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Eduardo Martínez Abascal,, Professor, IESE Business School

Good news must also see the light of day

Wed, 13 Feb 2013 11:11:00 +0000 Published in El Periódico de Catalunya

The Economics has more to do with the psychology of people and sociology than with an exact science such as physics. Trust is its basic driver. If the environment is hyper-negative, people get scared and do not consume, and with it the GDP leave; the entrepreneur does not invest, because of the prevailing uncertainty, and the GDP leave.

In fact, there is a very clear relationship between the fall in GDP in Spain and the episodes of rising risk premium in June and November 2011 and March-August 2012. If the risk premium captures the citizen's attention, he/she withdraws and the Economics does not pull.

The persistence in the negative news will only lead us to a vicious circle in which we will be worse and worse and the prophets of doom will come out reinforced. That is why I think it is good that when there is good news, it comes to light and somehow attenuates the flood of negative news that invades us.

Here is some of it. The risk premium has dropped by almost half since August, and this reflects greater confidence of international investors in Spain's Economics . The central government is getting loans at reasonable prices; some autonomous communities as well (Madrid, Galicia, Navarra, Aragón). Quite a few companies have obtained financing, something that has not happened since March 2012. Money from abroad is once again flowing into peripheral countries: according to the Financial Times, 100 billion since November.

With regard to banking, the fall in deposits that had been occurring since autumn 2011 has slowed down since November. It seems that savers' confidence is starting to rebound (or not to fall). Banks have made a lot of provisions, increased their capital and are now in a better position to lend again (although they will start to do so very slowly).

I have personally seen that two large banks have granted loans now that had been stopped for two years. It is a one-off experience, but it says something. On the public administration a lot has been achieved in terms of transparency. Now we have the data of expense public in just one or two months (before it was two years). Some autonomous communities are making an effort B in the rationalization of expense, which is not spending less, but eliminating expenses that are not necessary in order to concentrate on those that are.

This is why the markets are starting to lend to us. Although there is still a long, long way to go. And with regard to Economics. For the first time we exported more than we imported. This has saved us 60,000 million or 6 % of our GDP, which used to go down and now does not. International car manufacturers (Renault, Nissan, Ford, etc.) are once again investing in Spain, preferring it to other countries. All this indicates that if we get our act together we can manufacture as well and cheaply as others. We will get out of this, albeit with blood, sweat and tears... and a lot of well done work .