis we have ever experienced because of the number of factors that are on the table." But around then he had moved on to avoiding the "R" word. In an interview in August he said, "We think there will be very low or flat growth in the coming quarters, but we are not thinking of a recession." Misleading, or misreading?

Last summer Solbes and Company forecast that Spain would avoid recession and that the GDP would actually grow a full 1%. This was very different from what most other economists were saying. Then yesterday he and the Government belatedly acknowledged the country is in a recession when he announced that his ministry was changing the forecast from one of GDP growth to one with a 1.6% drop. Misreading, or misleading?

Of course, there are still many non-government economists who are not as confident as Solbes, with some predicting the Spanish economy will contract as much as 3% this year. Neither the dire views of others, nor his lousy performance so far, seem to have given him pause. Indeed, while finally admitting he was wrong yesterday, he also had the temerity to make yet another prediction. According to his crystal ball (which must be what he uses in lieu of economic theory), 2009 will see the worst of the crisis, 2010 will witness GDP growth of 1.2%, and 2011 will experience a jump up to 2.6%. Misreading, or misleading?

Of course, people here say that Solbes is only delivering the information Prime Minister José Luis Rodríguez Zapatero wants him to, and I don't doubt it for a second. Certainly the buck stops with Zapatero, but it would be nice to have an Economy Minister who told the PM and the people what they needed to hear.

Instead what is it exactly that he offers? Is it misreading, or misleading? Double-speaking, or misspeaking? Denying, or lying? Call it what you will, but it does not often resemble the truth.

Finally, one more question: if you were running a business, would you hire someone with a track record like this?

Dios nos ayude, amig@s,

Carloz

Minimum Wage Spain = Salario Mínimo España

Some years ago I asked a Spanish colleague what the minimum wage was here and was met with a puzzled look. When I explained what I meant further, he said he didn't think there was such a thing -- an average, perhaps, but nothing guaranteed. This person was a professional with a post graduate degree, so I thought if he did not know, then there must not be such a thing in Spain.

Eventually, I learned that there is indeed such a thing, but that it is not a guaranteed hourly wage, but a monthly salary. The Spanish minimum wage is called the Salario Mínimo Interprofesional or the SMI and has existed since 1963. It supposedly pertains to all occupations, businesses and economic sectors. It is adjusted at regular intervals, usually each year, although the law allows for bi-annual adjustments. It is based on "normal working hours" (whatever that means), and is established according to various economic indices such as productivity, retail-price index, etc., and is protected from seizure by creditors.

I've read that since the SMI is so low, only about 0.7% of the employed population is affected by adjustments to it -- or 140,000 people. However, it is said to have an important indirect impact because the SMI is used as a reference point for establishing pensions and for collective pay negotiations. Spanish unions claim that it effects the remuneration of one million employees. That leaves about 18,860,000 people who are not affected.

In addition, before moving here and since living here, I have continuously heard and read that employers are supposed to pay their contracted employees 14 monthly payments a year, not 12. In the 9 years I have lived here, I have never received the two extra payments.

Anyway, I write all of this as background to the news that Prime Minister Zapatero announced yesterday that the SMI would go up 4%, to 624 euros a month. It is the lowest increase in the past five years. It is also much lower than the 7.5% a year that would be necessary for Zapatero to reach his campaign promise of a monthly SMI of 800 euros by 2012. So, now he's promised to raise it by 8.6% a over the next 3 years.

Yesterday the Government also approved a 2.4% raise in pensions for 2009. The average pension will be 741.62 euros a month.

It is estimated that the cost of living in 2008 went up 5.3%.

I suppose many Spaniards will be counting their pennies as well as their grapes when the clock strikes midnight next Wednesday.

Let's hope that 2009 is a better year in Spain and everywhere!

Saludos amig@s,

Carloz

Main sources: European Employment and Industrial Relations Glossaries and El País (Un final de ciclo amargo and El Gobierno eleva un 4% el salario mínimo, a 624 euros.)

Crisis? What crisis?

Spanish Prime Minister Jose Luis Rodriguez Zapatero finally presented his new government's economic plan on Saturday, while avoiding saying anything that might make it sound like Spain is facing serious economic problems. I think the reaction published in this Sunday's El País hit the nail on the head:

“Crisis? What crisis? 'A difficult scenario', 'a difficult period of adjustment' or 'a deep deceleration of the economy'. These are some of the terms the president of the government, José Luis Rodríguez Zapatero, employed yesterday when referring to the current state of Spain's economy, which receives a blow each time a new economic indicator is revealed. The president attributes the deterioration to external factors (increased oil and food prices). Still, he announced a package of 'structural reforms' to make things more tolerable. There is nothing new in this battery of urgent measures.

