One of Spain’s top banks, Santander, is making a bid to buy the British banking firm Abbey plc, the mortgage lending firm which used to be a building society (what Americans would know as a Savings and Loan).
I do not have much to say about the specifics of the deal. It is all a part of the merger, acquision and disposal process which is a healthy part of capitalism and the efficient allocation of scarce capital. Maybe the shareholders of either firm have strong views on the matter but I do not. However, what is interesting to me is what this deal says about Spain’s development as an economic power.
Spain is one of the success stories of the past few years. When I went to the glorious city of Barcelona last year I was struck by how prosperous and dynamic the place was. I hear and read similar impressions from other sources. Much of this has to do with the determination of Spanish entrepreneurs to throw off the shackles of former failed socialist policies and embrace a more liberal economic culture, which former centre-right premier Aznar helped spawn. Let us hope the new socialist government elected earlier this year in rather shameful circumstances after the Madrid bombings does not mess it up.
It would be a grave error to infer too much from the acquisitive activities of a Spanish bank in Britain. But I get the feeling that this grand old nation is flexing its economic muscles again, and who knows, making a distinct improvement to the quality of Britain’s economy while getting richer as well. Good. It feels appropriate somehow. There are hundreds of thousands of British expatriates living in Spain so it perhaps fitting that Spain’s biggest companies are trying to get a piece of the action in the UK.
(As an aside, I would like to know what the Spanish-based blog Iberian Notes makes of this).
Johnathan Pearce writes:
“Much of this has to do with the determination of Spanish entrepreneurs to throw off the shackles of former failed socialist policies and embrace a more liberal economic culture….”
And much of it also has to do with the way Spain has been one of the EU’s “winners”, along with Ireland.
Looks as though the predators are starting to pick off the laggards and lame ducks… I wonder who will be the next to fall?
Typical of so many so-called ‘management teams’, they would rather sell their shareholders ‘down the river’, than stick around to see the results of their poor management.
Spain is hustling, selling weapons to the Sudanese government; see http://www.expatica.com/source/site_article.asp?subchannel_id=81&story_id=9825
BTW, the hustling north is the home of industry and entrepreneurship. . . and socialism. It was the heart of the Republic. When the monarchist landowners of the south couldn’t take it (the Republic) any more, the Army revolted (1936).
GCooper makes a rather snide dig at Spain and Ireland re the EU. Well up to a point, mebbe. But lower taxes, partial deregulation also played a part. Ireland has been a notable example of this. Let’s give credit where it is due sometimes. Or maybe a certain kind of commenter cannot abide the thought that a country in the EU actually gets things right?
Johnathan
I spoke to the Economist’s Scotland correspondent about a year ago and he estimated that about 25% of Ireland’s growth was due to EU subsidies and the rest to internal reform.
I think the Economist’s Scotland correspondent should stick to his knitting.
Ireland has lower corporate and personal taxes than old Europe and Britain. That is the explanation for Ireland’s continuing high growth.
Nowadays rich Ireland pays in more than it gets out of the EU.
Now the Irish finance minister is going to Brussels maybe he can show them the way… or maybe not.
As a control example, to evaluate the effectiveness of EU funds, it is necessary to remember two things:
1) Greece has gained virtually nothing in growth from massive EU largesse.
2) Both Ireland and Spain were recieving EU money long before their economies started to become exempliary growth stories.
In both cases liberalisation led to a dramatic improvement in growth. Only combined with good economic policies could the EU funds have a beneficial impact on the recipients.
In the case of Greece, it is still the international equivalent of “on the dole”. EU funds have supported a culture of corruption and dependency.
Johnathan writes:
“Or maybe a certain kind of commenter cannot abide the thought that a country in the EU actually gets things right? ”
Actually, this “certain kind of commenter” (what a miserable choice of words) simply resents having redistributive socialist EU policies passed-off as some kind of capitalist success.
Johnathan L writes:
“Only combined with good economic policies could the EU funds have a beneficial impact on the recipients.”
