20180509-NATIXIS-Could_Spain_become_a_core_euro-zone_country__9页_793kb

Flash Economics Summary: Could Spain Become a Core Euro-Zone Country?

Core Content

This document analyses whether Spain has the characteristics to be considered a core euro-zone country, based on twelve key economic and financial indicators. It compares Spain with Germany, France, and Italy to evaluate its alignment with core country status.

Main Viewpoints

• Financial Market Perception: The financial markets have recognized significant improvements in Spain's economic and financial situation, particularly reflected in the marked tightening of yield spreads with Germany and France since 2017.
• Growth Performance:
  • Spain's short-term growth is better than that of the other countries.
  • Its long-term potential growth is low, but this is attributed to a shrinking labor force rather than low productivity.
• Public Finances:
  • Spain's fiscal solvency has been ensured since 2017.
  • It has more room for fiscal maneuver than France and Italy.
• Banks and Borrowers:
  • Spanish banks have seen a significant reduction in non-performing loans, though they remain higher than in Germany and France.
  • Household and corporate debt ratios have declined, but are still above those of the other countries.
• Cost Competitiveness and Trade:
  • Spain has become more competitive in terms of unit labor costs.
  • It has experienced a recovery in exports and a significant trade surplus.
• Corporate Investment and Modernization:
  • Spain has made substantial efforts in investment and modernization since 2012.
  • Its level of industrial automation is increasing, indicating progress in this area.

Key Information

• Compatibility with Core Country Status: Out of twelve criteria, nine are compatible with Spain being considered a core euro-zone country.

• Incompatible Criteria:

  • Structural unemployment: Spain's structural unemployment rate remains high, even at a 16% overall unemployment rate.
  • Banks' situation: Despite improvements, Spanish banks still have a higher non-performing loan ratio compared to Germany and France.
  • Household and corporate debt ratios: These are still higher than in Germany, France, and Italy.

• Comparison with France:

  • France has five criteria that are incompatible with core country status, indicating a more pronounced challenge in becoming a core country compared to Spain.

• Conclusion: Spain has made progress in several areas that align it with core euro-zone characteristics, but it still faces challenges in structural unemployment, banking stability, and debt levels. These issues may prevent it from fully transitioning to a core country status in the near future.

Disclaimer Highlights

• The document is intended for professionals and qualified investors only.
• It is strictly confidential and must not be disclosed to third parties without prior consent.
• No personalized investment recommendations are made; the information is for general purposes only.
• No liability is accepted by Natixis or any associated parties for the content or use of the document.
• The information is based on public data and does not include specific tax or accounting considerations.
• The views expressed are the personal opinions of the authors and do not necessarily reflect the views of Natixis or its affiliates.

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Final Notes

• The document does not constitute a financial analysis and is not subject to legal requirements for investment research independence.
• The views and assumptions in the document may change without notice.
• The document may include specific disclaimers for individual stocks or securities, which can be accessed via the provided link.