Spain should raise the school-leaving age

Sir, Spain certainly needs to improve its education system (“Recovery position”, The Big Read, October 23). The early school-leaving rate hit 31 per cent in 2009, more than double the EU average, just as the country entered a deep and prolonged recession.

Students who dropped out flocked to work in the oversized construction sector. They were the first to lose their jobs and are poorly qualified. Today the rate is down to 22 per cent, still way too high. A much more knowledge-based economy remains a pipe dream until the rate is down to single figures. It would make eminent sense to raise the school-leaving age from 16 to 18.

Never too late for Spain to begin to woo the Gibraltarians

Sir, a year ago this week the Spanish government imposed stringent controls at the border with Gibraltar, the territory ceded to Britain under the Treaty of Utrecht of 1713. The checks, ostensibly a crackdown on tobacco smuggling (cigarettes are much cheaper in Gibraltar), came after the Rock’s government dumped 70 concrete blocks in contested waters in order to create an artificial reef and regenerate fish stocks. The controls are still in force and produce at times long and arbitrary queues of cars and pedestrians on either side of the border.

The PP’s closing down of the Trilateral Process for Dialogue in which the UK, Spain and Gibraltar agreed to discuss all matters of mutual interest except for sovereignty, the stepped up border controls and increased maritime stand-offs have done nothing to further Madrid’s claim to the territory. Instead, its policy has created an absolute absence of dialogue and a siege mentality among Gibraltarians reminiscent of that when the Franco regime closed the border in 1969.

Fabian Picardo, Gibraltar’s chief minister, was in Madrid earlier this month and met with virtually all of Spain’s political parties with the notable exception of the ruling Popular Party (PP), which gave him a wide berth.

The Spanish government could do with following the advice given by the Duke of Edinburgh to former King Juan Carlos in 1977. According to a declassified US Department of State document, the Duke told Juan Carlos that “when one wished to gain the hand of an attractive lady, one should woo her with flowers and the like. And if Spain wished to have the situation in Gibraltar evolve more to its liking, it should begin to woo the Gibraltarians.” It is never too late.

Now it’s over to Spain’s political class

Sir, King Juan Carlos (”Abdication is the king’s final gift to a grateful Spain”, Comment, June 5) has wisely taken a step to revitalise the tarnished monarchy by handing over to his son. Dubbed “Juan Carlos el Breve” (Juan Carlos the Brief) and “Juan Carlos el Tonto” (Juan Carlos the Stupid) by the Communists after General Franco appointed him his successor (in 1969), the king surprised everyone and reigned for almost 40 years.

When I met him in 1977, he told a joke against himself. “Why was I crowned in a submarine? Because deep down I am not so stupid.” Once again, he has shown how true this is.

The king has made his move; now the widely discredited political class needs to regain the country’s confidence.

Bricks and mortar to blame in Spain

My letter in the Financial Times.

Sir, Tobias Buck overlooks a key point in his analysis of why Spain’s unemployment is so high (January 24). Part of the problem is Spain’s lopsided economic model which was excessively based on bricks and mortar. Even with the most liberal hire and fire rules, Spain is not going to create jobs in large numbers. Employment will not be generated in the public sector (an axe has been taken to this sector), obviously not much in construction (1.7m jobs have been shed since 2008 out of a total of 3.7m and there are still more than 1m unsold homes); the flourishing tourism sector cannot employ that many more people and knowledge-based jobs in large numbers are something of a pipe dream in a country with a generally poor education system. So where do new jobs come from?

Sane voices in a world gone mad

The other day I attended a small event that I found strangely moving. About 40 people were gathered in a seminar room at the London School of Economics to hear William Chislett, the FT’s former man in Mexico who now lives in Madrid, talk about two fine but not terribly well-known Spanish writers, Arturo Barea and Manuel Chaves Nogales. Both had their lives shattered by the Spanish civil war and died as exiles in England; neither has had his due as a writer, partly because each of them refused to take an extreme ideological position.

