The end of austerity?

Last year I wrote a post entitled “Austerity”, suggesting that here in the UK there was no real austerity, and that a trip to Spain was necessary if you really wanted to see what austerity meant. Well, over the last couple of months I have visited 2 of the Club Med countries and here is a brief and wholly unscientific report back.

Italy. In September I was in the Lazio and Campania region of southern Italy, where the strictures of EU fiscal policy are said to be hitting the hardest. From what I saw however the dolce vita is still available. Although Naples was particularly dirty, with rubbish strewn around the streets I didn’t see many of the usual signs of recession. There were a few beggars but most of the shops were rented out and open for business. There weren’t many bargains to be had. Italy did not seem to me to be in poor shape.

Spain. Back in the Marbella region, where I went last year there are some small signs of recovery. Some of the empty shops which I saw last year have now been filled, not with fancy goods merchants but by hairdressers and estate agents. And although it is not difficult to find abandoned construction sites and half completed buildings, there are now new developments being progressed. We asked in the local branch of El Corte Ingles, the Spanish equivalent of John Lewis, how business was doing. “We are hopeful”, they said. “But we are very dependant on foreign visitors spending their money here.” In the La Canada shopping centre outside Marbella it was the same story. Most shops were advertising sales and all were very happy to see us. It seems that the growing confidence in the UK economy is rubbing off in Spain: if the English have money to spend they will come out here and buy on the new developments. The locals however are cautious, preferring to save rather than spend.

In the meantime however both countries are having their economic policy decided for them by the Germans (acting of course through the ECB). There is an obvious answer, and that is for Italy and Spain to leave the Euro, devalue their new currency and become competitive again. But I have to say I was unable to discover any local appetite for that solution.

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