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Unemployment is on the rise, inflation has gotten out of control, sales of homes have collapsed, sales of cars cannot even get off the ground, and the gross domestic product is losing wind. But Zapatero resists thinking that this is a crisis situation...

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The measures were neither new nor quantified. ...one consists of a 30% reduction of administrative charges that businesses bear. [However,] This was an action that had been announced in April of 2007...with the aim of lowering bureaucratic costs by 2012... ...other plans [included enhancing] railway competition and energy sharing with France.”

And this less than enthusiastic coverage was from a news organization sympathetic to Zapatero's socialist party! Imagine what the center and right leaning media wrote!!

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Most distressing to me was the revelation that this “plan” is to be incorporated into a national program of reforms which will be presented to the European Commission in October. A lot can happen between now and October!! What is the government planning on doing to address the so-called “difficult scenario” before then -- more thumb twiddling?!!!

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Perhaps the most interesting part of the El País report was the following:

“Microphones are treacherous -- above all when they are on without the speakers' knowledge. That was the case yesterday with the President of the Government, José Luis Rodríguez Zapatero, and the owner of Planeta Publishing Corp., José Manuel Lara, who before the presentation made several recommendations regarding the crisis, as recorded by Channel Four:

Lara: 'For the time being, [the crisis] is not going to stop. I am afraid it's going to get worse in the second half of the year. That's what I fear.'

Zapatero: 'It's not clear'

Lara: 'I would advise that you not burn yourself...'

Zapatero: 'What?'

Lara: 'You shouldn't speak; have [Finance Minister] Solbes speak. You shouldn't burn yourself, because it could look bad as president'.

Zapatero: 'There is another factor you have to consider. That is, if you instill a lot of pessimism, if you don't say anything positive...'

Lara (interrupting him) : 'No, no, you make the crisis worse, yes, yes. ..'

Zapatero: 'That's what we're doing.'

Lara: '...but let the the Economy Minister, the Industry Minister affect optimism and the president be reserved. That's what I mean.' ”

Well, it seems we get a lot of optimism from Zapatero, Solbes and others, but not much action. Meanwhile, other Sunday headlines about the economy were not so optimistic: "The worst is yet to come" , "Everything about the crisis" , and one headline which quoted the President of the European Bank, "We must stay alert, now is not the time for complacency." It sounds like others believe that optimistic talk is not realistic.

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To be fair, from this consumer's viewpoint there was at least one good piece of news that came out this weekend: Spain's state-regulated electricity prices will not rise by the 11.3 percent the industry was hoping for. During an interview with the radio network Cadena Ser, Zapatero said the increase would be close to the rise in inflation. "The National Energy Commission proposal is not going to be adopted by the Government of Spain," he stated. Spain's inflation hit a record high of 4.7 percent in May, so I am hoping rates won't go up much more than 5%. If that's what happens, many of us in Spain will let out a “Phew!” of relief while bracing ourselves for whatever comes next in this non-crisis that the government seems dead set on being so upbeat about.

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Hasta luego amig@s,
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Carloz

Bad news: Barcelona 20; Madrid 24

This was the "score" that made headlines here last week, but it wasn't soccer results -- it was about how expensive the two major Spanish cities have become. So, "Barcelona, tan cara como Nueva York" ("Barcelona, as expensive as New York") screamed the front page of Barcelona's La Vanguardia newspaper on March 19th.
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Sure enough, according to the latest "Prices and Earnings: comparison of purchasing power around the globe" report by the Swiss banking firm UBS, Barcelona is the 20th most expensive city in the world, while New York City is 18th. Madrid comes in at number 24. (FYI, the 5 most expensive cities according to USB are Oslo, Copenhagen, London, Dublin and Zurich -- in that order.)
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However, looking a little closer at the data, one can see that this first list, referred to as the "Prices" list has two columns -- one including rent costs and the other not. Therefore, according to UBS, Barcelona is the 20th most expensive city in the world for visitors, and Madrid number 24, etc.
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For a look at the cost of living in a city, one needs to look at the second column, which includes rent costs. Here Barcelona is ranked as the 26th most expensive city to live in, Madrid number 22 and New York City number 5. So, saying Barcelona is as expensive as New York city could be considered stretching things a bit -- but it certainly isn't cheap anymore! (By the way, according to this list, the most expensive city to live in is London followed by Oslo, Dublin and Copenhagen.)
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Another list in the report is called, "Domestic purchasing power including rent prices." Here Barcelona is ranked number 24, Madrid goes down to 30 and New York comes in at number 22. (The five most expensive cities in this grouping are Copenhagen, Zurich, Berlin, Geneva and Frankfurt.)
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Here are a few interesting quotes from the report:

