Well Spain did have a relative firm grip on the national deficit, as I wrote, however did nothing to reign in the happy private/regional party where the credit drinks got too cheap for the good of most. Some got more fun out of it then others but for all the deflationary morning came. That hardly anybody tries to keep such bubbles under control is deeply human. Who wants to bust a good party? Certainly not the politicians who think they are doing great due to their own wise rule and are glad to get reelected...
Unemployment was always high, even if you account for the black labour market, and this has to be Spains biggest weakness. It should have put all that pre-crisis inflow of cheap money to much better use, just like the US, especially with an eye on youth unemployment. A good economic policy would have given them much more liberty of action, now they are hounded by the markets and the crisis.
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This crisis has given me again faith in macro. For example I did expect relative high inflation around 2010-11 after all that easing in 2008, but basic macro (liquidity trap etc) and decent logic helped some to get it right. Krugman was one of them. With demand that low and the economic heart, the banks, pumping the lifeblood of the economy so slowly and out of sync the inflation has indeed been very low by historical standards.
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The earthquakes in Northern Italy have not just caused once again a tragic loss of life but inflicted very significant damage on our cultural heritage and economy. If the destruction of old castles and churches is tragic then the collapse of relative modern industrial buildings is a scandal.
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