I have absolutely no doubt you are right. But to pretend that it was simply the liberation of those economies that achieved this result is, at best, naive, at worst, mendacious.
Rather like the German ‘economic mirace’ post-WWII, it didn’t appear out of thin air – a phenomenal amount of other people’s money was used to kick-start the proces.
GCooper, don’t get me wrong, I would not deny the role of EU funds as a factor, but as some other EU states which have received aid shows, there are other factors which are at work. I just think it is soooo predictible for bashers of the EU (including moi, by the way) to take any credit away from a country’s people for improved state of affairs. The Spanish have done rather well of late, and their revived enterprise culture seems to have a lot to do with it.
After all, as we have seen in large parts of the Third World, aid often does not provide a lasting basis for prosperity.
One cannot really compare post-war west Germany and the states that receive EU funds in recent decades. Germany’s industrial infrastructure had been obliterated due to the efficiency of the British and American airforces, she suffered huge influxes of refugees from the communist east, suffered millions of casualties, and her political system was in ruins. Spain, while it had to emerge from the Franco period, underwent far less trauma.
In Spain, didn’t it go something like this? The EU gave the funds, that improved the infrastructure, that lured the tourists and ‘second-home’ residents, that inspired the property boom, that made the population a bit wealthier, who then spent the extra improving their lifestyle, that encouraged more business, – and on and on……
How long ago was it that Spain had little more than the tourist industry to rely on, and when the drunken tourists scared off the family tourists, there was little left, then came the SEAT car company, and things began to change, all at about the same time that EU funding came ‘on-stream’.
Sorry, just a lay-mans, ill perceived time-line…but it seems that it was all due to a happy confluence of events, one of those ‘one-offs’, that may serve as an example of what can be done, but nevertheless, can not be copied in the detail.
Umm, hate to be the bearer of bad news, but you have all managed to avoid the most important feature of the spanish economic revival – interest rates falling from double digits to 3% when they entered the Euro.
Yes there was some welcome reform under Aznar, and yes free handouts from the EU played its part, but on a macro-economic level this was by far the most significant boost to the economy.
The interest rates were single-digit well before Spain entered the euro.
If you want to be pedantic about dates then at the date of euro inception you are correct – The convergence trade started 2-3 years earlier. It makes no difference to my point, as it was the process of rates falling from double digits to 3% at the euro inception that provided the great macro-economic boost.
The mismanagement of Abbey National has continued for years because the state has outlawed any of the big British banks buying this crock of **** on the grounds of “competition”.
Spain is fairly corporatist as an economy. Would Banco Santander have grown so large without a state that favoured a banking “national champion”?
When I spent three months in Barcelona in 1999 I was really quite surprised how prosperous the place was. To me Barcelonans seemed as well off as us it was just that the exchange rate hadn’t seemed to have cottoned on yet.
But why is this? I don’t think it has much to do with deregulation. As I understand it, even then regulation was very high. An English businessmen told me of the 7-year struggle he had had to get permission to start a business.
Spain’s economic miracle occurred in the 1960s under the technocrats of Opus Dei. It had as fast a growth rate as Japan, by far the fastest in Europe; although it was not in the Common Market, remittances from guestworkers in the EC played a part in financing industrial development. In two generations it went from an importer of bicycles to an exporter of cars. Between the end of WW2 and Franco’s death, GDP quintupled in 30 years.
Spain has never had a Thatcherite revolution in economic policy: it has always been dirigiste one way or another. Under Franco it was autarchic in the 1940s and 1950s, mainly because it was shunned by foreign investors for political reasons. A welfare state was introduced and many big firms were publicly owned. From 1975, after Franco’s death, neither Adolfo Suarez nor Felipe Gonzalez liberalised the economy thoroughly in the New Zealand/UK/Reaganite manner, although the “socialist” Gonzalez paid close attention to monetary growth and disposed of ailing State concerns.
I’m one of the British that Santander will be “making a distinct improvement to the quality of Britain’s economy while getting richer as well” – NOT!!!
I’m going to be very unemployed by the takeover…