• "The euro has continued its extraordinary ascent."


• "...Eurozone cities are even more expensive."


• "In 2006, Barcelona and Hong Kong were similarly costly. Now the Catalonian port city is 22% more expensive than the Chinese one."

Well, it seems from this report that Europe is the most expensive part of the world to live in today. As for the Euro, I have definitely seen a substantial increase in the cost of living since it was introduced in 2001. And I can personally attest to how much more it costs me to live in Barcelona than it did in previous years.
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In 2005 someone on a forum about life in Spain asked me how much I usually spent on groceries and sundries. Since I keep my supermarket receipts that was easy for me to answer -- at the time it was typically between 120 and 130 euros a month. Looking at current receipts, I can say that today I regularly spend between 165 and 175 a month.
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I need to mention that I am single and relatively frugal. Certainly there are single people who spend less than me on groceries and such, but there are probably many more who spend a greater amount than I do to eat each month.
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In closing, let me mention another report that made the news this week: Personal Income and the Risk of Poverty in Catalonia by IDES-CAT, the Statistical Institute of Catalonia. According to this study, 19% of the Catalan population falls beneath the poverty threshold. This means that 19 out of every 100 people living in Catalonia live on less than 689 euros a month!
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While I know many "mileruistas" who struggle by on about 1,000 euros a month, it must be incredibly difficult to get by on less than 689 -- especially on one's own. Sharing an apartment would be a must on such an income. Indeed, it is for many people above the poverty level.
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IDES-CAT also reported the following:

• 30% of people surveyed reported that they had difficulty making ends meet each month;
• only 4 out of ten persons surveyed stated that they had NO difficulty making ends meet;
• income is 22.3% lower in households headed by women;
• households that suffer the most economically are those made up of foreigners and those with divorced or separated heads of households;

And on that cheery note, I need to head out to do my weekly marketing.
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Chao amig@s,
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Carloz

It's election time!

Not the US election, but the Spanish election. On March 9 Spaniards will go to the polls to vote for Parliament -- 350 seats in the lower chamber, the Congress of Deputies ,and 208 seats in the upper chamber, the Senate. The make-up of the Parliament determines which party (or which coalition of parties) selects the Prime Minister, who is also referred to as the President of the Government.
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The two major parties are the conservative PP (Partido Popular - Popular Party), led by Mariano Rajoy and the PSOE (Partido Socialista Obrero Español - Spanish Socialist Workers Party), led by the current Prime Minister, Jose Luis Rodriguez Zapatero. Other parties include:the United Left (IU), Convergence and Union (CiU), the Republican Left of Catalonia (ERC), and the Basque Nationalist Party (PNV).
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Compared to the USA, campaigns in Spain are relatively brief -- thank God! While there is plenty of maneuvering and posturing for a few months before the election, advertisements are only allowed during an officially designated campaign period. For example, on January 14 of this year the Spanish government approved the dissolution of Parliament and called for general elections on March 9. The official electoral campaign runs from February 22 until March 7.
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However, before the advertising begins parties issue statements, candidates make promises, polls are conducted and the media covers it all. So far the PSOE has promised to a 400 euro tax rebate for all citizens, while the PP has said it would require immigrants to sign a "contract" promising to learn Spanish, adapt to the culture and traditions of Spain and obey the nations laws. Both parties promise more nurseries and pre-schools, higher pensions and to plant trees to combat climate change. (The PSOE was the first to come up with the tree offer, and said it would plant 45 million trees nationwide. Last week the PP upped the ante by promising to plant 500 million! So, either way, Spain will be greener by 2012, right? Yeah, right!)
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As for controversy, well, the Spanish Catholic Church got into the act by issuing a letter telling its members not to vote for parties that support abortion rights and gay marriage -- in other words, don't vote for the PSOE. (The Zapatero government introduced full gay marriage in Spain in 2005. The PP has said it does not intend to overturn it.) The Government was so bothered by the Spanish Bishop's Conference intrusion into the political process that it had its ambassador to the Vatican make a formal complaint. (The Pope has yet to respond -- and if he does, I'll bet it's with a similar letter of his own.)
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The economy is a major issue and will surely affect the outcome. The Spanish housing market bubble is deflating, if not exactly bursting, with prices beginning to fall; price increases for basic necessities have been sharp; unemployment is rising; and because of world-wide economic instability, Spaniards seem to be a little jittery in general. This has been a rather recent turn around, coming after a few years of steady economic growth.
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This change in exonomic fortunes probably has done more than anything else to allow the PP to cut into the PSOE's lead in the polls. A month ago, the PSOE was widely seen as having the best chance at victory. Now, according to one major survey reported on in today's El Pais, the PSOE has only a 2.9% lead over the PP.
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So, who will win? ¿Quien sabe?

