It is disheartening to hear government officials tirelessly repeat an entirely unjustified message of economic euphoria.
Recent events are particularly concerning, with the Minister of Economy, Nadia Calviño, launching a campaign against opposition leaders for stating the undeniable empirical fact that industrial employment is declining in Spain. We have already witnessed the government's tactic of denying reality when Minister Yolanda Díaz claimed that agricultural employment had increased, a statement that is simply false.
Beyond the battle of statistics, where governments tend to select the data that suits their narrative, lies a deeper concern. Spain's government seems content with absolute mediocrity while burdening all citizens with irresponsible levels of debt.
Spain's economic performance is characterized by an increase in debt-to-GDP of more than 13 points since 2019 and a meager GDP rebound of just 2 points. In comparison, the Eurozone as a whole experienced a 3.1% increase in GDP with less than half the debt increase of Spain. To make matters worse, Spain now boasts the highest unemployment rate in the OECD and the EU, surpassing even Greece, while diverging from its neighboring countries in terms of economic convergence.
Celebrating having the highest unemployment rate in the OECD, stagnant working hours, and an economy that only improves due to heavy reliance on tourism is a sad state of affairs.
The alarming decline of 26% in foreign investment during the first six months of 2023, falling to less than half the level achieved in 2018, is deeply concerning. Even more concerning is the fact that without the substantial investments in Madrid, which accounted for over €7 billion of the nearly €12 billion total foreign investment, the picture would be even bleaker.
The political debate often focuses on the political, constitutional, and coexistence consequences of political uncertainty and government interference in legislative and regulatory bodies. However, little attention is given to the legal and investment insecurity it generates.
The disaster in foreign investment figures should indeed be a major concern. It reflects not only the current state of our economy but also the unrealized potential and opportunities we should be seizing.
Spain's dwindling appeal to international investors can be attributed to several factors, with institutional and legal risk topping the list. Foreign investors encounter a country burdened by exorbitant taxes on investment, capital, and labor, all exceeding the European Union average, which is far from competitive. Additionally, Spain is one of the countries where entrepreneurs must dedicate a significant portion of their time to bureaucratic requirements, nearly half, according to a study by PwC. Finally, instances of political interference in regulation, capital freedom, and legislative discretion further stifle our enormous potential.
The changing economic narratives by the government not only affect the political landscape but also create investment uncertainty. Abroad, Spain is perceived as a country that fails to uphold its commitments, leading to asset seizures, changes in laws and regulations on a whim, and a circle of mercantilism that penalizes wealth creators while subsidizing those who pledge allegiance to the political leader. This is also a form of legal insecurity.
It is urgent for opposition parties to wake up and confront the impending disaster without hesitation. The alternative must be resolute, unquestionable, and compelling.
Spain's economic vows is not just mediocre; it is depressing when considering the country's enormous potential and the excellent entrepreneurs we possess. These entrepreneurs, unsung heroes and heroines, are forced to remain inconspicuous to avoid the yoke of intrusive bureaucracy and expropriatory taxation.
The government's propaganda and the parties that celebrate economic mediocrity and subservience to wealth expropriation are indeed a source of sadness.
Daniel Lacalle is one the most influential economists in the world. He is Chief Economist at Tressis SV, Fund Manager at Adriza International Opportunities, Member of the advisory board of the Rafael del Pino foundation, Commissioner of the Community of Madrid in London, President of Instituto Mises Hispano and Professor at IE Business School, London School of Economics, IEB and UNED. Mr. Lacalle has presented and given keynote speeches at the most prestigious forums globally including the Federal Reserve in Houston, the Heritage Foundation in Washington, London School of Economics, Funds Society Forum in Miami, World Economic Forum, Forecast Summit in Peru, Mining Show in Dubai, Our Crowd in Jerusalem, Nordea Investor Summit in Oslo, and many others. Mr Lacalle has more than 24 years of experience in the energy and finance sectors, including experience in North Africa, Latin America and the Middle East. He is currently a fund manager overseeing equities, bonds and commodities. He was voted Top 3 Generalist and Number 1 Pan-European Buyside Individual in Oil & Gas in Thomson Reuters’ Extel Survey in 2011, the leading survey among companies and financial institutions. He is also author of the best-selling books: “Life In The Financial Markets” (Wiley, 2014), translated to Portuguese and Spanish ; “The Energy World Is Flat” (Wiley, 2014, with Diego Parrilla), translated to Portuguese and Chinese ; “Escape from the Central Bank Trap” (2017, BEP), translated to Spanish. Mr Lacalle also contributes at CNBC, World Economic Forum, Epoch Times, Mises Institute, Hedgeye, Zero Hedge, Focus Economics, Seeking Alpha, El Español, The Commentator, and The Wall Street Journal. He holds a PhD in Economics, CIIA financial analyst title, with a post graduate degree in IESE and a master’s degree in economic investigation (UCV).