I thought I would start this little article on work in Spain by telling you a few salient facts about Spain;
1) Unemployment currently stands at 22.9%. I estimate a rate of 25-26% within a year if nothing is done due to the swinging cuts being proposed.
2) To set up your own business costs an initial monthly cost of at least 450 Euros with an on-going monthly cost of 350 Euros, even if you do not require office space or a place of work. Compare this with the Uk where self employment costs 120 pounds per year or Holland where it is 240 Euros per year!
3) If you are self-employed, you do not qualify for any unemployment benefit if things don’t work out.
4) Entrepreneurs risk everything on starting up a business because if the business fails then they are labelled failures and never again will they be able to get funds for a second attempt – as they are placed on the credit blacklists for the rest of time. Most business successes are born out of previous failure. It is highly unusual for someone to hit a home run first time out. The penalties for failure are too onerous in Spain and discourage experimentation. People stick to proven formulae rather than trying something new.
5) Spanish business generally looks for short term, huge gain rather than long term, sustainable growth (known in Spain as: “La Cultura del Pelotazo”.
6) Banks do not lend because they cannot borrow and if they do lend then the interest rates are punitive.
7) There are currently between 800,000 and 3 million properties for sale in Spain. The discrepancy in the figures shows just how badly regulated the industry is.
8) Spain is currently losing population as more people emigrate to look for work or return to their country of birth, after losing their jobs here.
9) Spain has just been named the 31st least corrupt country in the World. All I can say to that is that there must be some pretty ropey countries out there. I would suggest that well over 50% of politicians are corrupt (and if I was in a polemical mood I would suggest that figure is nearer to 90% – or higher)
10) The new government hasn’t got a clue how to solve any of the above problems. Or rather in their electoral programme there was nothing shown about how they would face up to these issues.
11) The Spanish deficit is totally unsustainable without a large devaluation of the currency and a spurt to exports and investment into the country.
12) The black economy in Spain is estimated to make up to 30% of the real economy. Obviously this is because of the disincentives to declaring the money, the cost and the bureaucracy and time involved – together with a common incentive to get one over the government.
Ok, so there are 12 things that need facing up to and that is without going into the smaller problems that can be found in virtually every town and village throughout the country.
So how does Spain change?
1) It needs to be easier to set up a business in Spain. Young people in Spain are highly educated, they are almost forced through University due to the lack of opportunities elsewhere, although they do not, in general, have the entrepreneurial spirit because the educational system is not set up to provide them with it (is it anywhere, really?)
The reasons for not being entrepreneurial in Spain are the impediments put in their way before anyone can open a business here. The temptation of many is to start work in the black economy and then, once they earn enough, to “go legal”. This is work on the “never-never” and ‘going legal’ rarely happens.
2) In order to make it easier, the new government needs to open up cheap financing to new businesses by guaranteeing to underwrite any losses. An easy ‘to get at’ fund from central government, not embroiled in ridiculous bureaucracy and paperwork, is needed to stimulate the productive area of the economy.
3) It needs to get rid of the “autonomo” self employed payments for the first year and then introduce them slowly into the system from year 2 onwards, to give the business owners the chance to get established in their markets.
4) There should be a better use of Civil Servants who are allowed to waste the majority of their day, and unfortunately are complicit in it, on coffee breaks and avoiding contact with the public, so that they help businesses in the private sector to grow and prosper – rather than being an impediment to growth of small businesses.
5) The government needs to invest in R+D and make it tax efficient for companies to do so. It shouldn’t take two years to get a license for research, as in the case of what happened to this company in Extremadura.
6) The civil service, at an administrative level, needs to be completely overhauled. It is inefficient, badly run and the systems and practices in place are from the mid 1900’s. It needs a hammer taking to it and then building up from scratch.
7) The government needs to stop pandering to property developers and banks and needs to start thinking about its citizens – after all they are elected to act in the interests of the people not big businesses.
8) Many of the properties that are empty in the country should be taken on by the banks and rented at really low rates to people having a problem finding a home at a decent price. Those rentals should be based on an ability to pay and backed by a central government fund for non-payers. Once the people living in them are earning more then they can pay more. If they earn less – then they should pay less.
9) Rather than bailing out the banks, those same banks should be working for the public good. After all many of the banks in trouble were Cajas (building societies) that have, at the heart of their reason for existing, a requirement to act as social agents within their communities.
10) All politicians convicted of fraud, however small, should be banned from politics for life. They shouldn’t be able to get off with charges because the labyrinthine justice system has taken too long to bring the cases to court.
11) The judiciary should be depoliticized in order to give the judges free rein to dispense justice. All politicians accused of corruption should be tried by jury not just a judge – who may not be impartial and in many cases is a friend of the politician being tried.
12) Repossessions of property should be stopped immediately. The banks should be forced to come to payment agreements with the mortgage holders as repossession does neither party any good. The return of the property to the banks as full payment of the debt on primary residences should be the norm rather than the current system of indebtedness for the rest of the life of the person evicted (once repossessed). This would also free up the justice system which is currently totally overwhelmed by repossession orders from banks.
13) Spain should leave the Euro. This is a polemical solution, of course, but I do not foresee any of the above happening unless there is a chance of growth and, within the structures of the Euro at the moment, there is no chance of Spain getting out of the problem. Spain needs to be able to export its goods at a cheaper price and bring investment into the country which will happen, if the value of the currency drops. Property sales to foreigners would also increase substantially, if the prices came down across the board by 20-30%. Due to devaluation people would still be getting the money to cover their mortgage payoffs, without being in debt for the rest of their lives. Of course, there are downsides to this such as inflation – but I think the potential benefits easily outweigh the costs.
That’s my manifesto anyway. Now what do you agree or disagree with, what do you think and what would you add or take away?
I was reminded by David Carrolon about the Españistan video. You must see it. So here it is with subtitles. How Spain got to where it is today. This bit is NSFW by the way.