The first casualty of war is truth, it has been said; you could just as well give that dubious honour to moderation. We tend to see conflicts in binary terms; Catholics versus Protestants, for example, in the religious wars of the 16th and 17th centuries, or the extreme right versus the extreme left in Spain from 1936-1939 – or the liberal west against militant jihadism in the war on terror. Both Barea and Chaves Nogales supported the Republic against the military uprising of General Franco in 1936 but neither fitted into the romantic stereotypes beloved of film-makers, of heroic young working-class martyrs or idealistic poets and intellectuals joining the International Brigades.

Chaves Nogales, one of the most brilliant journalists and correspondents Spain has produced, described himself as “a liberal petit bourgeois”. Barea, son of a washerwoman but partly brought up by his aunt, a middle-class religious bigot, didn’t fit comfortably into any class and had been a successful businessman before becoming the (deliberately lax) foreign press censor of the embattled Republic. His friend Gerald Brenan described him as looking more like a mechanic than an intellectual.

Before and beyond any ideological commitment, both had the writer’s commitment to tell the truth about the world and about themselves. Barea’s three-volume autobiography, The Forging of a Rebel (1941-46), came out of an intense personal crisis of identity. His writing method was the opposite of ideological. “I wanted to wipe the slate of my mind clear of all reasoning … to go back to my beginnings, to things which I had smelled, seen, touched and felt.” The opening volume, The Forge, begins with an unforgettable image of breeches drying by the Manzanares river, looking like “fat men without a head”.

Barea does not shy away from any area of physical experience, death, extreme poverty, sex: he wanted to set down life as he saw it, “raw and bare”, riddled with violence and suffering but also redeemed by kindness and love. The second volume, detailing his experience serving in the Spanish army during the Rif war in Morocco, is even more unsparing in its depiction of the brutality of colonial conflict; it is also historically important in its charting of the rise of Spanish military fascism, which would find its bloody apotheosis in the civil war.

The journalist Manuel Chaves Nogales reported from both Communist Russia and Nazi Germany in the 1920s and 1930s and was repelled by both. “Red assassins, white assassins: assassins the lot of them!” was his verdict on the former. In Germany he seems to have been gifted with second sight and went around taking photographs of places that a decade later would become death camps.

Both writers took stands against indiscriminate violence. When considering whether the extreme violence of the fascist right justified an equal and opposite reaction from the left, Barea, according to William Chislett, “answered with a principled ‘no’ ”. He considered the Church of Spain “an evil which had to be eradicated” but was horrified by the burning of churches.

The pair could be considered members of what the historian Paul Preston, moderating the LSE event, has called “the third Spain”, the millions belonging neither to the extreme left nor the extreme right, caught up in a conflict they neither caused nor desired.

Barea arrived as a refugee in England in 1941, feeling “spiritually smashed”: without a job, a home, a homeland. But things turned out well for him; he loved the country, was given a place to live by Lord Faringdon, the Fabian peer and friend of the Spanish Republic, and found work at the Latin American service of the BBC. He eventually delivered more than 800 15-minute broadcasts, which made him famous from Mexico City to Montevideo.

Chaves Nogales was less fortunate, dying of stomach cancer aged 46 in London in 1944, far from his wife and daughters, who had gone back to Spain to live in hiding. He is buried in an unmarked grave in East Sheen cemetery.
Now might be the time to put up a stone to him, reflected his grandson, present at the LSE talk, together with Barea’s niece. Both Barea and Chaves Nogales kept their sanity and their moral bearings in a world gone mad in the furious pursuit of ideas. Both fought on the side of life against what Chaves Nogales called the “brutality and stupidity fed equally by the fever of communism and the blandness of fascism”.

Why Spain enjoys export success

Sir, José María Beneyto and Alexandre Perez (“Beware the five common myths about the Spanish economy”, August 24) are right to highlight Spain’s current export success. The surge in sales abroad, however, is almost entirely due to the depressed state of the domestic economy, which apart from anaemic growth in 2011 has been in recession since 2009 and will remain so until 2014, according to the latest official figures. For many companies exporting is a matter of survival.
It is striking that between 1988 and 2012 the contribution of external demand to gross domestic product growth was positive in only seven years and its largest contribution was in 1993 when Spain suffered its last recession, which was mild compared with this one.
Recent history shows that once the economy starts to expand again, external demand’s contribution becomes negative again as exports tail off. The challenge is to maintain the momentum of exports.