STOP TIPPING SO MUCH! Spain's Economy Minister says Spanish public doesn't know the value of a euro

At 4.1%, Spain's inflation rate is currently higher than other euro zone countries. Economy Minister Pedro Solbes apparently believes that part of the reason for this is the failure of Spaniards to understand the value of the euro.

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At an economic forum held on Saturday he said, "We Spaniards haven't internalized the value of a euro, which can be seen in bars and cafes. When people leave tips, they don't take into account that 20 cents is worth 32 pesetas and that one euro is worth 166 pesetas. They often leave a tip that's 50% the value of the product."

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Before the euro replaced the peseta in 2002, Spaniards were in the habit of leaving 25 peseta tips in cafes, which would have equaled somewhere between 10 and 15 cents.

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While Solbes added that he believes inflation will return to below 3% before next March, he admitted that he was wrong when he said some years ago that the euro had not had an inflationary effect as a result of merchants rounding up prices at the time of the conversion from the peseta.

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"When I was in Brussels (as the EU Economic Affairs Commissioner), I said the opposite, but now I can say that the euro has had an inflationary effect on low cost items."

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So, why should we now believe his predictions about inflation? ¡¿?!

Interesting results from Spanish surveys, studies, reports, etc.

GUESS WHICH WORLD LEADER SPANIARDS CONSIDER TO BE THE WORST. If you guessed US President George Bush, you were only off by two. Bush came in third to last, behind Cuban leader Fidel Castro in the pentultimate position, leaving Venezuela's President Hugo Chávez to reign as the international leader held in lowest esteem.
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This terrible trinity of the worst was the result of a poll of 12,000 Spaniards conducted by the Elcano Royal Institute (Real Instituto Elcano), a Spanish think-tank. The survey, which was carried out between November 26th and December 3rd, had Chávez finishing last in the popularity poll with a 1.4 ranking. Next came Castro at 1.9, Bush at 2.2, Nicaragua's Daniel Ortega at 2.9 and Russia's Vladimir Putin rounding out the bottom at 3.4. The most respected leaders were EU foreign policy chief Javier Solana, with a 6.2 rating, followed by former IMF director Rodrigo Rato with 6.1, German Chancellor Angela Merkel with 5.8, and French President Nicolas Sarkozy and UN Secretary-General Ban Ki-moon in a tie at 5.3.
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MOST SPANIARDS SUPPORT ZAPATERO'S FOREIGN POLICY, according to the same Elcano study. Of the respondents, 54% view the Spanish Prime Minister's foreign policy efforts positively, while 39% take a negative view.
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CONSUMER PRICE INDEX UP AGAIN according to statistics released on Friday by Spain's National Statistics Institute (NIE). November's CPI was 4.1% compared with 3.6% in October. In addition, the European Central Bank, in its monthly economic bulletin released the day before, noted that inflation has risen in Spain, Portugal and the euro zone in general.
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SPANIARDS UP TO THEIR NECKS IN DEBT according to a study by The General Association of Consumers (La Asociación General de Consumidores), ASGECO. The Study of Family Indebtedness (Estudio sobre el endeudamiento de las familias) released by the organization last week reported that 40% of Spanish households have difficulty making ends meet each month, only 30% have money left over at the end of the month, and nearly 60% face the possibility of having to obtain a second mortgage on their homes.
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BARCELONA HAS THE HIGHEST CINEMA TICKET PRICES IN SPAIN AND CORDOBA THE LOWEST according to a comparison done by FACUA.org Consumers in Action (Consumidores en Acción). The survey of movie ticket prices at 104 cinemas in thirty-three cities across Spain found that the price of admission can vary up to 90% nation-wide. Barcelona, A Coruña and Madrid have the most expensive cinemas, against Jaén, Cadiz and Cordoba, the lowest priced. The average price nationally is 5.41 euros. Ticket prices have risen 3.6% over 2006, when the previous study found an average price of 5.22 euros. The average was 5.05 euros in 2005, 4.80 in 2004 and 4.62 in 2003.
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In the report, FACUA denounced as illegal the practice of prohibiting movie-goers from bringing with them beverages or food from outside cinemas. The association recommends that consumers request a complaint form from cinemas to denounce this irregularity, since it is a violation of the General Law for the Defense of Consumers and Users. (La Ley General para la Defensa de los Consumidores y Usuarios.)
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TWO OUT OF EVERY TEN RAMBLERS ARE LOCALS according to a study by the Barcelona NGO Friends of The Rambla (Amigos de La Rambla / Amics de La Rambla). Only 2 out of every 10 people who walk along Barcelona's Las Ramblas are Barcelonans, whereas nearly 60% are foreign tourists. Another 20% or so are visitors, too, but from Spain rather than abroad, with about 10% of these from other parts of Cataluña.

