This great collection of quotes, comprised by an analyst at Fairfax, an investment bank, has made rounds on the Internet:
"Spain is not Greece." - Elena Salgado, Spanish Finance minister, February 2010.
"Portugal is not Greece." - The Economist, April 2010.
"Greece is not Ireland." - George Papaconstantinou, Greek Finance Minister, November 2010.
"Spain is neither Ireland nor Portugal." - Elena Salgado, Spanish Finance Minister, November 2010.
"Ireland is not in ‘Greek Territory.’" - Brian Lenihan, Irish Finance Minister, November 2010.
"Neither Spain nor Portugal is Ireland." - Angel Gurria, Secretary General OECD, November 2010.
"Spain is not Uganda." - Mariano Rajoy, Spanish Prime Minister, June 2012.
"Uganda does not want to be Spain." - Henry Okelo Oryem, Unganda Foreign Minister, June 2012.
And what is Germany?
Let's step back. European integration and the euro created a new economic union, enlarging the market for the German export-driven economy. German surpluses, nourished by higher external demand, were channeled back into deficit countries. The crisis has put an end to this virtuous cycle of self-financing export demand. ECB liquidity provision and international bailouts are helping deficit countries to repay German loans, in addition to financing capital flight to Germany. These flows, together with largely unchanged high German savings, cause a flood of liquidity in Germany which is no longer channeled back into foreign countries. High and increasing risk aversion limits the choice for investments that are deemed safe, such as Bunds and real estate.
Where could this lead Germany to? After decades of stagnation, real estate prices have started to climb. Demand for real estate assets may stimulate construction, pushing Germany's output above its potential. Ensuing increases in wages and prices may erode the real value of savings and reduce Germany's international competitiveness, slowing external demand. In consequence, safe haven flows may reverse, a real estate bubble may burst, and bad loans may cripple the banking system. And someone may say: "Germany is Spain."
About cliffeconomics
This blog offers original economic thought and policy recommendations on Germany, the euro area, and whatever cliff has on his mind.
About cliff
The author is an economist specialized in financial and macroeconomic policy analysis. All posts present a personal opinion, and all analysis is based on publicly available information.
About cliff
The author is an economist specialized in financial and macroeconomic policy analysis. All posts present a personal opinion, and all analysis is based on publicly available information.
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I doubt that Germany will be Spain. Although Germany still has large public debt ( more than 80% of GDP) its economy is performing well in those days. I don't think that there is a bubble threat in Germany. There is no fear for Germany while it maintains GDP growth and budget surplus in public finances.
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