William Chislett, Associate Researcher, Elcano Royal Institute, Madrid, Spain

Country’s fall from grace is greatly exaggerated

Richard Boucher, deputy secretary-general of the Organisation for Economic Co-operation and Development (OECD), hit a raw nerve in April when he told a conference in Marseille of the NATO Parliamentary Assembly: “Nobody wants to be like Spain today”, because: “It is only good for flamenco and red wine.”

In the audience was Diego López Garrido, Spain’s secretary of state for the EU in the former Socialist government, who demanded Boucher retract the remarks. José Manuel García-Margallo, the foreign minister in the conservative Popular Party government, complained about the “intolerable” words and received an apology.

The incident highlighted the extent to which Spain’s image has deteriorated since its deep crisis in 2008. During its 14-year economic boom it was lauded for creating almost one-quarter of the total new jobs in the euro zone, but now has 5.6 million unemployed – almost one-third of the zone’s total.

Too much of the success was due, literally, to sand (the construction and tourism sectors) and not knowledge. The blame lies mainly with a myopic political class. There are still 700,000 new, finished unsold homes and many white elephants including the €1.1 billion airport at Ciudad Real with one of Europe’s longest runways. It operated for less than two years and virtually its only traffic were private jets that brought wealthy hunting parties.

The Spain brand has taken a nosedive. This is most evident in the Madrid stock market – one of the world’s worst performers this year- and the rise in the risk premium on 10-year government bonds over Germany’s benchmark bunds to above 550 basis points, at times, from an average of 8 b.p. in 2007.

Nevertheless, Spain’s fall from grace is exaggerated. The image is out of sync with reality, yet the perception, for many, is the reality.

The country has many positive elements, including about 20 multinationals with leading positions in the global economy – far more than Italy for example. The Ibex 35 companies collectively generated 60 per cent of their revenues abroad last year – up from 57 per cent in 2010. The latest global presence index of the Elcano Royal Institute, the Madrid-based think tank, using objective criteria, puts Spain in 11th place in the world, unchanged for a decade.

Governments since the end of the Franco dictatorship in 1975 have successfully “sold” abroad the smooth transition to democracy, but little of the other changes that have taken place. As a result, the old stereotypes of a country of fiesta and siesta have re-emerged with a vengeance.

José Luis Rodríguez Zapatero, who was prime minister from 2004 to 2011, aimed to correct the negative image by creating a public diplomacy commission in 2009 – along the lines of other countries, such as the UK and Germany, which have successfully re-branded themselves- but it failed to take off.

One problem is that Spain needs to speak with one voice. However, its 17 autonomous regions pull in different directions and create confusion abroad.

Several years ago, the government of Castilla and León (known in Spanish as the Junta de Castilla y León), one of the least known regions, sent a trade mission to New York. As it omitted Spain on its promotional literature, many people mistook the word “Junta” for a Latin American military government.

“What is needed is a coordinated and non-partisan approach by the public and private sectors which would regenerate Spain internally and not just externally,” said Emilio Lamo de Espinosa, the president of Elcano. The institute is setting up a Spain brand observatory.

García-Margallo is making Spain’s diplomacy more commercially focused, and promoting the Spain brand. Given the depressed state of the Spanish economy, this overdue initiative makes a lot of sense. Exporters could certainly do with more official help: 47 of Spain’s 118 embassies and 80 consulates do not have a commercial section.

It will not be easy for Spain to change its image and improve the Spain brand. The country is viewed in surveys as “hot” (creative, passionate and not very serious) as opposed to “cold” (efficient, rigorous and serious) like Germany and the UK. The “hot” image benefits the still flourishing tourism industry but not other parts of the economy and the way the country is perceived abroad.

Chile was so determined to impress upon the world its “coldness” that it shipped a 60-tonne Antarctic iceberg to Seville in 1992,and made it the centrepiece of World’s Fair pavilion.

Spain does not have to go to this extreme but it needs to be more pro-active.