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Of those surveyed, 34% said that Las Ramblas' diversity and cosmopolitanism was what attracted them most; 20% felt there were usually too many people on the famous paseo; 15% indicated that they felt insecure and vulnerable to theives and 5% were there in order to get to La Boqueria public market. The most traveresed section is between Plaza Cataluña and Plaza Real. Most people enter Las Ramblas from Plaza Cataluña, whereas the point of access least frequented is Arc del Teatre street.

Spain's Sunday News: Dalí, Photos, DNA, Music and Money, Money, Money, Money

Dalí Photos - El Pais announced today that Salvador Dalís former photographer and personal assistant, Robert Descharnes, is exhibiting 147 of the thousands of photos he took of Dalí and his muse, Gala, at the Municipal Museum of Cadaqués until January of next year. The photos focus on the Catalan artist's relationship with the coastal town and the nearby village of Port Lligat.

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The 83 year old French photographer said he is computerizing and cataloguing the more than 60,000 photographs that he took of Dalí and Gala over 40 years of friendship with the couple.

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Note: this photo (Dalí with ocelot) was not taken by Robert Descharnes, but by Roger Higgins.

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Dalí DNA - Descharnes revealed to El Pais that he has provided samples of Dalí's DNA to American scientific experts for the purpose of obtaining the genetic map of the surrealist icon. He apparently obtained the samples from the tubes inserted into Dalí's nose when the painter was last hospitalized. Descharnes claims that due to Dalí's genius a study of his DNA would contribute much to science.

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Test for buskers - Musicians now have to pass a test in order to perform in the Metro, Barcelona's subway system. El Pais reported that some 80 musicians auditioned yesterday before officials of the Street Musicians Association of Barcelona (Amuc BCN) and the Barcelona Transportation Metropolitan agency for permission to perform in Metro stations and trains. "The objective is to guarantee minimum standards," stated Hugo Guerrero, president of Amuc.

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Until now, permission to perform was given to anyone who registered with Amuc. Esther Ayala of TMB explained that the audition was organized because the previous system did not work well, which resulted in people who did not really know how to play or sing performing.

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Reportedly many of those who tried out yesterday were Latin-American guitarists and Eastern-European accordionists and the most were successful in their bids. "Between 85% and 90% were approved," according to Guerrero.

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Have you seen any 500 euro bills lying around? Apparently there are over 113 million of them in Spain, worth over 56,529 million euros, but they aren't seen very often. Spain's Tax Office has been has been investigating the situation for years, but to little avail. In fact, this past May a record number of 500 euro bills in circulation was reached, according to the Bank of Spain -- 64,3% of the total currency in Spain!

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Spaniards humorously refer to the bank notes as "Bin Ladens" because hardly anyone claims to have seen one. El Pais noted that over the past year the number of 200 euro notes in circulation has increased, too -- from 19 to 21 million.

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What do you think is going on?!