An economy built on sand must be rebuilt on education

Too much of the Spanish economy over the past 30 years has been built, literally, on sand. At their peak in 2006 the housing and tourism sectors accounted for close to 25 per cent of gross domestic product (GDP).

The country needs an economy based much more on exports and direct investment abroad. This would make it more competitive and productive and generate stable employment in a country now suffering from a 20 per cent jobless rate.

The spectacular collapse of the construction sector (1m fewer people are working in it than in 2008 and there are about 1m unsold homes) brutally exposed the vulnerability of a lopsided economic model based on bricks and mortar.

Construction and related activities generated hundreds of thousands of jobs (many of them held by immigrants), but contributed little to value added because of low productivity.

Spain’s current crisis is almost entirely home-made.

For more than a decade, the political class was happy to encourage phenomenal growth of the property sector without giving thought to the bubble being created or what would happen after it burst.

The housing bubble started during the government of the conservative Popular Party (1996-2004) and intensified under the Socialists, who broke their promise to end tax deductions for home purchases, although they have changed their minds again in recent months.

The number of housing starts in 2006 (865,561) was more than France, Germany, the UK and Italy combined.

The explosive growth of the property sector had a big knock-on impact on the rest of the economy and caused corruption among politicians to flourish, particularly as a result of reclassification of land by town halls. More than half the increase in total tax revenue between 1995 and 2007 came from the property sector.

For many analysts, it was, to borrow the title of a novel by Gabriel García Márquez, a chronicle of a death foretold. The only question was when the slump would happen; the international credit crunch was the trigger.

There is another path to prosperity – through international expansion.

The country has a core of multinationals, such as the Santander financial group, Telefónica (telecommunications) and Iberdrola (renewable energy), and there are also successful medium-sized companies that have expanded abroad. Geographical diversification enabled them to weather the severe downturn in their domestic market.

Spain’s outward investment stock was $602bn at the end of 2008 (the latest figure), 37.5 per cent of GDP, compared with Italy’s $517bn (22.5 per cent of GDP).

In GDP terms, outward investment stock was 12 times higher than in 1990.

Most of the investment is in the European Union and Latin America, increasingly in the US and very little in Asia, despite its growing importance in the global economy. There is thus considerable scope for further increases.

The export sector, however, is lacklustre. Between 1988 and 2009, the contribution of external demand to GDP growth was positive in only six years, two of which were recession years (1993 and 2009) when companies were forced to sell abroad to offset the contraction in their home market.

In “normal” years, buoyant domestic demand sucks in imports and – coupled with the traditionally low level of exports of goods and services (around 25 per cent of GDP) – generates a big trade deficit (7.9 per cent of GDP in 2008) and intensifies the current account deficit (9.5 per cent in 2008).

Another indicator of the low export capacity is their amount in per capita terms: $5,355 compared with $8,330 in Italy and $16,175 in Germany, according to the 2009 World Development Indicators.

The cornerstone of a knowledge-based economy, and, thus, one capable of exporting more, is education.

With one of every three people aged between 18 and 24 not completing basic secondary education (double the EU average); poor results in the OECD’s Pisa tests in reading, mathematics and scientific knowledge; no university among the world’s top 150 in the main rankings (up to 35 per cent of students drop out before graduation and only about one-third complete their studies on time); and research and development spending of 1.35% of GDP, way below that of the most advanced economies, Spain is going to have to make a Herculean effort to improve its education system and it is perhaps not surprising that high tech products account for only 5 per cent of manufactured exports.

A decade is needed before the positive effects would be felt, and a start has not yet even been made thanks to the squabbling political class.

The export sector is also hampered by the country’s image abroad, which is out of line with reality. Foreign views are still predominantly forged by stereotypes (fiestas, and bullfighting). This affects consumer’s perception of the quality of products. Only one company, fashion retailer Zara, is in Interbrand’s top 100 global brands.

Fiscal adjustments are necessary to reduce Spain’s dependence on the construction sector, but they are not enough. Deep structural reforms are needed for it to become a strong, export-oriented economy.,dwp_uuid=084669ca-71cb-11df-8eec-00144feabdc0.html